Canadian VC investments down sharply in Q2 compared to US VC activities

US and International VC funds abandoned Canadian market in Q2, 2022
Canadian VC disbursements reached $1.17 billion in Q2, down 67% from Q1 2022 and 76% from Q2 2021

  • 299 financings for $4.72 billion for the first half of 2022. 127 venture capital financings for disbursements of $1.17 billion in Q2 2022.

  • Investors from US and foreign countries/regions invested $3.31 billion accounting 70% of the total disbursement, down from 74% recorded in Q1 2022. US investors invested $2.62 billion or 55% of the total.

  • Cleantech companies received $603 million, third behind $2.78 billion by ICT companies and $634 million by financial companies.

  • Biotech companies raised $464 million, continuing to lag at fourth place down from its usual second place.

  • US VCs and foreign corporate VCs continue to lead all investor types with $1.69 billion and $574 million investments respectively. Canadian VCs ranked 3rd investing $410 million.

  • $1.72 billion raised by 21 Canadian venture funds.

All dollar ($) figures in Canadian dollar unless otherwise noted.

TORONTO, Aug. 18, 2022 /CNW/ – Canadian companies secured $1.17 billion in venture capital funding1 through 127 financings in Q2 2022, down 67% from the amount raised in Q1 2022 and 76% from the amount raised in Q2 2021.

CPE Analytics, a division of CPE Media & Data Company (CNW Group/CPE Media Inc.)

For the first half of 2022, Canadian VC disbursements reached $4.72 billion from 299 financings, down 40% from total disbursements in first half 2021.

NVCA/PitchBook reported Q2 2022 US activities showed an decrease of 24% from Q1 2022 and 23% from Q2 2021, an decrease of 9% for the first half compared to first half of 2021.

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1 CPE Canadian VC investment data includes only primary funding by companies and excludes secondary transactions involving investors buying shares from founders or existing investors with no money flowing into companies. US $300 million secondary transaction as part of 1Password’s US $620M Series C transaction was excluded, so were some known PE transactions (Hydrostor), VC deals by foreign HQ companies with Canadian subsidiaries (Domain Therapeutics, Shoplazza, Ventus, Faire Wholesale.).  CPE data is based on closing date not the announcement date for accurate tracking of Canadian VC investment activities.

H1 2022 VC funding sources (who funds Canadian companies)

US and foreign investors invested $2.62 billion and $689 million or 55% and 15% of the total disbursements respectively.  Canadian investors invested $1.41 billion or 30% of the total, up from historical low of 27% recorded in Q1 2022.

Top six investor types in H1 2022 were US Private VCs ($1.69 billion), Foreign Corporates ($574 million), Canadian Private VCs ($410 million), US Corporates ($323 million), Canadian Governments ($250 million), and Canadian Corporates ($247 million).

Non-traditional VC investors followed with US mutual/hedge funds investing $219 million, Canadian family offices investing $173 million and US family offices investing $151 million.

H1 2022 VC disbursements

Provinces
Ontario companies raised $1.8 billion from 97 financings, leading Quebec and BC companies which raised $1.37 billion and $885 million respectively.

Alberta and Saskatchewan, only other $100 plus provinces, saw their companies raise $431 million and $118 million respectively.

Municipal Cities
Companies from 41 cities secured venture capital funding. The top 10 cities, including Toronto, Montreal, Vancouver, Calgary, Waterloo, Quebec City Saskatoon, Mississauga, Victoria, Kitchener, raised a combined of $4.40 billion accounting for 93% of total disbursements.

City of Toronto and City of Montreal companies raised $1.44 billion and $1.22 billion respectively, together accounting for 56% of total disbursements.

Sectors
ICT companies raised $2.78 billion or 59% of the total amount. Financial companies raised $634 million (13%).

Cleantech2 companies raised $603 million (13%) ranking as third active sector.

Biotech raised $464 million, continuing to lag behind dropping from its usual 2nd place in all sectors.

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2 CPE Analytics has re-classified and included advanced agri-tech in cleantech.

Stages
Early stage and growth/late-stage financings led in all stages, raising $3.04 billion and $1.12 billion respectively.

Seed/pre-seed stage financings raised $265 million from 67financings representing 22% of total number of financings.

Company size
Companies with 0-49, 50-99, 100-400 and 500+ employees raised $3.04 billion, $234 million, $1.04 billion, and $401 million respectively.

H1 2022 VC fund fundraising

21 Canadian venture capital funds, including 19 private, 1 social impact, and 1 corporate funds, raised $1.72 billion in H1 2022.  14 funds raised $758 million in Q2 2022.

H1 2022 VC law firms

24 known law firms acted as legal counsels in various capacities for the companies or the investors.

Osler, Hoskin & Harcourt LLP, Fasken Martineau DuMoulin LLP, Borden Ladner Gervais LLP, Bennet Jones LLP, and LaBarge Weinstein LLP were the top five VC law firms in number of VC financings.

“As expected, Q2, 2022 VC investing volumes were down significantly in Canada. Not only have VC investments fallen dramatically quarter over quarter and year over year in Q2, but the Canadian market has experienced a much sharper downturn than in the US. It is worth noting that the data reveal a much steeper decline in VC investing in Canada on the part of US, particularly, and international funds than that of Canadian funds which has had the effect of boosting the market share of domestic VC investors. This reveals a pattern evident in previous downturns, when US market participants were perceived to have rapidly exited Canada when times got tough. The reliance on US and foreign VC investment, while actively pursued by federal and provincial authorities alike does reveal a strategic vulnerability in the innovation economy that will likely need to be addressed as the peak to trough to peak cycle in VC is likely to be an enduring feature of the asset class. One partial solution, in the eyes of many, has been the potential contribution of corporate Canada to fuelling VC investment volumes. But, as this data set reveals, such an expectation is not likely to be met any time soon given the paltry contribution of the Canadian corporate VC to the overall level of investment,” commented Richard Rémillard, President of Rémillard Consulting Group (RCG).

Summary report

Summary report can be downloaded from financings.ca website:  https://www.financings.ca/reports/

Methodology

Included

Excluded

Rémillard Consulting Group (RCG)

Rémillard Consulting Group (RCG) is a unique, Ottawa-based, bilingual consulting firm specializing in providing private sector, government & trade association clients with creative, research-grounded solutions to business issues and public policies involving the Canadian financial services industry. For more information: rremillard@bellnet.ca

CPE Analytics

With over 65,900 financing transactions and 89,100 data points in its all financings.ca database, CPE Analytics is Canada’s leading all financing intelligence provider.  We provide comprehensive, verified and unbiased information and unmatched insights and intelligence on private and public financings, initial public offerings (IPOs), M&As, professional investment firm fundraising activities.

CPE Analytics is the data analytics division of CPE Media & Data Company.  More Info: https://cpeanalytics.cahttps://financings.ca

CPE Media & Data Company

Founded by Canada’s the most experienced private capital and financing research experts, CPE Media & Data Company is Canada’s leading all financing news and intelligence provider. More information: https://cpecompany.ca/

US investors leading Canadian VC funding source (CNW Group/CPE Media Inc.)

SOURCE CPE Media Inc.

Cision

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