Last year was undoubtedly a "year of headwinds" for Canada's emerging and high-growth companies ecosystem. Our team continues to monitor the growth of a robust pipeline of strong, early-stage Canadian companies supported by incredible investors across the country. In our second annual Deal Points Report: Venture Capital Financings, we analyzed 353 anonymized venture capital and growth equity preferred share financings completed by the firm from 2020 to 2022, representing more than $6 billion U.S. dollars in total transaction value.
In the video below, Chad Bayne, founder and Co-Chair of Osler's Emerging and High Growth Companies practice, outlines the key findings and trends from the Deal Points report.
Deal Points Report: Venture Capital Financings
Video transcript
CHAD: Hello, my name is Chad Bayne, and I am the Founder and Co-Chair of the Emerging and High Growth Companies practice at Osler.
For the second year, we have published our Deal Points report: Venture Capital Financings, a comprehensive study of 353 anonymized venture capital and growth equity preferred share financings completed by the firm from 2020 to 2022. These deals represent more than 6 billion US dollars in total transaction value.
The report is unique within the market as it draws on publicly available data on venture capital and growth equity financings, and Osler's confidential anonymized data sources. The 353 financings represent, as a random sample, only a portion of Osler's significant overall financing deal volume.
In fact, from 2020 to 2022, Osler represented clients across the Canadian emerging and high-growth ecosystem in 837 financing transactions with an aggregate deal value of approximately 12 billion US dollars, of which approximately 4 billion US dollars were financings that closed in 2022.
We have examined these transactions and distilled insights from the data.
Last year was undoubtedly a "year of headwinds" for Canada's emerging and high-growth companies ecosystem. However, I see a number of signs of resilience and reasons to be optimistic for 2023.
For 2022, early-stage financings represented the bulk of financings covered by the Deal Points Report, accounting for nearly 73% of all such financings. This is a strong indicator that investors and founder teams are making long-term bets on the growth and resilience of the Canadian ecosystem.
For those financings that closed in 2022, key venture financing terms for those financings remained consistent with historical norms and standards, even with ongoing pressures on valuations and market uncertainty. The standard terms include:
- 1x liquidation preferences
- no participation rights
- non-cumulative dividends
- broad-based weighted average anti-dilution rights; and
- no redemption rights
It is worth noting that the number of women co-founded companies in the Deal Points Report rose to 16.4% in 2022, up from 13.3% in 2020 - a positive sign of the rising number of women in the Canadian ecosystem.
While the percentage of women co-founded companies in Seed stage financings covered by the Deal Points Report dropped to 16% in 2022 (from 20% the year before), the percentage of women co-founded companies represented in Series A and Series B financings covered by the Deal Points Report increased in 2022 to 19% and 21%, respectively, up from 10% and 11%, respectively, in 2021.
The growth in Series A and B rounds for women co-founded companies is a noteworthy trend. However, we know there is still much work to be done in increasing the participation of women in the ecosystem.
To help support this continued growth, Osler has implemented several initiatives and programs directly targeted at women co-founded companies, which are discussed in more details in the Deal Points Report.
For 2023, our team is closely watching the ongoing growth in markets such as the Prairies and Atlantic Canada, and in industries like Artificial Intelligence, AGtech and CleanTech – 3 key sectors that are of great importance to the Canadian economy.
Overall, we see a robust pipeline of strong, early-stage Canadian companies supported by incredible investors across the country. We certainly expect to see these trends continue.
Osler believes the Deal Points Report data should be available to all stakeholders within the Canadian ecosystem, to ensure that all market participants have access to the same level of information on market terms.
We hope you will find the information in the report valuable and informative.
Please reach out if you have questions or if we can help your company move to the next stage.
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