Canadian VC has strong fourth quarter, reaches $5.3 billion in 2020
Canadian venture capital (VC) had a strong fourth quarter, reaching $1.650 billion on the back of returning US investors, according to a report from research firm CPE Media. This drove VC activity in 2020 – at $5.3 billion – to surpass 2017 and 2018 levels.
Though resurgent VC in Q4 propelled 2020 past 2017 ($3.910 billion) and 2018 ($4.697 billion) levels, the year was still well below the record $7.5 billion registered in 2019. Total venture capital disbursement and financing rounds (610) were down 29% and 12%, respectively, from 2019.
"This comprehensive data set amply demonstrates that venture capital investing and fundraising follow a different rhythm than that of the overall economy, with a significant bounce back in Q4 resulting in a better-than-expected full year result for this asset class,” said Richard Rémillard, president of Rémillard Consulting Group, a financial services advisory firm. “The data also reveal how reliant Canadian portfolio companies are on the 'swing' investors from the US – investors who returned to Canada in numbers in Q4.”
US investors retreated amid the pandemic, accounting for just 31% of funding in the first three quarters of 2020 – well below their above-40% historical share. However, US investors returned in Q4 2020, bringing their funding share back up to 40% on the year.
US investors contributed $2.137 billion (40%) of VC funding in 2020, while Canadian investors contributed $2.554 billion (48%). US private VCs, however, invested more than double that of Canadian private VCs at $1.265 billion versus $561 million.
Ontario led all provinces with $2.284 billion in VC investment, followed by British Columbia ($1.216 billion) and Quebec ($1.096 billion).
BC and Prairies companies attracted the highest share of funds from US and foreign investors, at 75% and 63%, respectively. Quebec, with its various language, regulatory, and taxation barriers, attracted the smallest share of foreign investment, at 25%.
“The data further highlight the weaknesses in several provinces, notably Québec – a province which suffers from a relative US investment deficit vis-à-vis neighboring Ontario.”
Ontario, by comparison, reeled in approximately half of its VC funding from US/foreign investors.
ICT and biotech companies continued to be the top targets for VC investment, receiving 53% and 29% of funding, respectively.
