Canadian venture capital activity reaches record high in first quarter

10 May 2022 Consulting.ca 2 min. read
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Venture capital activity reached an all-time high in the Canadian market, rising to US$3.5 billion in Q1 2022 from US$3 billion in Q1 2021, according to KPMG's Venture Pulse report. 

The number of deals dropped to 213 deals, down from 276 deals in the same quarter last year.

Canadian VC firms raised US$824 million in Q1 2022 as investors grappled with uncertainty driven by Russia’s invasion of Ukraine, rising inflation and interest rates, supply chain problems, and a lingering Covid-19 pandemic. The bulk of funding went to Toronto-based software firm 1Password, which raised US$650 million in a series C round.

The wider global VC market saw deal value drop to US$144.8 billion in the first quarter after a record-breaking 2021, as investors slowed deal-making amid growing global uncertainty.

"While significant uncertainty during the quarter impacted the total number of deals, the amount of money being invested in the market is astronomical," said Sunil Mistry, partner, private enterprise and TMT, at KPMG Canada. "Canada's VC ecosystem remains remarkably robust in the current environment, which is a strong indicator that Canada's VC market has matured.”

Venture financing in Canada

Mistry expects the VC market to remain stable for the next few quarters as a significant amount of dry powder is expended.

Similar to global markets, Canada attracted significant VC investment in the technology space, which accounted for 105 of 213 deals. Thirty deals were in AI and machine learning, 28 were in fintech, and 17 were in crypto assets and blockchain.

Healthcare sat in second place with 34 deals, though one-third of deals involved health tech firms.

In terms of deal type, there were 75 seed round deals, 51 early stage investments, 73 late stage, and 14 angel investments.

Corporate VC investment dropped significantly from 68 deals in Q1 2021 to 41 deals in Q1 2022 at US$966 million.

After a record year for exits, there were only 27 exits worth US$77.5 million compared to 34 exits worth US$1.2 billion in the same quarter last year. Five were buyouts, two were IPOs, 16 were mergers/acquisitions, and four were reverse mergers.

"It was very frothy market last year where many companies went public, but that's dissipated as valuations have dropped. A lot of the companies that went public last year aren't living up to expectations," said Mistry.