Compared to the rest of the world, it's fair to say that Canada has made a pretty good go of it in the aftermath of the financial crisis. Stocks have rebounded nicely, the loonie has climbed to near-parity and even though the economy has recently slowed, Canada has recovered much more swiftly than most other developed nations. But one area that desperately needs improvement is the country's long-troubled venture-capital market, wrote the National Post Feb. 1., 2011, in a story about Toronto-based P2P Financial Inc. and its plan to help venture capital in Canada get back on its feet:

Since 2000, the amount of start-up financing provided by traditional sources in Canada, including private equity and labour-sponsored funds, has significantly dropped. Predictably, the total pales in comparison to the United States, a much more welcoming environment for small business. Canada's Venture Capital and Private-Equity Association reported the industry raised less than $1 billion in venture funds in 2009 compared to $3.9 billion in 2001. And the credit crunch has left Canadian banks even more risk-averse when it comes to small-business loans.

That has left private investors, or so-called "angels," to pick up the slack. Even then, jaded entrepreneurs quip, the best chance of striking a deal is an appearance on "Dragon's Den," CBC's hit television show that brings them face-to-face with potential investors.

But Matthew McGrath, president of Toronto-based P2P Financial Inc., has a plan to help venture capital in Canada get back on its feet. Last September, the former Royal Bank vice-president launched P2Pfinancial.ca,a virtual marketplace that brings together accredited well-heeled individuals with would-be entrepreneurs seeking capital usually in the range of $25,000 to $1 million.

. . .

Douglas Cumming, a professor of finance and entrepreneurship [and Ontario Research Chair in Economics and Cross Cultural Studies] at York University's Schulich School of Business, says businesses such as P2P will play an increasingly important role in venture-capital markets, particularly as they develop and become better established. As they do, capital flows should free up and new mentoring relationships will be fostered between experienced business leaders and budding entrepreneurs.

"The importance of the angel investment market is huge and cannot be overstated," Cumming says. "Without it, the number of new successful innovations and patents generated in the country will remain well below potential."

Posted by Elizabeth Monier-Williams, research communications officer, with files courtesy of YFile– York University’s daily e-bulletin