Canadian venture capital drops to $2.59 billion in first half

Canadian venture capital disbursements in the first half of 2020 were down 23% from H1 2019’s $3.18 billion, as the pandemic continues to make its impact felt, according to a report from research firm CPE Media.

First half activity ($2.59 billion) was down 62% from H2 2019’s record high of $4.19 billion.

Q2 2020 saw $1.14 billion in financing across 145 deals, down from $1.45 billion across 135 deals in Q1 2020.

Q2 saw particularly steep drops in disbursements in May and June, according to the CPE report. Depressed activity is projected to stretch into the second half of 2020.

“The data reflect some particularities of venture capital...as this part of the financial services industry has long relied on face-to-face meetings with startup and early stage firm entrepreneurs prior to making investment decisions,” said Richard Rémillard, president of Rémillard Consulting Group, a financial services advisory firm.

H1 2020 had nine deals exceeding $50 million in value, accounting for $861 million (33%) of total deal value.

The top three provinces were Ontario ($1.05 billion), Quebec ($700 million) and BC ($553 million), accounting for 41%, 27%, and 21% of the total deal value, respectively.

ICT and biotech companies raised $1.64 billion (63%) and $592 million (23%) respectively, while early stage companies raised $1.5 billion (58%) of the total amount.

US investors have historically played a central role in supporting Canadian startups. US investor share of VC has exceeded 40% for the last three years: 46% in 2017, 41% in 2018, and 46% in 2019. Concerningly, US funding share dropped to 30% of total disbursements in H1 2020.

“Of note is the decline in the percentage contribution of US-led investment across the board, but acutely in certain parts of the country, notably Québec," said Rémillard.

US investors spent $789 million in H1 2020, followed by $69 million from South Korea and $34 million from the UK. Canadian investment amounted to $1.5 billion, with $375 million from Canadian private VC, $287 million from corporate VC, $209 million from institutional VC, and $177 million from private equity.

Quebec companies attracted the smallest proportion of US and foreign investment at 15%, compared to Ontario companies, at 42%.