The majority of Canada's venture capitalists are increasingly optimistic about the economy's prospects in the months to come, according to a survey by Deloitte & Touche and the Canadian Venture Capital Association.

Buoyed by the widespread belief that the impact of this year's economic challenges will quickly fade away, about 58 per cent of VCs expect general economic improvement over the next six months.

That majority is a big jump from the result of 25 per cent in the Canadian Venture Capital Confidence Survey carried out three months ago.

The result is also far stronger than in the U.S., where only 30 per cent of VCs surveyed expect economic improvement.

"The second quarter of 2003 was one of the toughest periods the Canadian venture capital industry endured," Michael Badham of Deloitte & Touche said in the report.

"Diseases outbreaks, unstable global economic and political conditions were only a few of the factors which derailed investment levels to a seven-year low. With these obstacles out of the way, Canadian VCs are looking to a brighter future which unfolds greater investment opportunities and higher valuations."

About 39 per cent of Canadian respondents said they plan to spend most of their time on new investments.

VCs also expect higher returns on their investments over the next six months. About 29 per cent and 55 per cent of respondents expect exit and portfolio valuations to increase. That compares to 14 per cent and 39 per cent, respectively, in the last survey.

Computer software is seen as the favourite sector for VC dollars, with the percentage of respondents planning to invest in software firms jumping to 44 per cent from 21 per cent.