There have been quite a few personnel changes here at Ventures West over the last few months. As we announced in January, Robin Axon has been named a Partner and has relocated to Ottawa to manage our IT and Communications investments in the region. Ottawa is one of the preeminent centres of technology innovation in Canada and having someone on the ground and part of the community will provide us an enhanced opportunity to source investments in the region.
We are also pleased to announce that Duncan Hill has joined Ventures West as Entrepreneur in Residence. Duncan was the Founder and Chief Technology Officer of Think Dynamics, a developer of data center provisioning and automation software, which was acquired by IBM in May 2003. Duncan will assist in evaluating investment opportunities, with a focus on enterprise software applications, and will provide specialized management counsel to portfolio companies while he seeks his next venture.
In February we were very excited to welcome Ken Galbraith as our new Venture Partner on the Life Sciences team. Ken is a well-known and active member of the North American life sciences community with 19 years of experience acting as an executive, director, investor and advisor to companies in the life sciences sector, most recently as Chairman and Interim CEO of AnorMED. To read his full bio, click here.
And finally, in March, we added Steve Turner as an Associate in our Vancouver office. Steve will work with David Berkowitz, focusing on deal generation and portfolio management in the Cleantech sector. We are looking forward to expanding our efforts in this growing sector.
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Fortiva is the leading provider of on demand email archiving solutions for legal discovery, regulatory compliance and email storage management. www.fortiva.com
Fresco Microchip is a fabless semiconductor company whose focus is developing leading-edge silicon tuner and demodulator products for television and consumer electronics applications. www.frescomicrochip.com 
Marqui, Inc. is a leading provider of on-demand marketing software. www.marqui.com
NeurAxon Inc. is developing new drugs for the treatment of pain and other CNS disorders such as epilepsy and depression. www.nrxn.com
Serveron provides technology and services that continually monitor the performance of electric utility assets. www.serveron.com
In March, 2007, Cellex Power Products Inc. agreed to be acquired by Plug Power Inc. (NASDAQ: PLUG), a leader in providing clean, reliable on-site energy products. 
Also in March, TIR Systems Ltd. announced they were being acquired by Royal Philips Electronics (NYSE:PHG)(AEX:PHI) for approximately C$75 million. TIR, based in Vancouver, is a leading supplier of specialized Solid State Lighting (SSL) technology and products for high quality white light.
Looking Back
2006 Year in Review
By Ted Anderson, Managing General Partner
The improvements we saw in the general economy and venture capital industry during 2004 and 2005, continued into 2006, even though some storm clouds appeared on the horizon as oil prices climbed and inflation concerns surfaced. The Canadian venture capital industry had a good year with the amount invested totaling approximately $1.7 billion, just slightly above the amount invested in 2005. Follow-on investments continued to account for the majority of dollars invested ($1.35 billion vs. $474 million for new investments) reflecting the support the industry is providing to its existing portfolio companies. And in fundraising news, the industry raised $1.6 billion of new capital in 2006, a 26% decrease from the $2.2 billion raised in 2005.
We have expressed concern in the past regarding the average amount invested per company in Canada compared to that invested in the U.S. In 2005, the average amount of venture capital invested per company in Canada was $3.1 million; in the U.S. the average was $10.5 million. Our concern was that these U.S. companies are our portfolio companies’ competitors and having over three times the capitalization provides them significant competitive advantages. We are pleased to note that the average Canadian VC investment in 2006 was $4.2 million, a 40% increase from the average in 2005. This is obviously a move in the right direction but there is still a long way to go to close the gap. This is an issue that the Canadian industry must continue to address in order to allow Canadian entrepreneurs and their companies the ability to succeed on both the continental as well as the global stage.
Ventures West Highlights
Over the course of 2006 Ventures West made four new investments, as well as 10 follow-on investments, investing a total of $43 million. Overall, Ventures West portfolio companies were successful in raising over $175 million in financing during 2006, with the average round size being $14 million.
New Investments in 2006
Ventures West made one new investment in each of our four sectors of activity (Biotechnology, Cleantech, Communications and Information Technology). Early in January, we participated in a $30 million convertible debenture offering in TIR Systems. TIR is a Vancouver-based publicly traded company (TSX: TIR) that develops solid state lighting technology. In the spring, Ventures West led the US$45 million series C financing of Macrogenics. This Maryland-based company is developing therapeutics for autoimmune disorders, cancer, and infectious diseases. We also invested in the first financing round for Dabble DB, a ‘Web 2.0’ developer of a platform for building collaborative, data driven, web based applications. And in October, we participated in a $21.4 million Series D funding of BelAir Networks, an Ottawa-based provider of mobile wireless broadband mesh network solutions. BelAir's solutions have already been launched in Boston, Minneapolis, London and Toronto.
2006 Follow-Ons
2006 saw a number of our portfolio companies raising substantial follow-on rounds, from Canadian and U.S. co-investors alike. Angstrom Power, a developer of hydrogen fuel cell technology, raised US$18 million. Another Ventures West 7 portfolio company, Zeugma Systems, raised US$13.5 million in May. The round was led by new investor San Francisco-based Granite Ventures. And in January, QuIC Financial Technologies, Inc., a developer of enterprise-wide risk management and financial analytics solutions, raised US$10 million in Series B financing. New investor JMI Equity led the round alongside existing investors Ventures West, GrowthWorks and Springbank.
M&A Exits
M&A seemed to be the exit strategy of choice in 2006. During the year, two Ventures West 7 portfolio companies were acquired by U.S. companies. In May, Pearson, the world's leading education company, announced that they were acquiring Chancery Software Ltd., a Ventures West 7 portfolio company, and a leading provider of student information systems (SIS) in the K-12 US school market. In July, RadiSys Corporation, a NASDAQ listed global provider of advanced embedded systems, announced that it would acquire Convedia Corporation, the global leader in IP media processing technologies and IP Media Server products, for $105 million, plus an additional milestone based $10 million. As Convedia CEO Peter Briscoe stated at the time of the announcement, "This is the proverbial win-win for both companies and their customers.”
What’s in Store
We entered 2007 with a number of new investments in the process of being finalised and the second quarter of the year will see three companies added to the VW portfolio. These exciting and interesting companies will be reported on in our next newsletter.
Here at Ventures West we are feeling optimistic about what 2007 holds; we have seen increased stability in the market, the general economy continues to be robust and we are seeing good opportunities across a wide range of industry sectors. Exits continue to be strong, primarily through M&A, and we are seeing indications that the public markets may be again warming to IPO’s by technology companies.
