ARTICLE
12 April 2024

Deal Points Report: Venture Capital Financings – Resilience And Renewal Characterize The Ecosystem In 2023 (Video)

OH
Osler, Hoskin & Harcourt LLP

Contributor

Osler is a leading law firm with a singular focus – your business. Our collaborative “one firm” approach draws on the expertise of over 400 lawyers to provide responsive, proactive and practical legal solutions driven by your business needs. It’s law that works.
Amid economic flux and technological disruption, Canada's emerging and high growth companies ecosystem embraced resilience and renewal in a rapidly changing environment throughout 2023.
Canada Corporate/Commercial Law
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Amid economic flux and technological disruption, Canada's emerging and high growth companies ecosystem embraced resilience and renewal in a rapidly changing environment throughout 2023. 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 third annual Deal Points Report: Venture Capital Financings, we analyzed 486 anonymized venture capital and growth equity preferred share financings completed by the firm from 2020 to 2023, representing more than $7.7 billion U.S. dollars in total transaction value.

In the video below, Michael Grantmyre, lead author and partner in the Emerging and High Growth Companies Group, outlines the key findings and trends from the Deal Points report.

Transcript

MICHAEL: Hello, my name is Michael Grantmyre, and I am a partner in the Emerging and High Growth Companies practice at Osler.

For the third year, we have published our Deal Points Report: Venture Capital Financings, a comprehensive study of 486 anonymized venture capital and growth equity preferred share financings completed by the firm from 2020 to 2023. These deals represent approximately US$8 billion in total transaction value.

This report is unique within the market as it draws on publicly available data on venture capital and growth equity financings, as well as Osler's confidential anonymized data sources. The 486 financings in this report represent, as a random sample, only a portion of Osler's significant overall financing deal volume.

In fact, from 2020 to 2023, Osler represented clients across the Canadian emerging and high-growth ecosystem in more than 1,100 financing transactions with an aggregate deal value of approximately US$14 billion, of which approximately US$2.2 billion were financings that closed in 2023.

In 2023, we continued to see the effect of high interest rates, among other factors, impacting the Canadian economy and forcing a return of venture investment to pre-pandemic levels of activity. At the same time, our data shows that there were more down rounds and flat rounds than in prior years, as cash conservation and bridge financing strategies were exhausted, forcing companies to go back to the market to raise capital in challenging market conditions and on less favourable terms.

That said, "resilience" and "renewal" characterize the Canadian emerging and high growth companies ecosystem in 2023.

The ecosystem demonstrated resilience as investments, and investment opportunities, in artificial intelligence and cleantech materially increased. And at the same time, Ontario, British Columbia and Québec continued to serve as the major engines of the Canadian venture space, while the Prairies and Atlantic Provinces continued to emerge as critical destinations for venture and growth equity investment in Canada. Renewal also characterized 2023, as early-stage financings accounted for 78% of all such financings in the Deal Points Report, demonstrating investor and founder confidence in the future of the emerging and high growth companies ecosystem in Canada.

For those financings that closed in 2023, and despite a slight uptick in investor friendly terms, key venture financing terms remained largely consistent with prior years where we found that typical key terms were driven by an adherence to the CVCA model agreements in Canada and included:

  • 1x liquidation preferences
  • no participation rights
  • non-cumulative dividends
  • broad-based weighted average anti-dilution rights; and
  • no redemption rights

For 2024, our team continues to monitor the ongoing growth in markets such as the Prairies and Atlantic Canada, and the growth of industries like Artificial Intelligence, Agtech and CleanTech, all of which are uniquely positioned to experience incredible growth in Canada.

We hope you will find the information in the report valuable and informative, and please reach out if you have questions or if we can help your company move to the next stage.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

ARTICLE
12 April 2024

Deal Points Report: Venture Capital Financings – Resilience And Renewal Characterize The Ecosystem In 2023 (Video)

Canada Corporate/Commercial Law

Contributor

Osler is a leading law firm with a singular focus – your business. Our collaborative “one firm” approach draws on the expertise of over 400 lawyers to provide responsive, proactive and practical legal solutions driven by your business needs. It’s law that works.
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