By: Andrew Wahl

My cover story in the current issue of Canadian Business magazine—our special annual Innovation Issue—looks at how entrepeneurs in this country are trying to cope with a venture capital industry in crisis. One tactic is to look to the U.S., where VCs are still flush with money and looking for promising investments.

But news today suggests U.S. VCs are nevertheless not writing a lot of cheques. Reuters reported Monday that preliminary figures show VC funding dropped 71% to US$1.3 billion in January from a year earlier. Only 203 companies received investments, compared to 465 in Jan. 2008, and average funding amounts were down sharply, too.

Of course, one reason might be that only a desperate company would willingly take venture capital in market conditions are that weighing down valuations. U.S. VCs may still be interested in investing, but smart entrepreneurs won’t do a deal at any price. Some Canadian entrepreneurs who have recently pursued U.S. venture capital are also finding that, although networking in America is worthwhile, tapping angel investors is a faster, simpler means to financing their growth strategies—without destroying their company’s valuations.

For now, find my cover story on newsstands.