Canadian venture capital (VC) investments slowed down significantly compared to 2021, according to projections from two reports published in recent weeks. While the amount of capital invested in 2022 declined compared to the prior year, it is still higher than 2020 and previous years.
Y Combinator is the top international investor in Canadian VC deals in 2022, investing in 25 rounds.
Tracxn, a research firm that tracks startup data for VC firms, and CPE Analytics, the data analytics division of Toronto’s CPE Media & Data Company, both published reports that indicate 2022 is projected to become the second-strongest year for Canadian VC behind the record-breaking era of 2021. All of the numbers from Tracxn are in USD, and data from CPE is CAD.
According to Tracxn’s data, VC investments in Canada in 2022 (up until December 15) amounted to $8.7 billion. CPE’s data reports that Canadian companies raised $8.19 billion within 2022 (at time the report was published).
Compared to the $13.5 billion that was raised in 2021, per Tracxn’s report, 2022 VC funding had a decline of about 35 percent. The Canadian Venture Capital & Private Equity Association (CVCA) reported $14.7 billion CAD in VC investments within 2021.
Though 2021 stands out as the year with most VC activity, the $8.7 billion (Tracxn’s data) tallied for 2022 looks strong when compared to CVCA data that $4.5 billion was raised within 2020, $6.5 billion in 2019, and $3.8 billion in 2018.
CPE Analytics also found that most of the funding in 2022 came from United States (US) and foreign investors— 66 percent of total investments to be exact. It reported that US and international investors account for 47 percent and 19 percent of the VC funding poured into Canadian businesses in 2022, respectively.
In a separate analysis, Tracxn counted 643 foreign investors that invested in Canada in 2022, including those based in the US.
Some of the top foreign investors in Canadian tech companies in 2022, according to Tracxn, include Y Combinator, which invested in 25 funding rounds.
US investors, according to CPE Analytics, contributed $1.07 billion in Q4 2022, compared to $722 million from Canadian investors. According to the report, the total amount of venture capital raised in the last quarter of 2022 amounted to $2.18 billion CAD. Compared to the same quarter last year (Q4 2021), which saw companies raise $3 billion CAD, funding for Q4 2022 decreased by 27 percent.
Across the entire year, Tracxn reported that the top funding rounds in 2022 were raised by TransPod ($550 million), Assent ($350 million), Paper ($270 million), Enerkem ($255 million), and Hydrostor ($250 million). It also tracked five new unicorns for 2022, which were Xanadu, Nexii, Neo Financial, LayerZero, and Assent.
Tracking over 33,200 Canadian tech companies, Tracxn reported a number of indicators of the slowing down of VC funding last year. Unicorn births in 2022 were slashed by half since 2021; the amount of exits down by 41 percent; the number of funding rounds down by 23 percent; and first time funded companies went down by 30 percent.
Featured image courtesy Unsplash.