2012 Was a Great Year for Startup Financing in Canada, Investors Say

It’s official: we’re finally out of recession mode.

The cautious, conservative mindset investors across Canada adopted following the 2008 recession was well warranted. But it seemed to linger longer than necessary: our country recovered remarkably fast and by 2010 most areas of the economy were functioning normally. Yet startup financing remained atypically low.

This unusual low continued through most of 2011. But last year at long last marked us shedding those recession shackles.

In 2012, investor deals totalled $1.1 billion through the first three quarters, a pace not far off the 2007 high of $2.1 billion for the full year. Moreover, venture capital raised by Canadian funds last year was well over $1.5 billion, up more than 50% from 2011. The momentum is palpable, too.

“I’ve been in venture for nine years and by far 2012 has been the most active year at every level,” Derek Smyth, managing director at OMERS Ventures, told the Financial Post. “[There have been] companies being funded, funds closing and actively investing and continued government support.”

Not only are Canadian investors active, but US investors are active in Canada. Major American VC firms participated in several large startup financing rounds last year, including Montreal’s LightSpeed Retail raising $30 million and Toronto’s Wattpad raising $17 million. They even went in on smaller deals, such when Peter Thiel participated in seed rounds for Canopy Labs and ShopLocket.

Beyond investors, the government has also made tangible efforts to shift startup financing into the next gear. For example, the Business Development Bank of Canada’s Venture Capital IT Fund has a $150 million fund. And the government has set aside $400 million to support private investment in early-stage companies.

And all of this is not to mention the dozens of new accelerators and incubators that sprouted up last year in Canada. These programs don’t always work but their intentions are good and include helping startups raise funds.

These myriad factors combined for an amazing 2012. Now let’s hope for an even better 2013.