There’s a buzz about venture capital now that’s growing ever louder. The buzz is growing to impressive volumes nationally, but here in Atlantic Canada it’s reaching unprecedented decibel levels.

The numbers are starting to show the reason for optimism. As I wrote last month, 2011 should prove to be a record year for VC investment in the region, especially in Nova Scotia. But statistics can prove a one-time aberration, and the chatter among investors right now goes beyond big investments in or exits by a handful of companies.

What’s happening on a national level is fascinating because Canada never recovered from the dotcom bust of 2001. For more than a decade there’s been a drain of funds from the VC industry. Even though VC investments in companies began to recover this year, there is still no increase in money flowing into VC funds themselves. But that may be changing as well.

Omers, the Ontario municipal employees pension group, this year opened a VC fund with an initial $180 million investment, and Avrio Ventures of Alberta has already closed $50 million of its second fund, which it hopes will be worth $100 million.

And of course, our own Atlantic Regional VC Fund will open its doors early next year. New Brunswick and Nova Scotia have both committed $15 million to that fund, and from the beginning the backers hoped it could attract additional investment. The hope is that the other two Atlantic Provinces (which now have their provincial elections behind them) will come in, as will the federal government, likely through the Business Development Bank of Canada. And finally – arguably most important – there was hope private investors would back the fund.

The development of this new fund has reached an interesting stage. Wilson Executive Search, Innovacorp and the people putting the fund together are in the final stages of selecting a manager for the fund, which is due to open next year. As I’ve written before, the selection of the manager will be key to attracting new money, and I’m optimistic that they’ll get it right. It sounds trite to say it but the creation of this fund is something rare in Atlantic Canadian history: the principals realize it can be a strong agent for change and development and they are emphasizing the success of the fund rather than narrow provincial interests.

It appears this fund will be larger than the $30 million now committed, but the question is how much larger? With a fair wind behind it, I bet the commitments for this fund could exceed $70 million within a year.

So here are the factors we’re dealing with: increased activity in Canadian VC, new funds coming into this asset class and the creation of a new, hopefully well capitalized, fund in Atlantic Canada. But there is one more intangible that cannot be overestimated; the willingness of VC funds from outside the region to back companies here.

This can’t be overestimated because for too long the kneejerk reaction of fund managers west of Gaspe Bay or south of the border was to reject our companies simply because they were based in Atlantic Canada. New Brunswick’s Radian6 (which exited for about $370 million) and Q1 Labs (its exit was rumored to be worth $600 million) put the kibosh to the myth that East Coast companies are inferior companies. 

Now, outside VCs are noticing us. Of the two VC funds that I mentioned above, Avrio has already invested in Origin Biomed of Halifax and Ascenta Health of Dartmouth. Omers Ventures is one to watch. And just last week, GoInstant of Halifax was voted the most impressive company at 48 Hours in the Valley, raising its profile among the top tech VCs in the world.

With their capital growing, outside VCs are now willing to look at Atlantic Canada while our own regional fund gets up and running. The buzz is inspiring and I believe it’s justified.