CVCA Intelligence

Following the Money: Ontario & ICT Deals Propelling VC Activity in Canada

CVCA Data Vis Q32016 Canada Final forweb6

By the Canadian Venture Capital and Private Equity Association

Activity in Canada’s VC investment landscape continued at a steady pace in the first three quarters of 2016.

Despite the teeter-totter influxes of activity — seen specifically in Q2 — Canada remains on track towards another strong year. A record-breaking first half of 2016 catapulted Canada’s investment scene, with $1.5B VC dollars invested across 255 deals — an increase of 41 per cent from the same period in 2015. Fast-forward to the tail end of 2016, where Canada has seen $2.1 billion invested throughout the first three quarters, which is just nine per cent shy of the total invested in all of 2015 ($2.3 billion), and more than any previous single year since 2007.

As with last year, the information and communications technology (ICT) sector outperformed other supplementary sectors in the first three quarters of 2016 and is now well positioned to surpass 2015 activity.

As a consistently strong leader in attracting activity in Canada’s innovation ecosystem, the ICT sector took the largest share of VC dollars from January to September. To date, ICT is only 3.4 per cent short of the total invested in the sector in 2015, and with 244 completed deals, it accounts for 63 per cent of all VC activity and has secured a hefty $1.4 million in disbursements.

To date this year, Real Ventures remains the most active VC investor involved in 52 deals (with a total deal value of $103M for all investors combined). The early-stage venture firm also recently participated in a $32-million Series A round in LEAGUE, Inc. alongside OMERS Ventures.

I believe we will continue to see more capital going into the ICT sector than any other sector because the size of the industries being disrupted by ICT, in total, exceed the size of the industries being disrupted by any other sector in which VC is investing”, says Janet Bannister, General Partner of Real Ventures.

While Bannister believes there is opportunity to create great companies and realize huge investment returns in startups that are disrupting industries such as energy and life sciences, the fact of that matter is that the size of the ICT industry in total, is larger than any other segment.

Following on the heels of a slower second quarter, there was surge in the amount of VC financing into later-stage companies. YTD Q3 saw a 13 per cent increase in total VC dollars invested in later-stage companies compared to last year’s total, which is attributed to the overall increase in deal sizes we’ve seen. The average later-stage deal size in 2016 is $14.1 million, which is up 113 per cent compared to $6.6 million in 2015.

Just a few months ago Kitchener, Waterloo-based wearable tech company Thalmic Labs Inc. netted one of the largest Series B rounds in recent Canadian history, earning $158 million in funding led by Intel Capital and with participation from iNovia Capital.

Real Matters Inc., a cloud-based real estate technology platform, is another example of the overall increase in deal sizes, being the third-largest later-stage deal and raising $100 million from Canadian private investors.

Looking across all sectors to date, 2016 has seen the bulk of investments in Ontario with $1 billion invested across 134 deals, which encapsulates nearly 50 per cent of all VC deals in Canada this year.

Ontario represents almost 40 per cent of the country’s population so its size alone would indicate that it would receive a high portion of Canadian VC activity,” Bannister adds, explaining that within Ontario, the Toronto/​Waterloo corridor is Canada’s largest startup cluster based on the equity value of the tech companies in these areas.

Other insights reveal new highs for VC activity in Ontario, as the province has already exceeded the amount invested in all of 2015. In the first nine months of 2016, Ontario has invested a substantial $1 billion in venture capital, versus $950 million in all of 2015.

Next to Ontario is Quebec, with $629 million invested over 115 deals — 29 per cent of all Canadian VC deals.

For more information about our YTD Q32016 findings, read our YTD Q32016 VC & PE Canadian Market Overview.