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H1 - 2020 - Canadian VC & PE Market Overview
H1 - 2020

Canadian VC & PE Market Overview

Venture Capital Key Findings

CAD $1.7B Invested in Q2; Larger Cheque Sizes Drive Strongest Q2 Performance on CVCA Records
Later stage companies received half of all funding in the first half of 2020

CAD $1.7B was invested over 145 deals in the second quarter of 2020 which is 23% higher than the same quarter in 2019 ($1.35B) and more than double the amount invested in Q12020 ($818M). This was the highest investment in a second quarter since the CVCA began collecting industry data in 2013.

Large deal sizes (CAD $20M+) drove most of the dollars invested in H12020 which accounted for 69% of the total dollars invested. 11 mega-deals (CAD $50M+) closed in Q22020, totalling $884M invested. As a result, the average deal size in Q22020 was CAD $11.45M; 56% higher than the average deal size during the five-year period between 2015 – 2019 (CAD $7.3M).

Later stage Canadian companies received 50% of all funding (CAD $1.2B) in the first half of 2020, a sharp increase compared to the share of funding later stage companies collected last year with only 22%. 

VC investment activity in Q2 was driven by government stimulus coupled with a slight adjustment in valuation,” said Kim Furlong, CEO, Canadian Venture Capital and Private Equity Association.We saw fewer deals, larger injections in portfolio holdings and VCs reviewing and re-evaluating deal flow that they may had passed on last year. The key is that VCs are continuing to invest.”

There were 13 mega-deals (CAD $50M+) in the first half of 2020, which accounted for a 43% share of total dollars invested. Included in the mega-deals was Kitchener-based Miovision’s CAD $120M founding round led by TELUS-ventures with participation from previous investor, McRock Capital. 

The pace of VC-backed exits picked up in Q2, with an additional 9 exits closed. VC exits remain slow in comparison to previous years, with only 10 M&A exits in the first half. Two important VC-Backed IPOs were completed in Q2, both in the life sciences sector:

  • Montreal-Based Repare Therapeutics listing on the NASDAQ with a market cap of $1.5B
  • Hamilton-Based Fusion Pharmaceuticals went public on the NASDAQ, with a market cap of $964M

An additional notable exit was inovia Capital-backed North, Inc., which was acquired by Google for a reported $180M.

VC Highlights

  • 62% of deal flow (163 out of 264 deals) was less than $5M with 51 deals between $5M-$20M totaling $507M
  • Ontario-based companies received 42% of investment ($1B); Quebec-based companies received a 24% ($599M) share followed by BC-based companies with 22% ($555M)
  • ICT companies grabbed 53% of total dollars invested in H12020 ($1.3B over 145 deals) with life sciences companies receiving a 29% share ($722M over 47 deals)

Private Equity Key Findings

PE investment Up 33% in First Half of 2020 compared to H12019
PE in 2020 is pacing along the 2015 – 2019 average

PE performance is pacing along with the average between 2015 – 2019 in both deals and dollars invested (565 deals and CAD $21B) with $4.5B invested over 145 deals in the first half of 202033% higher than the amount in the same period last year (CAD $3B).

There was a total of six mega deals (CAD $500M+) so far in 2020, totalling CAD $7B, 67% of total dollars invested (CAD $10.4B). 83% of PE deals were below $25M (198 out of 238 deals with disclosed values).

Canadian PE investors continue to pursue transactions despite COVID-19,” said Kim Furlong, CEO, Canadian Venture Capital and Private Equity Association. As Canada and international business cautiously open back up, I am encouraged to see resilience and confidence from Canadian Private Equity investors. There may still be some uncertainty ahead, but there is also opportunity.”

PE Highlights

  • Although a fifth of all deals (61 out of 297) were closed in the Industrial and Manufacturing sector, the sector only represented 11% of total dollars invested with CAD $1.2B. The lion’s share of invested dollars was captured by ICT sector (CAD $3B),driven by the $2.7B secondary buyout of Xplornet Communications Inc. by Northleaf Capital Partners to a US-based private equity firm.

WEBINAR CVCA Member-Only VC & PE Canadian Market Overview // H1 2020

On August 24th, our CEO, Kim Furlong along with our Associate, Research & Product, David Kornacki, walked CVCA members through the latest industry intel and provided market colour prior to the official release of the reports on August 26th.

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