Investors deploy $1.7B to Canadian tech firms in 2016
Canada remains a bright spot according to the MoneyTree Canada report
Investment (all figures in USD) in venture capital (VC)-backed companies based in Canada closed the year with a strong finish, as deals and dollars rose in the final quarter, according to the MoneyTree Report from PwC Canada and CB Insights.
The number of deals increased to 266 from 248 (7%) in 2016. Total dollars invested equalled $1.7B in 2016, essentially matching last year’s figure (down 0.3%). Both trends contrast significantly with the global picture, where deals declined 10% and total funding dropped 23% from the heady highs of full-year 2015.
Investors deployed $527M to Canadian VC-backed startup companies
In Q4 2016, investors deployed $527M to Canadian VC-backed startup companies, spiking 49% from the previous quarter. In the same time period, financing was spread across 71 deals, which rebounded 27% from the previous quarter. During the year, quarterly financing topped $500M twice and each quarter during the year saw at least 50 deals completed, the lowest figure being the 56 in Q3.
“Standout annual and quarterly funding trends underscore the strength of the Canadian tech sector. Canada continues to attract significant global attention due to its impressive innovation initiatives and ambitious entrepreneurs.” said Chris Dulny, National Technology Sector Leader, PwC Canada.
Activity was strong in both leading Canadian hubs of Toronto and Montreal, which saw total dollars invested rising 10% and 8% in full-year 2016, respectively. The Waterloo Region saw a 65% increase over 2015 due to a deal valued at $120M to wearable computing startup Thalmic Labs. Vancouver saw healthy deal activity, with 2016 deals rising 17%, though total funding declined to $250M from $321M. Sector-wise, Internet and Mobile & Telecom companies led the way, although Healthcare saw a significant decline from 2015.
“Canada’s solid year is especially notable given the context,” stated Anand Sanwal, co-founder and CEO of CB Insights. “Whereas many other regions globally have seen a reset after the record financing we saw in 2015, the Canadian funding environment’s momentum continued to be strong. 2017 should be a good year given the growth in Canada’s home-grown investor ecosystem as well as the interest in the market from US and European investors.”
* Early-stage financings into Canadian companies show healthy participation by Canadian investors into local companies. 60% of investors participating in seed-stage deals to companies in Canada were themselves Canadian, and 57% of investors to Canadian early-stage companies were Canada-based.
* However, Canadian investor participation declines for larger, more mature rounds; only 48% of investors to late-stage Canadian companies were Canada-based. US-based firms feature more prominently for these later rounds.
* Toronto and Montreal saw total investment increase 10% to $578M and 8% to $334M in full-year 2016, respectively. Toronto’s annual deal total of 87 was down slightly from 2015 at 4%, while deals to Montreal-based companies rose 11% to 41.
* The Waterloo region saw annual funding spike 65% to $253M on the back of a few outsized rounds, although deal count fell. Vancouver saw healthy deal activity, with 2016 deals rising 17%, though total funding declined 22% due to the prevalence of smaller and earlier-stage deals.
* In sector terms, VC-backed Internet companies again drew the most financing from investors. Dollars invested ticked up 3% to $731M for full-year 2016, while deals jumped 20% to 121, lifting the tide in Canada.
* Mobile & Telecom bumped out Healthcare (which fell 34%) for the second-place sector by deal value, securing $242M across 41 deals.
* Internet of Things companies were a hot thematic area for 2016, with IoT companies in Canada securing $306M in financing across 23 deals through the year (rising 154% and 28% from 2015, respectively).
* Fintech financing and deal activity declined, though the full-year figures were still relatively robust with 27 deals totaling $274M in funding.
* Meanwhile, global VC-backed deals and dollars were down from Q3 2016, with $21B allocated across 1,971 deals as the US and Asia saw significant declines. The sub-2000 global quarterly deal total was the first since Q4 2013.