CVCA H1 2019 Venture Capital Canadian Market Overview: Canadian VC Experiences Strongest First Half On Record At CAD $2.15B Invested

CAD $1.28B invested over 143 deals in Q2; the largest quarter for VC dollars investment to date.

TORONTO — The Canadian Venture Capital and Private Equity Association (CVCA) today released its quarterly report focused on Canadian venture capital (VC). A record CAD $1.28B was invested over 143 deals in the second quarter this year, bringing the total dollars invested in the first half of 2019 to CAD $2.15B; surpassing the previous highest quarter in Q4 2018 (CAD $1.25B) and previous highest first half in H1 2018 (CAD $1.67B).

There were 11 mega-deals ($50M+) in the first half of 2019, which accounted for a 42% share of total VC dollars invested. Of these 11, Four were over CAD $100M and included Hamilton-based Fusion Pharmaceutical Inc.’s CAD $140M series B financing from a syndicate that included CVCA members Fight Against Cancer Innovation Trust (FACIT)and Genesys Capital Management Inc.

Information and communication technology (ICT) companies took home the majority of total dollars invested in the first half of 2019 at 54% (CAD $1.2B over 144 deals) with life sciences receiving 27% (CAD $586M over 55 deals), slightly higher than the five-year average of 21%. Agribusiness companies received 11% (CAD $243M over 20 deals).

VC-backed exits are on pace to exceed the 36 in 2018 (CAD $989M) with 20 completed in H1 2019 totalling CAD $2.1B. Of the 20 exits so far this year, there were two VC-backed Initial Public Offerings (IPO) and included Montreal-based companies. Lightspeed POS Inc. (TSE: LSPD) completed the largest IPO since 2017 (market capitalization of CAD $1.1B) and Milestone Pharmaceuticals Inc. (NASDAQ: MIST) closed its IPO on NASDAQ (market capitalization of CAD $468M).

“Canadian VC-backed exits are on a positive trajectory in 2019 which, in tandem with invested VC dollars, exhibit a healthy innovation ecosystem,” said Kim Furlong, Chief Executive Officer, CVCA. “We’ve heard time and time again that Canada is experiencing a ‘moment,’ and the results we are seeing in H1 2019 is a testament to that.”

Methodology Change

H1 2019 is the first time that CVCA is reporting on venture debt separately from overall venture capital activity. Based on consideration from its Data Committee and given the rise of VC debt as a financing vehicle, the association will report on VC debt deals separately (see page 14 in the H1 2019 report) but will no longer include these deals in aggregate quarterly VC activity figures. This change has impacted historical figures.

Canadian Venture Capital Highlights

  • A record $1.28B was invested over 143 deals in the second quarter this year, the highest amount since 2013 and marginally higher than the previous high-water mark of $1.25B invested in Q4 2018
  • The average deal size was $9M, a 22% increase from Q2 last year and a 26% increase compared to the average deal size during the 5-year period between 2014-2018 ($5.9M)
  • There were a total of 11 $50M+ mega-deals this year which accounted for a 42% share of total dollars invested. These included 3 deals over $100M which included:
    • Hamilton-based Fusion Pharmaceuticals Inc.’s $140M series B round from a syndicate that included Fight Against Cancer Innovation Trust (FACIT) and Genesys Capital Management Inc.
    • Toronto-based Vena Solutions Canada Inc.’s $115M growth equity financing from US investors
  • There were 18 deals between $20M-$50M totalling $566M or a quarter of total VC dollars invested and 43 deals between $5M-$20M totalled $449M, just over one-fifth share
  • Ontario-based companies received 52% of investment ($1.1B); Quebec-based companies received 25% ($532M) followed by BC-based companies with an 15% ($322M) share
  • Toronto-based companies received 34% ($741M over 76 deals) of total dollars disbursed, with Montreal-based companies receiving 22% ($440M over 66 deals) and Vancouver-based companies a 7% share ($158M over 27 deals)
  • ICT companies grabbed 54% of total dollars invested in H1 2019 ($1.2B over 144 deals) with life sciences receiving a 27% share ($586M over 55 deals). Agribusiness companies received a 11% share ($243M over 20 deals)
  • Early stage companies received 45% ($973M over 111 deals) of total investment; later stage deals accounted for 40% ($862M over 44 deals)
  • VC-backed exits are on pace to exceed last year’s total of 36 ($989M) with 20 already completed in the first half of the year totalling $2.1B. These included two VC-backed IPOs by 2 Montreal-based companies:
    • Lightspeed POS Inc. completed the largest IPO exit since 2017 listing on TMX with a market cap of $1.1B
    • Milestone Pharmaceuticals Inc. closed its IPO on Nasdaq with a market cap of $468M

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Source: Business Financial Post