Venture capital surged to a new record in the first quarter while private equity investment contracted modestly on the back of declining oil and gas activity, a new report from the Canadian Venture Capital and Private Equity Association says.
The value of venture capital investments made in Q1 surged to $838 million, nearly double the amount recorded during the same period last year. Growth was driven by large deals in British Columbia and Ontario, plus the $58 million investment made in Manitoba firm, Farmer’s Edge. That deal involved a group of companies led by Japan’s Mitsui & Co.
The CVCA said that it expects the frenzied pace of the first quarter to continue this year.
As these four entrepreneurs can attest to, there’s money on both sides of the border for startups with great potentialVenture Capital comes to Canada as private companies raise a record quarter
“The substantial increase in amount of VC investment in Canada offers a great reflection of the investment opportunities there are here right now,” said Mike Woollatt, chief executive officer of the CVCA in a statement. “VCs are seeing the value of Canadian entrepreneurial talent and making some big bets on the future.”
In total, there were 118 venture deals in the quarter, with Ontario companies generating the lion’s share of investments — $486 million. B.C. pulled in $207 million, while Manitoba racked up $69 million.
The largest single investment was made into Real Matters Inc., an Ontario real estate data company that has managed to sign up some of the biggest U.S. banks to use its services. Whitecap Venture Partners and BMO Capital Partners were two of the disclosed VC firms that contributed $100 million to the company.
Other large deals included $87 million into B.C.’s Zymeworks Inc., $49 million into Ontario’s BuildScale, Inc. and $42 million into B.C.’s Indochino Apparel Inc.
CVCA said that in addition to the funding boom, many of the investments made were late stage, compared with the seed and early stage venture capital investments of past years.
The average deal size has also grown to $7.1 million, compared with past years, where the average was in the $4-$5 million range.
Woollatt noted in an interview with the Financial Post earlier this month that a greater number of U.S. venture capital firms are heading north to make investments in Canadian companies, a factor likely helping to add to deal size, as U.S. firms tend to have larger capital pools to invest.
Private equity, in contrast, saw a big year-over-year decline in the first quarter. While $7 billion in deals were made last year, Q1 2016 saw just under $3 billion in deals struck. The slowdown was due to a sharp pullback in investments made in the oil and gas sector.
Woollatt said that he expects private equity deals will bounce back as balance sheets stabilize in the oilpatch.
“With the sheer amount of powder out there in the North American markets we expect the high activity to continue and private equity to return to its recent heights as well,” he said in a statement.