Venture Capital in Canada Rises to $2 Billion – Highest Level Since 2007: CVCA

February 27, 2014

Venture capitalists invested more money in Canadian companies in 2013 than in any year since 2007, according to new report released by Canada’s Venture and Private Equity Association.

VCs made a total of $2 billion in new investments during the year, an increase of 31 per cent from 2012, according to the report which was prepared by Thomson Reuters for the CVCA.

VC aren’t making that many more deals though – they made 452 investments last year an increase of only two per cent from 2012.

Instead, the dollar value of the average investment increased, from $3.3 million in 2012 to $4.3 million in 2013.

That increase was driven in part by several large rounds, particularly HootSuite’s $165 million Series B – one of the largest VC deals in Canadian history – and Shopify’s $100 million Series C.

The Shopify deal, along with Real Matters’ $40 million round helped push total investments in the fourth quarter of 2013 to $547 million. That’s a 40 per cent increase from the same period the previous year.

A large percentage of money funding these larger investments in coming from outside the country. The report found that foreign funds invested $828 million in Canadian companies in 2013, more than double the $384 million in foreign VC Canadian firms received last year. That pushed the foreign investment to 42 per cent of all VC dollars invested last year, up from 26 per cent the year before. Unsurprisingly, the far majority of those foreign investors were from the United States.

Of all the VC investments $1.1 billion – 54 per cent of the total went to information technology companies, with $497 million going to internet-focused companies. That’s up 56 per cent from $217 million last year. Another $378 million went to software companies, the report said.

Clean tech and alternative energy, along with biotech and life sciences accounted for most of the remaining deals.

Ontario-based companies continued to receive the majority of venture capital investments receiving $676.4 million. Quebec companies received the second highest amount, $589 million, while B.C. saw the largest increase, from $198 to $478 million.

“The investment results for 2013 are really encouraging and pushed Ontario, Quebec and BC into the top 10 regions for VC ranking in North America,” said Peter van der Velden, president of the CVCA and managing general partner of Lumira Capital in a press release. “Investment activity this year highlights Canada’s phenomenal potential as an innovation leader in the global economy and these investments illustrate the both the importance and rationale for a strong domestic Canadian venture capital ecosystem.”

The majority of the investments made last year came from institutional investors.

The Business Development Bank of Canada led the government funds category, with 86 deals worth an estimated $74 million.

Quebec-based labour sponsored fund Fonds de solidarité FTQ, led the pension, retail and corporate fund category, making 75 deals worth an estimated $78.2 million. When it comes to private independent funds Yaletown Venture Partners, which has offices in Vancouver, Calgary and Seattle, made the most deals, 14, worth an estimated $14.5 million. Calgary-based Avrio Capital had fewer deals, eight, but is estimated to have made the largest investments, a total of $20.6 million.

While VCs may have been investing more money in 2013, they raised less than in 2012.
According to the report, “new capital commitments to partnerships and other funds totalled nearly $1.3 billion last year,” down 24 per cent from 1.8 billion last year.

“Long term sustainable capital still remains a big concern,” said van der Velden. “Continued performance by independent partnerships and the implementation of programs such as the federal Venture Capital Action Plan should help the sector to continue to build on the positive momentum and hopefully encourage more corporate and institutional investor commitments to top-tier Canadian venture capital partnerships.”