Despite the tales told through the year of the imminent collapse of venture capital in Canada, data released by the Canadian Venture Capital & Private Equity Association (CVCA) last month showed no decline in activity by Canadian VC firms in 2007 and a 21% increase in VC investment in Canada, taking the total to $2.1 billion, thanks to increased participation of foreign investors, particularly U.S. VC firms.

Just over half (by dollars) of all investments went into IT firms, with $1.1 billion invested in 194 companies. That's an average deal size of $5.7 million, so obviously a lot of what's going into this total are not early-stage investments in software companies.

These numbers apparently include American Capital's announced $160 million investment in Geosign. American Capital later said that it recovered a "substantial" part of its investment after Geosign's business model collapsed shortly after the deal closed.

Canadian VC firms raised $1.2 billion in 2007, according the the CVCA, down from $1.6 billion the previous year. About 62% of the money raised in 2007 went into labour-sponsored funds. The CVCA says the drop in investment in LSIFs was much smaller than the drop in funds raised by non-LSIF funds—despite the scheduled removal of the LSIF tax credit in Ontario.

The number that might give the most reason for concern is the difference between amounts raised and invested in Ontario. According to the CVCA data, in 2007 Ontario VC firms raised less than one-third of the amount that was invested in Ontario companies.

As I've discussed before, no one really knows how much capital is invested in Canadian companies. Even the federal government doesn't know. What the CVCA data includes are the deals that were disclosed, which would provide a floor for the actual number. In another post I'll take a look at some of the numbers for Waterloo Region, which suggests that this "floor" number may not be a very good estimate of the total.