Year-End 2022 VC & PE Canadian Market Overview

Canadian VC Wraps Up 2022 With a Surprising Second-Highest Record in Both Deal Count and Deal Value

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The fourth quarter of 2022 saw CAD $2.5B invested across 162 deals, closing the year with CAD $10B invested across 706 deals as the market normalized from 2021.

2022 closed with the second-highest deal count and total deal value on record, as momentum from the 2021 highs carried through much of last year. The Q4 VC activity experienced a slight uptick after three consecutive quarters of decline in 2022, increasing by 182% in dollars invested and 9% in deal count.

While early-stage and growth-stage deal sizes declined from 2021, average deal size year-over-year increased for investments in pre-seed, seed, and later stages. Notably, pre-seed and seed stage average deal sizes increased by 79% and 8%, respectively, compared to the previous year. Venture debt in 2022 also hit a new record in both value and deal count, with CAD $139M across 34 deals in Q4, totaling CAD $664M across 124 deals. 

“Considering the macroeconomic conditions, the finish in 2022 was surprising, and it’s a testament to the resilience of Canadian businesses and our VC market,” said Kim Furlong, Chief Executive Officer, CVCA. ​“You can’t grow what you don’t seed, and given the increase across pre-seed and seed stages, we know Canada has a healthy pipeline of companies that are benefiting from VC investment”

The Information, Communications & Technology (ICT) sector continued to lead in 2022, accounting for over half of all deals, with CAD $6.2B invested across 381 deals. Life Sciences closed 16% of all deals (112) and 10% (CAD $1B) of the total deal value.

Market uncertainties continued to impact companies seeking capital through public markets in 2022. Notably, there were no IPOs. Overall, the annual exit value saw a 92% decline from the previous year, the lowest year on record. M&A exit activity also slowed down in 2022, although it remained in line with the 2020 pre-pandemic levels, with 29 exits and a total exit value of $668M.

Canadian PE Deals Reach Record High in 2022, Despite Downshift in Total Investment Value

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Q42022 saw CAD $2.3B invested over 194 deals as PE investors focus on smaller deals and add-ons due to macroeconomic pressures. Despite a downshift in total investment value year-over-year, CAD $10 billion was invested across 890 deals, a record-high for deal count.

Over 2022, Canadian PE investors saw a lack of larger deals due to the fastest interest rate increase cycle in the last 40 years. The largest deal was the CAD $271M debt deal raised by Westland Insurance Group from Blackstone Credit. Deals under CAD $25M continued to dominate in the Canadian market, accounting for 85% of all disclosed PE transactions in 2022. 

“The PE market in Canada is well-positioned to weather economic downturns and contribute to the country’s recovery,” said Kim Furlong, Chief Executive Officer, CVCA. ​“Despite global uncertainty, LPs remain confident in the strength of PE, which is particularly attractive during volatile conditions. PE also plays a critical, and often overlooked role, in supporting Canadian SMEs, which are vital to the country’s economic growth, and in helping transition business ownership as the population ages.”

The industrial and manufacturing sector surpassed the information and communications technology (ICT) sector for the first time in 2022, with CAD $2.4B invested over 212 deals, while ICT received CAD $1.6B over 134 deals. The top sectors were followed by Consumer & Retail with CAD $363M across 102 deals, and Life Sciences with CAD $315M across 129 deals.

Exit activity via M&A outpaced the 5‑year average in the number of transactions by 45% but trailed behind in total value by 47% due to downward pressure on exit value caused by drops in liquidity markets, valuation adjustments, and global uncertainty.