CVCA’s public quarterly market overview reports provide a deep analysis of the Canadian market, offering a panoramic view of private capital trends and investments. These comprehensive reports utilize data from the CVCA Intelligence platform, Canada’s foremost private capital database. They highlight performance indicators, emerging sectors, and strategic shifts, empowering stakeholders with crucial insights for informed decision-making.

This quarter highlights a mixed landscape in Canadian venture capital (VC), marked by strong performance in life sciences but challenged by a broader decline in deal volume and varied sector performance.

In Q12024, VC investments totaled CAD $1.3B across 128 deals, matching the investment levels of Q12023, but experiencing a 28% decline in the number of deals, marking the lowest volume since 2021. Notably, the average deal size surged to CAD $10M, a significant 47% increase from Q12023, spotlighting the trend of prioritizing quality over quantity.

It was a strong quarter for life science investment, with CAD $425M raised across 30 deals. This sector nearly matched investments in information and communication technologies (ICT), which saw investment totaling CAD $464M across 69 deals. 

“This quarter marks a continuation of the trend we’ve seen since 2021, where investors are increasingly selecting ventures with proven fundamentals and resilience,” said Kim Furlong, Chief Executive Officer, CVCA. ​“The standout success in the life sciences sector this quarter highlights a shift toward sectors known for their high growth and innovative capabilities.” 

Early-stage investments remained strong with CAD $576M invested across 38 deals, maintaining consistency with the performance seen in 2023. However, seed and pre-seed stages saw a notable decline, with pre-seed investments dropping back to 2020 levels. Later-stage investments continued their downward trajectory with the lowest number of deals recorded since 2017.

Venture debt financing remained stable with CAD $102M invested across 11 deals, reflecting its continued role in supporting startups amidst a tightening funding environment. 

The quarter also witnessed strong exit activity with 18 exits totaling CAD $4 billion, already accounting for 50% of the total exit value of 2023.

Despite the adaptability demonstrated by venture investors in navigating current market dynamics, the government’s decision to increase the inclusion rate on capital gains, as presented in the recent federal budget, is a significant blow to the industry. The CVCA is staunchly contesting this policy and adamantly pressing the government and stakeholders to recognize the detrimental effects it will have on Canada’s future prosperity.

The quarter witnessed CAD $4B raised across 140 deals, demonstrating a bounce back from lower investment levels recorded in 2023.

A key driver of this resurgence was a series of privatization deals. Notable among these were transactions involving companies like Logistec Corporation and Neighbourly Pharmacy, with privatization deals contributing to 47% of the total exit value for the quarter.

In terms of deal size, 84% of all disclosed deals remained below $25M, consistent with historical trends. This consistency highlights the role of PE in supporting Canada’s small and medium-sized enterprises (SMEs), which are crucial drivers of the nation’s job creation and economic stability. These investments not only provide the necessary capital to foster growth and innovation within these companies but also equip them with the expertise and governance to navigate increasingly complex market conditions, underscoring private equity’s integral role in promoting sustainable economic development across the country.

“This quarter, we’ve observed a strategic shift towards privatization,” said Kim Furlong, Chief Executive Officer, CVCA. ​“These transactions showcase private equity as a reliable partner, providing both stability and growth in increasingly turbulent markets. It’s a testament to the resilience and adaptability of Canadian investors to not only weather market conditions but adapt to secure substantial growth and returns.”

Sector-wise, the automotive and transportation sector led investment volumes for the first time on CVCA records, attracting CAD $1.4B across six deals, representing over a third of total investments. The ICT sector followed closely, with CAD $1.3B invested, continuing its recent dominance in the PE space. The industrial and manufacturing sector was the most active in terms of deal count with 35 transactions, though the total investment of CAD $194M was significantly lower compared to previous years.

Exit activity also saw a rebound, with 15 exits totaling CAD $2.8B, already surpassing the total exit value of 2023. Mergers and acquisitions represented 80% of the exits and 48% of the disclosed exit value, while secondary buyouts accounted for 20% of the exits and 52% of the total disclosed value.