It’s been a big year so far for Canadian venture capital, according to the Canadian Venture Capital and Private Equity Association (CVCA).
The Q1 2019 VC & PE Canadian Market Overview (CVCA’s quarterly report on Canadian investment) found that Canadian VC’s invested a total of $1B in Q1 2019—almost double the investment seen in Q1 2018.
And with the average deal size in Q1 2019 increasing an astonishing 56% compared to Q1 last year, Q1 2019 marks Canada’s fifth billion dollar quarter since 2013.
Where Did Canadian VC’s Invest In Q1 2019?
The majority of venture capital found its home amongst the usual suspects, namely Ontario ($481m), Quebec ($198m), and B.C. ($173m). Despite a poor showing from most of the Prairie provinces, Alberta does deserve an honourable mention—it came just $20m shy in investment from dethroning B.C.
By far and large, Canada’s Information and Communications Technology (ICT) sector attracted the most attention from Canadian VC’s. Canadian ICT companies garnered 59% of the total dollars invested by Canadian VC’s in Q1 2019.
While venture capital soared last quarter, private equity languished.
“PE Investment was 72% lower in the first quarter of 2019 compared to the same period last year with CAD $1.9B invested over 130 deals.”
In CVCA’s report, Kim Furlong, Chief Executive Officer of the CVCA shares some thoughts as to why PE investment has slowed.
“Our private equity members are reporting that the current high valuation environment continues to impact their deal flow . . . we anticipate that private equity activity will rebound in subsequent quarters.”
Lightspeed IPO Proves Canadian Companies Can Stay Canadian
But it’s not just venture capital that’s on the rise in Canada—it’s growth capital too.
Just ask Lightspeed’s CEO, Dax Dasilva, whose point-of-sale and e-commerce software company went public in March 2019 with a market cap of C$1.1B (as of this writing, the company now has a market cap of roughly C$1.6B).
Via Financial Post,
“I’ve had a lot of people in the ecosystem say that our IPO has opened new possibilities to what our tech companies are able to aspire to,” said [Lightspeed’s CEO, Dax Dasilva] . . . “We build these companies in Canada and then they evaporate as they get acquired by American or Asian companies . . . I think we’ve reached a stage of maturity with our ecosystems that there’s growth capital available now, not just venture capital, but growth capital.”
It’s an important message for the next generation of tech startups to hear: not only can you get the capital that you need to start your business in Canada, but you can get the capital that you need to scale it effectively.
Canadian Venture Capital In 2019 And Beyond
Even amidst fears of a global recession and prolonged trade war, Canadian venture capital investment has thrived thus far in 2019. Investors should expect Canada’s ICT sector (already the most heavily invested in sector when it comes to Canadian VC capital) to become increasingly important as the excitement surrounding Canada’s cannabis industry winds down.
And who knows—if we’re lucky, we may even begin to see more Canadian-funded companies “stay Canadian”. After all, Lightspeed is living proof that Canadian companies don’t need to relocate to Silicon Valley to achieve a billion dollar valuation.