Venture Capital Highlights & Key Findings
VC Investment in 2020 closes at CAD $4.4B – Lower than 2019 but the Second Highest on Record
Amid the COVID-19 pandemic, VC investment in 2020 was the second-highest level of annual VC investment based on existing CVCA records, with CAD $4.4B across 509 deals, second only to 2019. Total dollars invested in 2020 was higher than the five-year average ($3.8B and 517 deals in 2015 – 2019) with a lower number of deals.
The momentum of VC-backed exits is on track relative to previous years, with a total of 38 exits in 2020, which is only slightly below the 5‑year average of 40 exits. BC-based biotech company Abcellera was the largest exit in 2020, listing on NASDAQ with a market cap of $6.7B, making it the largest exit on record. Also notable is the Newfoundland-based fintech company Verafin acquisition by Nasdaq Inc. which was announced in Q42020 for $3.49B CAD.
“The second half of 2020 has demonstrated a real resiliency in the venture capital market,” said Kim Furlong, Chief Executive Officer, Canadian Venture Capital and Private Equity Association. “The long-term health of the Canadian innovation ecosystem, including venture investment, is critical as we continue to navigate the impacts from the COVID-19 pandemic. It is imperative that we continue to grow the capital available to Canadian entrepreneurs. Venture capital is vital to Canada’s economic recovery and future growth.”
Information communications technology (ICT) companies received the majority (55%) of total VC dollars invested in 2020 (CAD $2.4B over 284 deals) while life science companies received 26% of dollars invested (CAD $1.1B over 89 deals) and clean tech companies received 2% (CAD $101M over 22 deals)
In partnership with Prospect, the CVCA is pleased to include employment numbers once again for VC-backed companies in Canada. A total of 25,942 people were employed by VC-backed companies as of Q42020. These employment numbers represent only those positions in VC-backed companies that received VC funding as of Q42020. Prospect is a free and fully aggregated talent network built by-and-for the Canadian tech startup ecosystem.
Private Equity Highlights & Key Findings
Decrease in Megadeals refocuses PE investment on the Mid Market in 2020
PE-backed Exits in 2020 Experience Highest Value of IPOs on Record
2020 saw CAD $14B invested across 635 deals. The Canadian PE market has traditionally averaged $21B in yearly PE investment and 2020 was notable in that megadeals accounted for only $3.7B compared to $11.6B in 2019.
The exit market in 2020 saw the highest value of PE-backed IPOs (CAD $13.9B across 4 IPOs) but with the lowest number of exits on record. There were only 35 exits in 2020 which was 57% lower than the 5‑year average (82 exits, 2015 – 2019). In addition to IPOs, other exits include 24 M&A deals totalling CAD $1B, and 6 secondary buy-out deals with CAD $2.7B invested in 2020.
The largest exit in 2020 was Ontario-based waste management company GFL Environmental, listing on TSX in February with a market cap of CAD $7.7B backed by Ontario Teachers’ Pension Plan and other investors.
“PE investors are moving forward cautiously amid the ongoing COVID-19 pandemic and are being faced with a bombardment of new variables such as shifts to consumer preferences, digitization, government restrictions, and low-to-zero touch models,” said Kim Furlong, Chief Executive Officer, Canadian Venture Capital and Private Equity Association. “It is also interesting that amidst the economic turmoil that COVID-19 has created, the valuation market remains very hot. The valuation factor is what we will be watching most closely in 2021.”
2020 experienced an unprecedented rise in the number of debt financing deals, with 260 deals in 2020 compared to the 5‑year average of 195 deals (2015−2019), as well as an increase in minority investments compared to the 5‑year average. The rise in debt financing deals indicates a shift in investor risk during 2020 when the need for liquidity is heightened in portfolio companies. 2020 also saw an uptick in privatization deals returning to the peak levels experienced in 2017, potentially attributable to the trend of certain sectors opting to de-risk themselves from the volatility of public markets by going private:
- Debt deals comprised 41% of total deal volume, with CAD $1.1B across 260 deals. The average deal size was CAD $4M
- Minority (follow-on and growth) investments comprised 34% of total PE deal volume, with CAD $5.6B across 217 deals. The average deal size was CAD $26M
- Buyout and add-on investments comprised 18% of total deal volume in 2020, with CAD $2.5B across 113 deals. The average deal size was CAD $22.5M
- Secondary buyout deals comprised 0.6% of total deal volume, with CAD $2.7B across 4 deals. The average deal size was CAD $668M
- Privatization deals comprised 1% of total deal volume, with CAD $1.3B across 5 deals. The average deal size was CAD $254M
CVCA Member-Only2020 Year-In-Review Webinar
Our CEO, Kim Furlong along with Christiane Wherry, Vice President, Research walked through the latest industry intel in the completely redesigned report ahead of the public release of the reports on March 24. Plus, you will hear from Trevor Riback, Vice President, CAI Partners who provided an overview of PE trends in Western Canada and Peter Moreira, Principal and Owner, Entrevestor, who presented an analysis of VC trends in Eastern Canada.
The French versions of the 2020 year-end reports will be available soon!
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