Canadian venture capital drops 10% to $1.36 billion in Q1 2020

126 venture capital financings raised $1.36 billion in Canada in the first quarter of 2020, according to a report from CPE Analytics and Rémillard Consulting Group, a financial services-focused advisory firm.

The number of deals dropped by 26% from Q1 2019, while deal value declined by 10%. Deal value was down 36% from the $2.05 billion recorded in Q4 2019, which was one of the strongest quarterly disbursements in Canadian history.

The report noted, however, that Covid-19 had limited impact on Q1 2020 VC activity, as deals were either closed or in the process of closing prior to the outbreak in Canada. The pandemic will make its impact felt in financings for Q2 and after, though. CPE Analytics noted that incomplete data currently points to April 2020 overtaking April 2019, but that May and June will see drastic drops.

Funding in Q1 2020 came from 23 foreign countries. The top five funding sources were Canada ($782 million), the US ($457 million), South Korea ($69 million), the UK ($15 million), and China ($10 million).

Canadian investors led the way in the quarter, making up a majority of funding. The US had been the top investor between 2017 and 2019. The proportion of funding from foreign sources has been trending downward in the last three years, as Canadian investors claim a larger piece of the pie.

“One seeming strength of the Canadian VC market has been the diversity of funding sources, which have included substantial participation from US and foreign institutions as well as corporates. In the wake of Covid-19, it is uncertain whether or not these elements of the Canadian VC market will continue to play a comparably important role going forward which could have direct consequences for the funding of Canada's most promising firms," commented Richard Rémillard, President of Rémillard Consulting Group.

Five large deals with a deal value over $50 million accounted for 46% of deal value, at $624.7 million.

The top three provinces for VC financing were Ontario ($636.6 million), Quebec ($359.2 million) and BC ($275.9 million), representing 47%, 26%, and 20% of the total amount respectively.

Information and communications technology (ICT) and biotech firms accounted for the bulk of investment, at $739.4 million (61%) and $354.7 million (26%) respectively.