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The Canadian Venture Capital & Private Equity Association is seeking new federal money for the funds-of-funds that manage investments for startups through the Venture Capital Catalyst Initiative (VCCI). The CVCA anticipates it will become harder for funds to raise money, and that they’ll need more public support to help startups close deals. (The Globe and Mail)

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Talking point: While there was a spike in VC funding in the first half of the year, CVCA president Kim Furlong said that activity was driven by the need for investors to shore up their portfolio companies’ coffers to help them survive the pandemic. That relief funding was possible in part because several funds had raised big rounds pre-pandemic. As that money dries up, investors may look to government programs to incentivize new activity. BDC Capital, which manages venture capital programs for the federal government, did launch a $300-million bridge-financing program for COVID-19 relief in April and still has about two-thirds of its budget to deploy. However, several startups told The Logic the terms of the program are too prohibitive. BDC executive vice-president Jérôme Nycz noted that the emergency program is only a stopgap, and that startups will in fact need access to larger funding rounds to keep growing.

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There were 539 deals last year, according to a new report from the Canadian Venture Capital and Private Equity Association (CVCA). Toronto was the city with the most VC investment, at $1.8 billion, followed by Montreal and Vancouver. (The Logic)

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Talking point: The CVCA’s numbers are a bit higher than PwC’s roundup, which found that US$4.1 billion ($5.6 billion) was raised last year. The CVCA uses data investor-submitted data, while PwC works with CB Insights, which only partly relies on data from investors. The CVCA found private equity hit $19 billion in 2019, a drop from the $22.7 billion raised in 2018. There was much more activity on the earlier end, with 43 per cent of all VC deals coming in at the early stage. Canada is starting to see more so-called mega-deals, with 10 worth over $100 million and five worth over $200 million. There was also some good news for the cleantech sector, in which the government has been investing significant resources to bolster. All in, there were 29 cleantech deals with $407 million raised.

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The federal government awarded the Philadelphia-headquartered asset manager nearly $80 million under the Venture Capital Catalyst Initiative (VCCI), which gives investment firms money toward new funds that invest in Canadian tech companies. The firm had until the end of this June to secure the matching private-sector capital, and had originally aimed for a $275-million fund. But it only received Ontario Securities Commission approval to raise funds last May. (The Globe and Mail)

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Talking point: The firm was the newcomer to Ottawa’s VC seed-funding program—HarbourVest Partners, Kensington Capital Partners, Northleaf Capital Partners and Teralys Capital, who split the rest of the initial $350-million pot, all participated in the VCCI’s predecessor. Hamilton Lane hired Mike Woollatt, the former Canadian Venture Capital and Private Equity Association CEO, to run its new Toronto office, but couldn’t lock down the additional funding; the other firms raised from major financial institutions or institutional investors. The government has yet to decide where to reallocate the nearly $80 million, but it has previously set up additional $50-million VCCI streams for fund managers focused on underrepresented groups and clean technology, respectively.

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It’s the fifth fund for the Toronto-based late-stage-tech investor. The firm, which has backed companies like Shopify and Ritual, declined to comment. (The Globe and Mail)

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Talking point: Georgian’s last fund, closed in August 2018, was one of the largest VC funds in Canadian history, hitting $714 million. Founded in 2008, the venture capital firm ranks high in investment returns among its North American peers; it largely invests in companies that use artificial intelligence. One of its key offerings is its “impact team” that includes research scientists, analysts and engineers who help the fund’s portfolio companies develop software tools to improve their customer analysis. Earlier this month, Georgian co-led a US$55-million Series D round for Top Hat, a Toronto education-tech company.

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Overall funding increased 16 per cent, marking the third consecutive annual increase and the highest number since at least 2014, according to a report by PwC Canada and CB Insights. (The Logic)

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Talking point: There’s more money overall, but fewer firms are making investments. The number of deals decreased 11 per cent, but deal size jumped 13 per cent. Vancouver is emblematic of the trend. The city hit a six-year high, with US$924 million raised across 72 deals, compared with US$395 million raised across 109 deals the year previous. Waterloo also had a strong year, with an 81 per cent increase in terms of money raised. Toronto and Montreal took first and second place in funds raised, with US$1.3 billion and US$931 million, respectively, but neither moved much compared to previous years. Cleantech firms had a mixed year, with funding dropping 33 per cent, though the number of deals jumped 50 per cent. Fintechs, by contrast, had a banner year, with funding more than doubling to US$776 million.

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Energy companies use the startup’s controller hardware and software platform to get more oil and gas out of their wells. Cottonwood Venture Partners and Mercury Fund participated in the Series B round; Ambyint has an office in Houston, and plans to grow its teams in both cities. (The Logic)

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Talking point: Both investors focus on startups working on optimization and productivity technology for companies in legacy industries. Ambyint claims its AI increases output by five per cent and drops operating costs by 10 per cent. While many Canadian energy firms are considering digital investments to improve efficiency, they lag global rivals in technology adoption, according to research from EY—a shortcoming that’s not unique to the sector. Ottawa has previously backed innovation in the space: Sustainable Development Technology Canada awarded Ambyint $3.4 million in funding in October 2018. But other governments are also showing interest, with the U.S. energy department reportedly planning billions in AI investment over the next decade.

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Average deal size hit $19 million, nearly triple what it was during the same quarter last year, according to data compiled by the Canadian Venture Capital and Private Equity Association. There was $1.8 billion in private equity investment in the quarter, an eight per cent decline compared to the same quarter last year. (The Logic)

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Talking point: Canadian private equity and venture capital have been going in opposite directions all year. In the first half of 2019, private equity investment hit $4.9 billion, its lowest number since 2013. Today, venture capital investing hit a high—$2.4 billion invested in a single quarter—not reached since 2013. Private equity deal size is 46 per cent lower this quarter compared to the past three years’ average. Venture capital deal size is up 215 per cent compared to the average over the past five years. Most of the private equity strength is in Quebec, where three out of every five disclosed deals took place. For venture capital, the strongest areas are Vancouver, Montreal and Toronto, where 64 per cent of all dollars were disbursed.