Q3 Canadian VC disbursements continued downward trend from Q2 2022, reaching $950 million, a decrease of 21% from Q2 and a 71% decrease from Q1.
For the first nine months of 2022, Canadian VC disbursements reached $5.86 billion, a decrease of 46% from the same period in 2021.
Troubling trend was that US investors’ share continued to drop, down from 56% in Q1 to 45% in Q3 2022. Given the Canadian reliance on US VC investors, any further drop in US investor share would drag the total amount down further in Q4 2022.
photo credit: CPE Analytics, Canadian Financings
News Release
Canadian VC: sharper drop in VC investing in 2022 than occurred under COVID in 2020
Q3 Canadian VC disbursements reached $950 million, a decrease of 21% from Q2 2022 and a 71% decrease from Q1 2022.
Canadian VC disbursements reached $5.86 billion for the first nine months of 2022, a decrease of 46% from the same period in 2021.
US Investors’ share dropped from 56% in Q1 to 45% in Q3 2022. Canadian and international investors shares were up to 35% (from 27%) and 20% (from 17%) in Q3 from Q1 respectively.
All dollar ($) figures in Canadian dollar unless otherwise noted.
TORONTO, October 20, 2022 /CNW/ – Canadian venture capital disbursements reached a low of $950 million from 102 financings in Q3, dropping below $1 billion-mark for the first time since Q4 2022.
For the first nine months of 2022, Canadian VC disbursements reached $5.86 billion from 410 financings.
To put into perspective, quarter-to-quarter, Q3 2022 disbursement showed a decrease of 21% from Q2, 2022 and 74% decrease from Q1, 2022.
Disbursements for the first nine months of 2022 dropped 46% from the amount recorded in the same period in 2021 ($10.95 billion).
First nine months of 2022 – VC funding sources (who funds Canadian companies)
US and international investors invested $3.11 billion and $976 million or 53% and 17% of the total disbursements respectively. Canadian investors invested $1.77 billion or 30% of the total.
The percentage of shares remain virtually unchanged from H1 2022 which comprised of 55%, 15% and 30% for US, International and Canadian investors respectively.
The numbers masked the real dynamics of the overall funding picture. For the first nine months, US investors’ share dropped from 56% in Q1 to 45% in Q3 2022. As Canadian companies has been heavily relying on US investors, any further drop in US investor share would drag the total amount down further in Q4 2022.
Family Office investors continued to back Canadian companies investing $549 million, ranking third type behind Private VC ($2.48 billion) and Corporate VC ($1.42 billion), and ahead of Government Funds ($347 million).
Individually, US Private VC led all investor types with $1.90 billion, well ahead of International Corporate VC and US Corporate VC, which invested $656 and $486 million in Canadian companies respectively.
Canadian Private VC and Canadian Government Funds rounded up the top five individual investor types with $484 million and $341 million respectively.
First nine months of 2022 – VC disbursements
Provinces
As BC is predominately funded by US and international investors in recent years, it is not surprising that BC continues to trail Quebec in 2022.
Ontario, Quebec, and BC VC-backed companies raised $2.44 billion, $1.58 billion, and $1.05 billion respectively.
Companies from Alberta and Saskatchewan, the only other $100 plus provinces, raised $503 million and $126 million respectively.
Municipal Cities
Companies from 45 municipal cities secured venture capital funding. The top 12 cities, including Toronto, Montreal, Vancouver, Calgary, Waterloo, Quebec City Saskatoon, Ottawa, Mississauga, Victoria, Kitchener, and Halifax, combined accounted 93% of total raised combined from 344 financings (84%).
Companies from City of Toronto and City of Montreal, two of the only $1 billion cities, raised $1.79 billion and $1.42 billion respectively, together accounting for over half (55%) of total disbursements.
Sectors
ICT companies raised $3.35 billion or 57% of the total amount. Cleantech2 companies raised $874 million or 15% of the total amount.
Driven by two large ($20 million+) biotech deals in Q3, life science/biotech companies slight overtook financial companies to remain virtual tie with $681 million and $680 million respectively.
Stages
Early stage and growth/late-stage financings raised $3.94 billion and $1.13 billion respectively.
Seed/pre-seed stage financings raised $334 million from 86 financings representing 21% of total number of financings.
Company size
Companies with 0-49, 50-99, 100-499 and 500+ employees raised $3.96 billion, $418million, $1.08 billion, and $401 million respectively.
First nine months of 2022 – VC fund fundraising
29 Canadian venture capital funds, including 26 private, 1 social impact, 1 corporate, and 1 government funds, raised $2.76 billion, up from $1.72 billion raised by 21 funds, including 19 private, 1 social impact, and 1 corporate funds in first half of 2022.
The $500 million BDC Thrive Venture Fund and Lab for Women accounted almost 50% of the total fundraising in Q3.
“The dramatic decline in VC investing activity in 2022 has left no sector or stage unscathed. While commentary nine months ago tended to predict that 2022 would be the ‘Year of the Tiger,’ it is clear that 2022 has turned out to be the ‘Year of the Monster Bear.’ With the benefit of hindsight, 2021 is increasingly looking like an ultra-frothy peak driven by the sheer economics of very low real interest rates as well as by such well-known financial sentiments as FOMO (fear of missing out). With central banks set to continue raising interest rates in the face of stubbornly persistent inflationary pressures, it is likely that this difficult period will extend into 2023, at the very least,” commented Richard Rémillard, President of Rémillard Consulting Group (RCG).
Summary report
Summary report can be downloaded from financings.ca website: https://www.financings.ca/reports/
Methodology
Included
• Equity and quasi-equity investments in companies directly.
Excluded
• Secondary transactions (investor/shareholder exit events) in which companies received no money
• PE transactions
• Financing by foreign headquartered/domiciled companies with Canadian subsidiaries.
Rémillard Consulting Group (RCG)
Rémillard Consulting Group (RCG) is a unique, Ottawa-based, bilingual consulting firm specializing in providing private sector, government & trade association clients with creative, research-grounded solutions to business issues and public policies involving the Canadian financial services industry. For more information: rremillard@bellnet.ca
CPE Analytics
CPE Analytics is Canada’s leading all financing intelligence provider. We provide comprehensive, verified and unbiased information and unmatched insights and intelligence on private and public financings, initial public offerings (IPOs), M&As, professional investment firm fundraising activities.
CPE Analytics is the data analytics division of CPE Media & Data Company. More Info: https://cpeanalytics.ca, https://financings.ca
CPE Media & Data Company
Founded by Canada’s the most experienced private capital and financing research experts, CPE Media & Data Company is Canada’s leading all financing news and intelligence provider. More information: https://cpecompany.ca/