Canadian venture funding hit a record high of $2.49 billion USD in the first quarter of this year, breaking the previous record of $1.52 billion USD set in Q4 2019, according to a new report from KPMG.
“The impact of COVID-19 has not curtailed investment in Canadian technology and other high-growth sectors.”
KPMG’s Venture Pulse report uses data from Pitchbook to examine a surge in Canada’s venture capital environment in 2021. The report noted that venture investment in the first quarter of the year was more than double the $1.16 billion raised in Q4 2020 and the $1.11 billion raised in Q1 2020. The results from the first quarter of the year show promising signs for the Canadian venture ecosystem, which managed to perform well last year despite COVID-19.
The Canadian Venture Capital and Private Equity Association report found that despite early signs of a decrease in deal flow due to COVID-19, Canada experienced its second-highest level of venture capital investment on record last year, with $4.4 billion CAD invested total.
“As we saw in 2020, the impact of COVID-19 has not curtailed investment in Canadian technology and other high-growth sectors,” said Anuj Madan, partner and national sector leader of technology, media, and telecommunications at KPMG in Canada. “To the contrary, VC investment has soared to new heights, solidifying Canada’s position as an innovation hub that’s creating global disruptors.”
KPMG’s report signals this momentum has continued in 2021. The report found that foreign investment, primarily from the United States, was the key driver of this quarterly growth. Foreign investment accounted for $1.82 billion USD, or nearly three-quarters of overall funding in Q1 2021.
“The entrepreneurial spirit is alive and well in Canada with foreign capital increasingly focused on funding promising ideas and companies,” said Sunil Mistry, partner in KPMG Canada’s private enterprise and technology, media, and telecommunications practice. “While foreign investment is on track for record funding this year, we are also seeing Canadian VC firms becoming more active in later-stage rounds.”
KPMG found the first-quarter results were driven by five separate rounds of $100 million or more, which included four deals in the tech sector. Dapper Labs, for example, raised $305 million. The other large deals included cloud-based healthtech startup PointClickCare, Toronto-based edtech startup Top Hat, Prodigy Education, and a mineral exploration company.
The report also noted that FinTech, SaaS, and consumer-targeted digital solutions are drawing strong interest from venture capital investors.
There were a total of 157 deals in Q1, including 54 that were classified by KPMG as angel or seed financings, 39 as early stage deals, and 64 later stage for more mature companies. The fourth quarter of 2020 had more seed and early-stage deals, and fewer late-stage deals.
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