As venture capital deals tumble worldwide, Canada beats the odds

As venture capital deals tumble worldwide, Canada beats the odds

As venture capital deals tumble worldwide, Canada beats the odds Even though venture capital funding across the world sank by 23% in 2016, investment in venture capital-backed Canadian firms remained steady, dipping by only 0.3%.

Referring to a new study by PwC Canada, the Financial Post reported that dollar investment in VC-backed Canadian companies reached US$1.7 billion, virtually the same as the previous year’s total. Global venture capital-backed dollars and deals reached US$21 billion.

The number of deals in Canada fell by 7%, going from 266 in 2015 to 244 last year. Globally, the descent was much more severe at 10%, settling at 1,971 investments in 2016; the heaviest declines were seen in the US and Asia.

“Globally, we’re still bullish on tech overall, but this speaks to the strength of innovation in this country,” said PwC Canada national technology sector leader Chris Dulny in an interview. “And there are also added benefits in our market: the government does a lot of work supporting the ecosystem through tax credits and also uses its own purchasing power, and the lower Canadian currency coupled with our proximity to the world’s biggest market in the US help to enhance investment opportunities.”

The stability in investments was enabled by a Q4 2016 rush, with US$527 million spread over 71 deals pouring in to buoy anemic activity from the first three quarters. Toronto and Montreal were the major pontoons, achieving increases of 10% to US$578 million and 8% to US$334 million, respectively.

Vancouver acted as ballast, with VC funding in the city plunging by 22% to US$250 million. But Dulny said the descent belies positive developments, as the number of deals increased 17% year-over-year, with most being small or early-stage investments.

“There’s nothing structural to the negative number in Vancouver,” he said. “It’s a timing thing, and with more deals at the start-up phase as opposed to the mid-tier, we could very well see dollar increases in the years to come.”

Slicing the data by financing stage, Canadians comprised 60% of seed-funding investors and 57% of early-stage company deals. The number falls to 48% for more mature rounds, where US firms figured more prominently.

A 3% year-over-year increase brought VC funding for the internet space up to US$731 million, giving the sector the most VC investment in 2016. It was followed by mobile and telecommunications, which went up 5% to US$242 million, and healthcare, which declined 34% to US$228 million.


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