US funds help drive record investment in Canada’s VC market

Venture capital investing in Canadian technology companies continued its record-setting pace in 2021, with C$3.7 billion invested in 147 financings in the third quarter.

Venture capital investing in Canadian technology companies sustained its record-setting pace in 2021, with C$3.7 billion invested in 147 financings in the third quarter, final data released by Refinitiv show. This activity marked the second strongest quarter on record in the domestic market and brought the nine-month total to C$11.8 billion invested across 519 rounds. VC trends in Canada continued to be driven by foreign funds, especially those based in the US, which accounted for 52 percent of total investment as of the end of September.

A full PDF report of the Q3 2021 Canadian venture capital market activity by Refinitiv is available here.

REPORT SUMMARY

Canada venture capital investment totals $11.8 billion

Canadian venture capital totaled $11.8 billion invested across 519 rounds throughout the first nine months of 2021. Investment volumes increased by 5% year-over-year, and investment values continued their trajectory from the first half with an increase of 114% over the first nine months of 2020, already beating the full year record of $7.6 billion set in 2019 by 56%. The average size of disclosed rounds was $27.3 million, up 117% from $12.6 million a year ago.

Thirty-five rounds in the first nine months saw investment values in the nine-figure range. The top three rounds remained those from the first half of the year, including the $476 million investment into identity verification software business, Trulioo, the $385 million investment into blockchain entertainment company, Dapper Labs, and the $375 million investment into Kitchener-based international student platform, ApplyBoard, led by Ontario Teachers’ Innovation Platform. Newly added in the third quarter was another round into Dapper Labs, this time for $320 million, led by Coatue Management and joined by Version One Ventures, GV, a16z, GIC, and BOND.

Companies based within Ontario saw $5.3 billion invested across 216 rounds, resulting in 5th place for both dollar values and volumes in the North American provincial & state rankings. Companies based in British Columbia saw $3.6 billion invested across 90 rounds, resulting in 11th place for dollar values and 12th place for volumes. Companies in Quebec saw $2.0 billion invested across 131 rounds, resulting in 18th place for dollar values and 7th place for volumes.

Domestic funds invested $3.7 billion into Canadian companies during the first nine months, just a 39% share of all disclosed financings. This was down from their 54% share throughout the entirety of 2020 and lower than any annual share since the 38% in 1992. Funds located within the United States supplied $5.4 billion or 52% of all funding, up from 34% throughout 2020.

A total of 43 Canadian VC funds recorded closes during the first nine months of the year raising a combined $4.3 billion in commitments, an increase of 124% compared to a year ago. Inovia Capital’s second growth fund’s March close remained the largest fundraise for the period at $560 million. Newly added in the third quarter was Lumira Ventures’ Fund IV, which raised $276 million to support healthcare startups in both Canada and the United States.

Canadian companies completed 53 VC-backed exits worth $9.1 billion in the first nine months, the largest three quarter period in dollar terms on record and more than any full year period, topping the $8.9 billion of exits completed in 2000 by 2%. The top completed exit remained Nasdaq’s $3.6 billion cash purchase of Newfoundland-based financial security company, Verafin, announced in November and completed in February. The top announced exit for the period was newly added in the third quarter and was the acquisition of cancer treatment company, Trillium Therapeutics, by Pfizer, valuing the business at $2.7 billion.