Venture-capital investment is often seen as an emblem of wider economic health, but since the recession began in 2008, VC activity in both the U.S. and Canada has stagnated and shown only mild signs of recovery since.

A dry VC market is troubling in that it suggests investors are less willing to take on risky projects - a condition that likely complicates startups' ability to find suitable financing channels.

According to a report released this week by the Canadian Venture Capital and Private Equity Association, VC investment in Canada fell 2 percent during the second quarter, with a total volume of $328 million, compared to $335 million during the same period in 2010.

"After a period of steady, if moderate, expansion in VC invested, it is very concerning to see weaker dollar flows at this point," said Gregory Smith, president of the CVCA and managing partner at Brookfield Financial. "Clearly there is demand coming from young, entrepreneurial businesses - a fact that is borne out by year-over-year growth in company financings - but this demand is not being met by an adequate supply of value-added risk capital."

However, Globe and Mail contributor Tim Kiladze argues that the demise Canada's venture capital markets goes back even further than the recession. Since the collapse of the tech bubble in the early 2000s, VC firms have grown wary of the tech sector despite its critical emergence in the world economy.

To make matters more difficult, Kiladze adds, the tech industry is naturally more reliant on large venture investments, in that products require extensive research and development to bring to market.

"Venture capital is also crucial to the wider Canadian economy," Kiladze adds. "The federal government is staking the country’s future on building a skilled economy that can compete globally, but Canada's skilled workers will have nowhere to work if their startups fizzle out."

Canadian tech leaders such as Research in Motion and OpenText may not have gotten off the ground were it not for their early financiers, he argues.

The U.S. VC market, on the other hand, has shown stronger signs of recovery, albeit from an extremely low point. According to the National Venture Capital Association, venture-capital investment grew by 19 percent last year.

If Canadian venture capital intends to stay in toe with its neighbor, Kiladze argues, it may need some assistance from the federal government.