The Canadian Venture Capital & Private Equity Association (the CVCA) recently published its 2019 first half (H1 2019) report on Canadian venture capital (VC) and Canadian private equity (PE) investment. Over the past year, Canadian VC investment has continued its ascent, reaching unprecedented heights and experiencing its strongest first half performance on record. Conversely, Canadian PE investment remains feeble, posting its lowest first half performance since the CVCA began collecting data in 2013.
A review of the increasing trends in the Canadian market reveals that VC investment in Canada is very robust and showing virtually no signs of slowing down. With H1 2019 setting record highs, VC-seekers should be excited and motivated by the current state of VC investment in Canada and the innovative environment that it is cultivating.
- Canadian VC investment experiences strongest first half on record: At the close of Q2, the year-to-date Canadian VC investment has hit CAD $2.15B, surpassing the previous first half high of CAD $1.67B in 2018.
- ICT sector continues to receive majority of Canadian VC funding: Information and communication technology (ICT) attracted 54% of total VC dollars invested in H1 2019.
- Shifting back to increased investment in early-stage businesses: Early-stage companies received 45% (CAD $973M) of total VC dollars invested in H1 2019, an 8% increase year-over-year (up from CAD $612M representing 37% last year).
Overview of Canadian VC investment activity
In H1 2019, approximately CAD $2.15B had been invested across 256 deals, representing an average deal value of approximately CAD $8.4M. Despite this marked year-over-year decline in deal volume in H1 2018 (down from 308 deals), the positive result was bolstered by the significant rise in average deal size (from CAD $6M in H1 2018). In total, there were eleven CAD $50M+ mega deals which accounted for a 42% share of total VC dollars invested. Four of these deals exceeded CAD $100M. Making these results even more impressive is the fact that the overall Canadian VC activity numbers for this report do not include VC debt deals, which represented an additional 59 deals in H1 2019.
Ontario continues to be the number one jurisdiction for deal activity with both the quantity of investments (94 deals) and deal size (CAD $1.1B) exceeding the combined total for all other provinces. Toronto-based companies accounted for CAD $741M over 76 deals exceeding the total funding of the next top 9 Canadian cites outside of Montreal. Montreal (CAD $473M over 67 deals) and Vancouver (CAD $158M over 27 deals) rounded out the top three cities, both with respect to deal volume and total investment.
Canadian VC investment by sector and stage
Canadian VC investment continues to be concentrated in the ICT sector, accounting for 54% (CAD $1.2B over 144 deals) of total dollars invested in H1 2019, with life sciences receiving a 27% share (CAD $586M over 55 deals), and agribusiness companies receiving an 11% share (CAD $243M over 20 deals). In fact, of the nine largest deals by value in H1 2018, six were within the ICT sector.
In H1 2019, later-stage companies accounted for 40% ($862M over 44 deals) of total investment. This is a reversal of a trend that appeared to be developing in H1 2018 where later-stage companies received 54% (CAD $901M) of total dollars invested compared to only 41% in 2017. It followed that early-stage companies increased there share to 45% ($973M over 111 deals) of total investment. This is an 8% increase from H1 2018, but still a decline.
The author would like to thank Joshua Hoffman and Daniel Lupinacci, articling students, for their assistance in preparing this blog post.
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