Canada's VC market cooled amid COVID-19

Data indicates Canadian investors leading the way, but 2020 unlikely to match 2019 performance

Canada's VC market cooled amid COVID-19

The strength shown by the Canadian venture-capital space last year has been sapped away by the coronavirus crisis, according to new data from Toronto-based CPE Analytics.

The data firm reported that in Q1, $1.36 billion was raised across 126 VC financing deals. Relative to the same period last year, that reflected a 26% decrease in the number of financings and 10% in total amount raised.

Compared to Q4, the total amount of VC raised in Q1 2020 was down 36%, though CPE noted that Q4 and Q3 2019 showed the largest quarterly disbursements in Canada’s recorded history. It added that while COVID-19 had an apparent chilling effect on VC activity, it was limited by the fact that deals had already closed or were already being closed before the coronavirus hit Canada full-force.

“One seeming strength of the Canadian VC market has been the diversity of funding sources, which have included substantial participation from US and foreign institutions as well as corporates,” noted Richard Rémillard, president of Rémillard Consulting Group (RCG). “In the wake of COVID-19, it is uncertain whether or not these elements of the Canadian VC market will continue to play a comparably important role going forward which could have direct consequences for the funding of Canada's most promising firms.”

Looking at funding sources, CPE said that Canadian companies saw VC investment from 23 foreign countries, regions, or overseas territories. However, Canadian investors emerged as the space’s biggest benefactors with a total $782 million in capital raised, followed by U.S. investors ($457.2 million) and investors from South Korea ($69 million).

More than half of total VC financing in Q1 went to early-stage companies, which raised $739.4 million. Looking across provinces, the top three in terms of total VC disbursements were Ontario ($636.6 million), Quebec ($359.2 million), and BC ($275.9 million), respectively. Sector-wise, information and communication technology and biotech companies were most favoured, with VC raises reaching $739.4 million and $354.7 million, respectively.

Preliminary data from recent months show that as of April 2020, investment activity is set to surpass that from April 2019, but May and June levels are very depressed. Funding announcements from companies continue to be delayed, CPE added, which makes determining the impact of COVID-19 challenging.


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