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Canadian venture-capital investment plateaued in 2018 with $3.7-billion flowing into Canadian startups and scale-ups, holding the country back from a fifth consecutive year of growth, according to the Canadian Venture Capital & Private Equity Association.

The CVCA will release its annual year-in-review report on Wednesday. It found that venture-capital (VC) investment in Canada fell 2 per cent to $3.7-billion last year, while the total number of deals it recorded rose to 610 from 600 – ending 2018 relatively flat on both terms. The average size of all deals fell 3 per cent from 2017 to $6.1-million.

Fifteen “mega-deals” worth $50-million or more accounted for 30 per cent of 2018’s VC investment, the industry group said. In total, large later-stage investments totalled $1.8-billion, up from $1.6-billion.

Seed financing for very young companies rose to $303-million from $236-million in 2017. Early stage deals – which the CVCA considers investments in a company piloting a product or service or has one in the early stages of commercial availability – did see a jarring change, however. Last year, there were 189 early-stage deals in Canada, versus 234 in 2017. And the total value of such early investments fell 22 per cent to $1.6-billion.

The association, which began its independent data collection in 2013, said that the average early-stage deal size of $8.2-million in 2018, down from $8.5-million in 2017, was still up 40 per cent from the previous five-year average of $5.9-million, signalling continued strength in early-stage financing.

“We’re almost at par with what was our best year so far,” Kim Furlong, the CVCA’s chief executive officer, said in an interview, referencing the country’s record in 2017. She was named to the position at the start of 2019. “Even though the numbers don’t project significant growth, from every conversation I’ve had, with [CVCA] members and the government – and I’ve been to the U.S. twice since taking on this role – there’s a real sense that Canada is ... becoming more of a serious player.”

Darrell Pinto, the CVCA’s interim chief operating officer, said that the growth plateau appeared to be temporary as one federal venture-investment program to stimulate private investment ceded ground to another. Ottawa’s Venture Capital Action Plan (VCAP) was launched in 2013, encouraging growth for four years, he said. Its successor, the $400-million Venture Capital Catalyst Initiative (VCCI), was announced in the 2017 federal budget, although capital only began to flow later in 2018.

“I expect 2019 to catch the full wind of VCCI sails and we should see resumed growth,” Mr. Pinto said.

Information and communications technology (ICT) companies accounted for nearly two-thirds of Canadian venture investment last year – $2.6-billion across 386 deals – while Toronto was the city with the most investment, with $1.5-billion across 197 rounds. It was followed by Montreal, which saw $901-million invested across 119 deals, and Vancouver, with $400-million across 71 deals.

The biggest fundraising round of the year went to Ottawa enterprise software firm Assent Compliance Inc.’s $161-million later-stage raise, led by U.S. private equity giant Warburg Pincus LLC. It was followed by a $129-million investment in artificial-intelligence-powered Montreal flight-booking app Hopper Inc., a $103-million round for Montreal biopharma company Milestone Pharmaceuticals Inc., and significant rounds for startup financing firm Clearbanc, food-ordering app Ritual Inc. and smart-thermostat maker Ecobee Inc.

While the report did not break out Canadian versus global investment, it did highlight the large role non-Canadian funds have played in significant deals, such as Warburg Pincus’s lead investment in Assent Compliance.

Canada, Ms. Furlong said, was once considered a “flyover” destination for global venture capital. Now, she says, it’s closer to a “layover” destination, where global VC firms have begun exploring and investing. Soon, she continued, “we’ll be a full-on destination where capital will flow directly, not on its way to somewhere else.”

Private-equity investment in Canada, meanwhile, totalled $22.3-billion over 543 deals last year – a 15-per-cent fall from 2017. Many of these were $1-billion-plus “megadeals” as defined by the CVCA. They include the $5.1-billion syndicate-led recapitalization of GFL Environmental Inc., the $5-billion secondary sale of Husky Injection Molding Systems Ltd. by OMERS Private Equity Inc., and the $2.7-billion privatization of Mitel Networks Corp.