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Kim Furlong, the CVCA’s chief executive officer, said interest from U.S. capital and the sector-stimulating federal Venture Capital Catalyst Initiative helped boost funding in 2019 after a plateau in the previous year.Canadian Venture Capital and Private Equity Association

Canadian venture capital continued to soar in 2019 as homegrown startups and scale-ups saw more than triple the investment they received just six years earlier, nearing heights not seen since before the dot-com crash.

The Canadian Venture Capital & Private Equity Association, or CVCA, said Wednesday that venture firms invested $6.2-billion into startups and scale-ups last year across 539 deals. Early-stage startups enjoyed a surge in financing as later-stage companies saw a stream of mega-deals: In the latter half of the year, hardly a month went by before another record-setting investment was announced.

The CVCA’s figures are further evidence of the Canadian tech sector’s rapid maturation over the past decade, as well as the increased barriers to members of the public who want to invest in that trend. The sky-high valuations that come with increasingly large venture rounds means fewer companies are listing publicly. Last year only two Canadian information technology companies, Lightspeed POS Inc. and Docebo Inc., listed on the Toronto Stock Exchange.

Kim Furlong, the CVCA’s chief executive officer, said interest from U.S. capital and the sector-stimulating federal Venture Capital Catalyst Initiative helped boost funding in 2019 after a plateau in the previous year. But she said for the growth to be sustained, more Canadians will need to cut cheques. “We have to have the equity be Canadian and the growth be global,” she said in an interview.

Analytics provider Refinitiv last month reported a similar boost to the sector in 2019. Adjusted for inflation, it was the biggest year for the sector since 2000.

Last year saw a streak historic venture financings, sometimes mere weeks apart. Newfoundland fraud-detection software provider Verafin Inc. announced $515-million deal in late September, three weeks after B.C.’s Themis Solutions Inc., a legal-software provider that operates as Clio, announced a $333-million transaction.

In November, Quebec-based enterprise software business Coveo Solutions Inc. reached a more-than $1.3-billion valuation on a $227-million raise. Days later, Toronto’s Agilebits Inc., which makes password protector 1Password, raised $200-million from a U.S. investor syndicate as its first-ever outside investment.

The CVCA’s data found that the average deal size in 2019 nearly doubled to $11.6-million. While the total value of all early-stage financings surged 70 per cent to $2.7-billion, the value of all later-stage deals fell 8 per cent to $1.4-billion – despite the surge in deals valued over $100-million.

“We saw a lot more co-investing from big, $100-million-plus firms,” says Patrick Lor, managing partner of Calgary’s Panache Ventures, one of the most active private independent VC firms last year. “They’re coming down the pipe earlier for some companies.”

But looking ahead to the next year, the threat of a recession looms following recent coronavirus and oil-price scares “might mean less money” for smaller companies, Mr. Lor continued.

Michelle Scarborough, the Business Development Bank of Canada’s managing partner for strategic investments and the Women in Technology Venture Fund, said she’s also seen more money flow into companies earlier than in previous years – including increased attention from U.S. venture funds.

The expectations to scale with more money, she said, could have consequences for startups in today’s geopolitical and travel climate, given they often need to travel to drum up new business. “They could be more innovative in their approach to their market segments,” Ms. Scarborough said.

Thirty-nine per cent of investment went to Ontario companies in 2019, the CVCA said; Quebec came in second, taking in a quarter of all venture dollars, followed by British Columbia, with a fifth.

CVCA said there were 40 exits of VC-backed companies last year including IPOs, worth a total of $3-billion.

Two-thirds of VC investment went into information and communications technology firms, with 17 per cent flowing into biotechnology. The biotech sector saw $1.085-billion invested last year, up 67 per cent, thanks to deals including US$65-million to Vancouver’s Chinook Therapeutics Inc., which develops treatments for rare kidney disorders, and a US$82.5-million round by Montreal’s Repare Therapeutics Inc. to advance cancer-fighting drugs.

The lobby group also released its 2019 summary of private-equity deals, which totalled $19-billion over 526 transactions. The total was down 16 per cent from 2018. Three “mega-deals,” including Onex Corp.’s $5-billion buyout of WestJet Airlines Ltd., accounted for more than half of 2019’s deal value.

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