Venture Capital Key Findings
Strongest Quarter on Record with CAD $2.7B Invested
VC-backed exits soared with 11 exits valued at CAD $4.8B
Q12021 was the strongest quarter on record for VC investment with $2.7B invested over 175 deals in the first three months. There were 16 mega deals ($50M+) in Q1, accounting for 67% of total dollars invested in the quarter. The average deal size was CAD $15M. Over 57% of the 175 deals in Q1 were less than CAD $5M, with most of these deals ranging between CAD $1M-5M.
Later stage investments received half of all the VC funding in this quarter with a 71% increase in deal count and a 277% increase in dollars invested year-over-year (YoY), a signal that more Canadian companies may be preparing for an initial public offering (IPO). Notable later stage deals in Q1 include Vancouver-based fintech company Fraction, Toronto-based education technology company Top Hat, and Toronto-headquartered fintech company ClearCo (formerly Clearbanc).
“The record quarter was propelled by late-stage deals with an increase in investments in Canada’s best-performing companies,” said Kim Furlong, Chief Executive Officer, CVCA. “VCs are willing to stay the course across all stages of the startup life cycle. This rise of growth is contributing to the current IPO rage which is expected to continue throughout 2021. It’s an exciting time for Canada’s innovation sector and a testament to the role VCs play in our economy.”
There was a total of eleven exits valued at CAD $4.8B in the first quarter of 2021 which is 30% of the number of exits and almost 50% of total exit value in all of 2020. The largest exit this quarter was St. John’s‑based fintech company Verafin, acquired by NASDAQ for CAD $3.5B, one of the largest exits on record, with participation from Information Venture Partners, Northleaf Capital, BDC Capital, and Teralys Capital. Another notable exit was Dialogue Health Technologies’ IPO, listing on the TSX for $779M, the Montreal-based electronic health company followed 2020’s trend of Canadian life sciences companies going public during the COVID-19 pandemic.
The information, communications, and technology (ICT) sector received more than 54% of the total investment in the first quarter of 2021, with CAD $1.4B invested across 103 deals. The life sciences sector received 12% of the investment with CAD $324M across 24 deals, and cleantech received around 10%, with CAD $261M across 9 deals.
For a deeper look into the performance of Q1 as well as the trends uncovered in 2020, the Canadian private capital industry will be gathering for CVCA’s Invest Canada ’21 on June 8 and 9. This year, there are several expert-led panels dedicated to exploring current themes including the IPO boom, the increase in SPACs, and the economic potential of Canada’s life sciences industry. For more information, visit the Invest Canada website.
Private Equity Key Findings
Small Mid-Market Deals Dominate PE Q1 Activity
Exit environment on track to outpace 2020
Although Q1 had the highest level of PE investment activity on record in a first quarter with 177 deals, the first quarter had the third-lowest level of Q1 dollars invested based on CVCA records, with only CAD $2.6B invested.
There were two PE-Backed initial public offerings (IPO) in Q1, setting 2021 on track to have the greatest number of IPOs on record. There were 10 exits in the first quarter overall, with five mergers and acquisition (M&A) transactions and three secondary buyouts. 2021 is pacing above 2020’s exit levels. The largest exit was the IPO of Ontario-based automotive component manufacturer ABC Technologies which went public on the TSX with a valuation of CAD $525M.
“For the first time, we’re seeing more ICT companies receive PE dollars than any other sector,” said Kim Furlong, CEO, Canadian Venture Capital and Private Equity Association. “We have been waiting for this evolution in PE as Canada’s innovation sector continues to grow and mature. The exit environment is also hot, and the current IPO activity is expected to continue throughout 2021.”
The information, communication, and technology (ICT) sector had the most investment activity in Q1, accounting for 23% of all private equity investment activity and 21% of all dollars invested. The industrial and manufacturing sector accounted for 22% of all PE activity (23% of all dollars invested) and saw an increase in average deal size to CAD $15.8M, a 17% increase from 2020, and a 66% increase from 2019 levels. The financial sector saw an increased boost in dollars invested, surpassing the total amount invested in 2020 with CAD $421M dollars invested across 9 deals.
For a deeper look into the performance of Q1 as well as the trends uncovered in 2020, the Canadian private capital industry will be gathering for CVCA’s Invest Canada ’21 on June 8 and 9. This year, there are several expert-led panels dedicated to exploring current themes including behind the IPO boom, the increase in SPACs, and industry and investment perspectives featuring Kewsong Lee, CEO, The Carlyle Group. For more information, visit the Invest Canada website.
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