Report highlights how the industry and its ecosystem is maturing and innovating
The Canadian venture capital (VC) industry is resilient and maturing according to a new report from the Business Development Bank of Canada.
It shows that activity in the industry was significantly slower in 2022 than in the previous year, reflecting an easing back from 2021’s record-breaking levels.
There were 12% fewer deals year-over-year with a 34% decline in total amount invested. The average deal size was down 24%.
However, this is not a Canada-only issue and mirrors the trends seen in the global VC industry, the report from BDC Capital, BDC’s investment arm reveals.
"In the next cycle of venture investing in Canada, resiliency and prudent management of capital will play a key role" said Jérôme Nycz, executive vice president at BDC Capital. "Our industry has progressed significantly over the past decade, including through diversification, a growing number of established GPs and increased interest from foreign investors in the asset class.”
The report says that Canadian VC is strong along with the innovation ecosystem it supports, and it has proven its place as an international asset class with more than 50% of transactions originating outside of Canada, for the first time since 2005.
Even in the current economic environment, top quartile funds are delivering returns of 15% and above. The industry has around $13 billion in dry powder to invest.
Cleantech gains
The demand for cleantech investments has remained strong despite the overall decrease in Canadian VC activity.
IT and healthcare also continue to attract strong interest.
Overall, the report highlights how the Canadian VC industry is evolving and maturing.
“This maturation has led to a stronger and more sophisticated VC ecosystem in Canada,” added Nycz. “While the current environment is challenging, we are confident in the ability of the industry to build on its foundation and continue to grow Canada's innovation economy. BDC will be there for entrepreneurs nationwide through the ups and downs of the market."
