In 2019, Canadian venture capital had its strongest first half on record while private equity had its weakest, according to a new report published by the Canadian Venture Capital and Private Equity Association (CVCA).
Kim Furlong, CEO of CVCA, was quoted in the report stating,
“We’ve heard time and time again that Canada is experiencing a ‘moment,’ and the results we are seeing in H1 2019 is a testament to that.”
Highlights Of The CVCA’s H1 2019 Report
CVCA’s H1 2019 report, titled “VC & PE Canadian Market Overview (H1 2019)”, found that total venture capital financing activity in Canada reached $2.2b over 256 deals in the first half of 2019—just $100m less than what was invested in the entire year of 2015.
“ICT companies grabbed 54% of total dollars invested in H1 2019 ($1.2B over 144 deals) with life sciences receiving a 27% share ($586M over 55 deals). Agribusiness companies received a 11% share ($243M over 20 deals).”
“Ontario-based companies received 52% of investment ($1.1B); Quebec-based companies received 25% ($532M) followed by BC-based companies with an 15% ($322M) share”.
Asides from being a record half for venture capital financing, this half also marks the first time that the CVCA separated venture debt from overall venture capital financing activity in their report. While venture debt deals only totalled $66m, the CVCA’s decision to identify venture debt on its own reflects the growing popularity of venture debt as a financing vehicle.
In comparison to venture capital financing, total private equity financing activity in the first half of 2019 reached $4.9b over 289 deals. Although this may have been the weakest half on record for Canadian private equity financing, there is still $6b in private equity deals pending completion (including the $5b acquisition of WestJet Airlines by Onex Corporation). However, the private equity sector will need more than just these deals if it intends to get back on track by the end of the year—over the past four years, the average annual total for private equity financing in Canada has been $21.5b, according to data provided by the CVCA.
Financing Activity In Canada Faces Headwinds In H2 2019
While the CVCA’s H1 2019 report suggests that 2019 could be shaping up to be one of the strongest years for Canadian financing activity yet, headwinds such as a plunging Canadian consumer confidence index and contracting U.S. manufacturing gauge could detract momentum from the sector in the second half of 2019. As such, investors should keep a close eye on the Ivey PMI—an index that measures the economic activity of Canadian purchasing managers—to gauge where Canadian business sentiment could be headed next.