H1 2022 VC & PE Canadian Market Overview
Venture Capital Key Findings
Market Normalizes to Pre-Pandemic Levels with CAD $6.2B Invested During First Half of 2022
Entrepreneurship Healthy in Canada with Record Investment at the Seed Stage
There was CAD $1.65B invested across 182 deals in the second quarter of 2022 bringing the total for the first half of the year to CAD $6.2B invested across 371 deals. This is the lowest quarter since before the pandemic; with similar investment levels experienced across 2020 (CAD $1.63B across 137 deals in Q2 and CAD $1.2B across 128 deals in Q4).
Eight mega-deals (CAD +$50M) closed in Q22022, valued at CAD $799M bringing the total for the first half of 2022 to CAD $4B closed across 25 deals. Investment in the early stages in Q2 remained strong, with the highest seed stage investment and deal count on record (CAD $263M across 104 deals).
“The VC investment performance we are seeing is mirroring the 2020 market,” said Kim Furlong, Chief Executive Officer, CVCA. “In a lot of ways, 2021 was an abnormal year, particularly when it came to company valuation. What we are seeing now, is the correlation between the decrease in public markets slowly permeating the private markets. In choppy waters, we need to continue to ensure Canadian companies have access to capital. Programs like the federal government’s Venture Capital Catalyst Initiative (VCCI) will be essential to help weather unpredictability.”
The Information, Communications & Technology (ICT) sector received two-thirds of all investment in the first half of this year, with CAD $4.1B invested across 205 deals. Life Sciences received 10% of the investment with $622M across 55 deals.
There were no IPOs in the first half of 2022.
Private Equity Key Findings
CAD $3.3B was invested across 202 deals in Q2, a 93% increase in dollars invested in Q1 (CAD $1.69B over 218 deals). The increase in Q2 was driven by two mega-deals (CAD $500M+) that took place during the quarter which had an investment value of CAD $1.4B.
Deals under CAD $25M continue to make up the largest percentage of Canadian PE activity, 87% of the disclosed deals in the first half of 2022 were under CAD $25M, while the average deal size continues to decrease steadily, reaching an all-time low in Q2 of CAD $11.81M. Deals under CAD $25M are directly connected to Small and Medium-Sized Enterprises (SMEs).
“The private markets are normalizing to pre-pandemic levels,” said Kim Furlong, Chief Executive Officer, CVCA. “After an outlier 2021, investors are closely monitoring macroeconomic volatility and public market trends which are impacting the private capital investment environment. While the landscape is more challenging as we head into the second half of 2022, PE investors continue to actively invest and largely in Canada’s SMEs.”
The industrial and manufacturing sector saw the most investment activity in H1 (CAD $1.36B over 101 deals), followed by Information and communications technology (CAD $998M over 77 deals) and the life sciences sector (CAD $87M over 55 deals).
The majority of exit activity in the first half was through M&A, with 63 deals valued at CAD $312M followed by secondary buyouts with 10 deals valued at CAD $2.22B. There were no IPOs in H1 2022.