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Canada saw more venture capital invested this quarter—typically the industry’s slowest period—than any other quarter on record, with the dollar value of VC deals surpassing private equity figures, according to the Canadian Venture Capital & Private Equity Association. Here’s what you need to know:
$2.7 billion: The value of venture capital invested in the last quarter. The amount is 161 per cent more than last quarter’s investments, and nearly three times the deal value recorded for the same period last year. It beats the previous record by about $255 million.
178: The number of VC deals in the first quarter. There were 128 deals in the same period last year; the previous record high was 163 transactions in the fourth quarter of 2019.
$1.78 billion: The value of total deals over $50 million. There were 16 deals that met this “megadeal” threshold, accounting for 67 per cent of all dollars invested.
$15 million: The average deal size. More than 57 per cent of deals for the quarter were less than $5 million.
11: The number of companies that exited through an IPO, secondary sales or mergers and acquisitions. The total value of exits was $4.8 billion, almost half the worth of all exits in 2020, a record year for IPOs. St. John’s-based Verafin buoyed that value with its $3.5-billion sale to Nasdaq, which closed in February. There were nine exits of PE-backed companies, worth $2.3 billion, including two IPOs.
54%: The share of VC dollars that went to the information, communications and technology (ICT) sector. The space saw 103 deals worth $1.4 billion. Life sciences garnered 12 per cent of VC dollars, with 24 deals worth $324 million, and cleantech accounted for 10 per cent of investments, with $261 million across nine deals. ICT also attracted the largest share of deals in private equity, accounting for 23 per cent of deals and 21 per cent of all PE dollars invested.
0: The number of private equity megadeals worth at least $500 million. The sector saw $2.6 billion invested in the first three months of the year—one of the lowest quarters on record— despite logging 177 deals, the third most active quarter on record. Seventy-five per cent of PE deals were less than $25 million, “underscoring the important investments Canadian PE makes into [small and mid-sized enterprises],” reads CVCA’s report.
Doubling down: CVCA CEO Kim Furlong said the record first quarter reflects an investing approach that started with the pandemic. “We’re seeing a culmination of what started a year ago, where VCs first looked at their portfolios and how much runway cash [that] companies needed, then decided to pick the most solid companies and double down on them.” Furlong said the interest in startups with high-growth potential during the pandemic helped shift big deals from private equity to venture capital.
The public-market allure: “The performance of the public markets—and specifically the ICT sector, I believe—has driven a lot of companies to take the plunge and decide to go public,” said Furlong. “I think we’re going to continue seeing exits. Based on my conversations with investors … a lot of people are preparing for that.”
Record year in the making: Furlong expects to see more big deals throughout 2021. “I don’t know that we’re going to beat that $2.7 billion quarter over quarter, but if I was a betting woman, I would wager we will pass the 2019 $6.2 billion-mark this year,” she said, referring to the biggest year on record for VC.
A word of caution: The first-quarter results mirror observations from investors across the venture capital pipeline who, on a recent conference call with The Logic, said big deals had propelled startup valuations well above the norm. However, Caisse de dépôt et placement du Québec investor Nayla Chebli warned of possible corrections in valuations that could see firms close down-rounds in their next raises. “The right companies are going to be able to grow into their valuations,” she said, “but I think some of them are going to get hurt in the process.”