Canadian Venture Capital

In the first three months of 2019, the Canadian venture capital (VC) industry invested CAD $1B across 142 deals. This is the fifth billion-dollar quarter since 2013 and is almost double (48% higher) the investments made in the same quarter in 2018.

There were seven mega-deals ($50M+) in the first quarter which accounted for a 57% share of all dollars invested. Three noteworthy mega-deals include Toronto-based Vena Solutions Canada Incorporated’s CAD $115M growth equity financing from US investors; Squamish-based Carbon Engineering Limited’s CAD $90M round from two US cleantech investors; and Montreal-based Enerkem’s CAD $76M round from a syndicate which included Cycle Capital Management/Ecofuel, Fondaction CSN, Fonds de solidarite FTQ, and National Bank of Canada.

Montreal-based Lightspeed POS Inc. completed the largest and only IPO exit since 2017 with a market capitalization of CAD $1.1B.

“It’s great to see continued momentum across the Canadian VC industry with this fifth billion-dollar quarter in less than 10 years,” said Kim Furlong, Chief Executive Officer, CVCA. “Lightspeed’s exit this quarter is another proud accomplishment for the industry. We will be keeping an eye on the exit environment throughout the remainder of 2019.”

On trend with historical geographical allotment of VC investment, Ontario-based companies received the bulk of VC dollars in Q1 (46% or CAD $481M) while Quebec-based companies received 19% (CAD $198M) followed by British Columbia-based companies receiving a 17% share (CAD $173M).

The top three sectors in Q1 were Information and Communication Technologies (ICT) with a 59% share of total dollars invested (CAD $616M over 80 deals) followed by Cleantech’s 19% share (CAD $201M over 11 deals) and Life Science with 14% ($145M over 26 deals).

Canadian Private Equity

PE Investment was 72% lower in the first quarter of 2019 compared to the same period last year with CAD $1.9B invested over 130 deals. The pace of private equity also slowed in the first quarter with only 9 M&A exits totalling CAD $270M.

The largest disclosed deals in Q1 2019 were the CAD $199M acquisition of British-Columbia-based Prepac Holdings Inc. by Torquest Partners with financing support from Export Development Canada (EDC); and Goodlife Fitness Centres Inc.’s CAD $100M debt financing from Penfund Inc.

“Our private equity members are reporting that the current high valuation environment continues to impact their deal flow,” said Kim Furlong, Chief Executive Officer, Canadian Venture Capital and Private Equity Association. “While the first quarter was slow, we anticipate that private equity activity will rebound in subsequent quarters.”

A fifth of all PE deals in the first quarter (27 out of 130) were closed in the Information and Communication Technologies (ICT) sector totaling CAD $929M, representing almost half of all invested dollars. The Industrial & Manufacturing and Consumer & Retail sectors closed 43 deals combined receiving CAD $562M or 29% of all dollars.

Four out of every 10 deals in Q1 2019 were debt transactions with deal sizes averaging CAD $11.8M, which is one and a half times higher than Q1 2018.