First quarter saw record level of Canadian venture capital financings, industry group says

Canadian early-stage companies, riding a wave of pandemic-related interest and demand, raised a record amount of venture capital in the first quarter, the Canadian Venture Capital and Private Equity Association reported Tuesday.

The CVCA said Canadian companies raised $2.7-billion in venture capital over 175 deals in the period. That’s up sharply from the $831-million raised in 117 deals in the same quarter a year ago, which was affected as the pandemic shut down economies in March.

Eight deals in the quarter were valued at $100-million or more, including financings for Michele Romanow’s Clear Finance Technology Corp. and online travel firm Hopper Inc. They are among a slew of Canadian early-stage companies in recent months to reach “unicorn status” by achieving valuations of US$1-billion or more.

Financing for Canadian innovators has continued at a strong pace in the second quarter, with significant announced venture funding for Wealthsimple Technologies Inc., Ada Support Inc., Clio and Knix Wear Inc., among others, and initial public offerings by Magnet Forensics Inc. and Thinkific Labs Inc. Despite recent market volatility that has cut into valuations for technology vendors, several Canadian companies, including Q4 Inc., VerticalScope Inc., Softchoice Corp. and Maple, are all eyeing potential IPOs in the near term.

Funding for Canada’s ascendant biotechnology sector was strong, at $324-million in the quarter, putting it on track for a third consecutive year of US$1-billion-plus in venture capital raised. The biggest share of funding, or $1.3-billion, went to information and communications technology companies.

The first quarter also included several prominent “exits,” including the closing of Nasdaq Inc. ’s purchase of fraud detection software firm Verafin Inc., telemedicine provider Dialogue Health Technologies Inc. ’s IPO and a buyout of Tandem Expansion’s stake in Coveo Solutions by the Qatar Investment Authority for $130-million, the CVCA said.

CVCA chief executive officer Kim Furlong said, “What we’re hearing over and over is that capital is no longer the issue; there is capital if you require it. It tells you we’re going to have another fabulous year” in 2021.

The domestic VC industry is also set to get a boost after the federal government committed in April’s budget to a third $400-million program to boost the sector. Ms. Furlong said she wasn’t worried about valuations overheating, “but I agree that there are a lot of dollars at play.”

The CVCA numbers reiterate similar findings this month from Refinitiv, which also found Canadian venture capital had its most active quarter on record as measured by amount invested.

The CVCA also reported Tuesday that while private-equity investment activity was the highest on record, at 177 deals, the amount invested was relatively low, at $2.68-billion. However, the CVCA said 2021 will likely set the record for most private-equity-backed IPOs in Canada, with two in the first quarter and several others since completed or in progress, including offerings by Dentalcorp Holdings Ltd. and Softchoice Corp.

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