VC investment in Canada breaches US$1 billion in fourth quarter

30 January 2020 2 min. read
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Venture capital investment reached US$1.17 billion in Q4 2019, crossing the billion dollar threshold for the second quarter in a row, according to KPMG’s quarterly analysis of global venture funding.

The total of US$1.17 billion was a 30% increase from Q4 2018, but down 34% from the historic US$1.77 billion recorded in Q3 2019. VC investment in Canada reached a record high of US$4.6 billion in 2019.

“It is really a testament to the growing maturity of Canada’s venture capital ecosystem,” Sunil Mistry, a partner at KPMG Canada, said. “The tech ecosystem in Canada is now more independent and self-sustaining than ever before. I don’t anticipate deal activity slowing down anytime soon.”

The 109 closed deals in Q4 was a lower tally than Q3’s 151, but the deals were larger in size, on average. The fourth quarter was driven by big deals, including 1Password, a Toronto-based password manager; Coveo, a Quebec City-based artificial intelligence startup; and Nuvei, a Montreal-based payment processing company.

VC investment in Canada breaches US$1 billion in fourth quarter

“The Coveo funding round highlights the strength of Canada’s AI innovation ecosystem, which has spread well beyond its traditional innovation hubs of Toronto, Vancouver, Montreal, and Waterloo,” Mistry said. “At a sector level, fintech continues to be a dominant area of interest for investors – both from an investment perspective and from an M&A perspective – in part due to the strength of Canada’s banking and financial services sectors.”

Mistry has a positive outlook for VC investment in the first half of 2020, despite economic headwinds and lingering trade disputes. “A lot of funds already have their next fund monetized. They need to spend the money, and they’re looking to stay away from any volatility in the public markets,” he said.

The US remained the hotspot for VC investment in 2019, at US$34.2 billion across 2,215 deals. This amounted to more than half of global VC investment in 2019 (US$64.25 billion across 4,289 deals). KPMG notes that private valuations in the US are approaching those seen in the dot-com era, due to an abundance of capital.

Though AI, biotech, and fintech deal activity is expected to remain steady, KPMG says that US investors are now paying a lot more scrutiny to a company’s unit economics and business model.

They’re also increasingly eyeing Canadian firms, where valuations continue to be competitively priced. “Investors will keep investing where the economic climate makes the most sense, where the deal sizes are more reasonable, and where the venture ecosystem is reliable, and Canada checks off all of those boxes,” Mistry said.