US investors lead the investments to produce a good performance in challenging times
Canada’s venture capital market showed resilience in 2020 despite the clear challenges presented by the pandemic.
Disbursements reached $5.3 billion to make last year the second best year since 2017, only surpassed by the record high of $7.5 billion in 2019.
A total 610 financing rounds closed in 2020, down 12% year-over-year while the disbursements total was down 29 % from 2019.
Data from CPE Analytics shows that US private venture capitalists were the leading investor type, more than double the dollar volume of the second-placed Canadian private VC group. Canadian government and corporate sources and US corporates were also among the top funders.
In quarter four, US investors pushed their share of total funding to 40%, up from 31% for the first nine months of 2020. Other top 5 foreign contributors were UK, South Korea, China, and The Netherlands.
Canadian investors contributed $2,554 million (48%), US investors contributed $2,137 million (40%), while investors from 46 other countries/regions contributed $612 million (12%).
"This comprehensive data set amply demonstrates that venture capital investing and fundraising follow a different rhythm than that of the overall economy, with a significant bounce back in Q4 resulting in a better-than-expected full year result for this asset class. The data also reveal how reliant Canadian portfolio companies are on the 'swing' investors from the US - investors who returned to Canada in numbers in Q4,” commented Richard Rémillard, President of Rémillard Consulting Group (RCG).
Provincial weakness
However, the data also shows where there is weakness in the Canadian VC market, specifically Quebec.
Ontario led all provinces with $2,284 million, BC became second VC destination with $1,216 million, Quebec was relegated to third with $1,096 million. Toronto is the only $1 billion city.
“While 11 cities have joined the $100M plus club, the data starkly reveals the difficulties rural and smaller town Canada face in attracting VC investment, which is rife with implications for a countrywide, fulsome recovery from the economic effects of COVID," added Rémillard.
Top industries
The main focus for VC investment in 2020 was ICT companies which raised $2,819 million or 53% of total.
Biotech companies received $1,526 million or 29% of total, up from 22% in 2019. Cleantech companies raised $422 million or 8% of the total, unchanged in the share of total in 2019.
