Venture Capital Key findings
VC Investment Experiences a QoQ Drop; CAD $3.5B Invested YTD
Decrease in mega-deals drives average deal size down
In the third quarter of 2020, CAD $891M was invested over 126 deals , which is over 63% lower than the amount invested in the third quarter of 2019 and 47% lower than the previous quarter of this year (CAD $1.7B).
There were only three mega-deals (CAD $50M+) that closed in Q32020 versus eight in the previous quarter. As a result, the average deal size in Q32020 was only CAD $7M, bringing down the YTD average deal size to CAD $8.5M; in contrast to 2019, when the average deal size was $CAD 11M. The three mega-deals were:
- Vancouver-based Chinook Therapeutics $140M pre-IPO round with participation from Versant Ventures and Northleaf Capital Partners
- Kitchener-based ApplyBoard’s $70M Series C extension from a consortium of US-based investors
- Calgary-based Attabotics’ $66M Series C round, led by Ontario Teachers’ Pension Plan.
“The strength of Q2 was in many ways a combination of GPs further capitalizing their portfolio and the added capital injections of BDC and EDC matching programs. Q3, however, is more aligned with the challenges the pandemic has created for deal flow,” said Kim Furlong, CEO, Canadian Venture Capital and Private Equity Association. “While our members are finding ways to deploy capital, the realities of COVID and the continued strength of valuations is apparent in the deal flow.”
Later stage deals represented 45% of the total investment in the third quarter with CAD $1.6B invested over 57 deals, while 42% (CAD $1.5B over 189 deals) went to early stage and 8% (CAD $298M over 154 deals) went to seed stage companies.
The pace of VC-backed exits is on track relative to previous years, with 26 exits completed YTD.
For the first time, in partnership with Prospect, the CVCA is pleased to include employment numbers for VC-backed companies in Canada. A total of 18,419 people were employed by VC-backed companies YTD Q32020. These employment numbers represent only those positions in VC-backed companies that received VC funding Q3 YTD. Prospect is a free and fully aggregated talent network built by-and-for the Canadian tech startup ecosystem.
VC Dollars invested by geography
- Ontario: 44% (CAD $1.5B across 168 deals)
- Quebec: 23% (CAD $796M across 117 deals)
- BC: 22% (CAD $758M across 53 deals)
- Toronto: 25% (CAD $869M across 129 deals)
- Vancouver: 20% (CAD $704M across 88 deals)
- Montréal: 20% (CAD $696M across 44 deals)
VC Dollars invested by sector
- Information, Communication & Technology: 53% (CAD $1.9B over 226 deals)
- Life Sciences: 29% (CAD $1B over 73 deals)
- Cleantech: 2% (CAD $75M over 15 deals)
VC Dollars invested by Stage
- Late stage: 45% (CAD $1.6B over 57 deals, $27.8M in average deal size)
- Early stage: 42% (CAD $1.5B over 189 deals, $7.9M in average deal size)
- Seed stage: 8% (CAD $298M over 154 deals, $1.9M in average deal size)
Private Equity Key Findings
Slow Third Quarter Drives Canadian PE Investment 25% Lower Than the Four-Year Average
Private Equity Exit Rate Picks Up
CAD $1.4B was invested over 155 deals in the third quarter of 2020 which is 27% lower than the amount in Q32019 (CAD $1.9B over 177 deals). The YTD activity is tracking 25% below the four-year average across 2015 – 2019 in both dollars invested and deals (CAD $21B across 565 deals).
There were 15 PE-backed exits in the third quarter, a significant increase from the 11 exits in the entire first half of 2020. The most notable exit in Q3 was Nuvei’s IPO on the TSX for a total market capitalization of CAD $4.6B, backed by Novacap Management, Fonds de solidarité FTQ, and Caisse de dépôt et placement du Québec.
“Despite the uncertainty due to the COVID-19 pandemic, Canadian private equity firms are adapting to the evolving conditions,” said Kim Furlong, CEO, Canadian Venture Capital and Private Equity Association. “Given Canadian PE’s long-term investment horizon, PE fund managers are well-positioned to help our businesses on a path to economic recovery.”
There were no megadeals (CAD $500M+) in the third quarter. The largest deal in Q3 was the CAD $354M growth investment in Toronto-based Superior Plus by Brookfield Asset Management.
PE deal size in Q3 2020
- <$25M: 37 deals, YTD 286 deals at $1.1B
- $25M-$100M: 6 deals, YTD 39 deals at $2B
- $100M+: 3 deals, YDT 14 deals at $8.6B
Dollars invested by sector
- Information, Communications & Technology: 28% ($3.3B across 82 deals)
- Energy: 24% ($2.8B across 10 deals)
- Industrial & Manufacturing: 13% ($1.6B across 85 deals)
PE Dollars invested by geography
- Quebec: 43% ($4.9B across 261 deals)
- New Brunswick: 23% ($2.7B across 6 deals)
- Alberta: 19% ($2.2B across 28 deals)
- Ontario: 12% ($1.3B across 91 deals)
- Montréal: 13% ($1.6B across 105 deals)
- Toronto: 9% ($1.1B across 79 deals)
- Quebec City: 8% ($942 across 23 deals)
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