Venture capital (VC) investment in Canadian technology companies sustained a robust pace in the second quarter of 2019, with $1.4 billion deployed across 153 financings, according to final data released by Refinitiv.
This marked the most active April-through-June period in dollar terms since 2000. The number of rounds, however, were down slightly year over year.
As a result, VC investment in the first half of the year hit $2.8 billion, up 12 percent from $2.5 billion invested at the same time in 2018.
Life sciences sectors secured $587 million in the first half, more than the entire 2018 amount. This caused their share of disbursements to more than double to 21 percent from a year earlier.
In contrast, information technology sectors captured a relatively flat $1.7 billion in the first half, causing their share to drop to 59 percent.
A full PDF report of H1 2019 Canadian venture capital market activity by Refinitiv is available here.
REPORT SUMMARY (reproduced courtesy of Refinitiv)
Canadian VC Market Trends
Canadian venture capital funding continued its strong start to 2019, with yet another $1.4 billion invested during the second quarter bringing the total for the first half of the year to $2.8 billion financed across 281 rounds. Just like the first three months of 2019 marked the new strongest first quarter since 2000, the second quarter was also the strongest April to June period since 2000. Despite continued strength in funding amounts, volumes were slightly down 3% year-over-year, continuing the trend of more dollars being invested across fewer deals.
Retaining the top spot for the first half was the $141 million March series B funding round into Fusion Pharmaceuticals, a Hamilton-based biopharmaceutical company developing innovations in radiation therapy for cancer treatment. The round was led by Varian Medical Systems and OrbiMed, who were joined by a large consortium of life science investors including Canadian firms Genesys Capital and FACIT. Top deals newly added during the second quarter included digital wealth management company Wealthsimple’s $110 million investment by Allianz X and Power Financial, as well as PDF development software company PDFTron, which secured a $96 million investment in May by Silversmith Capital Partners.
Canada-based funds accounted for a 47% share of invested capital from disclosed sources during the first half of the year, remaining ahead of the 45% by funds headquartered within the United States. 2018 remains the only year since 1992 in which the opposite was true, with U.S. funds coming out on top, investing 47% versus 44% attributable to Canadian funds.
The top three most active investment firms in the half were all based in Montréal. These were BDC Venture Capital with 46 investments, Real Ventures with 30, and Desjardins Capital with 27. The firm with the largest amount of disclosed equity investment was Toronto-based Georgian Partners, with $77 million invested across 5 rounds.
Canada VC Fundraising Trends
Canadian venture capital firms continued to raise considerable amounts of money during the second quarter of 2019, with a tally of $1.4 billion being raised across 13 fund closings. Top fundraisings included Radical Ventures’ $472 million fund launch, which will focus on making investments within the artificial intelligence space, as well as Northleaf’s second Venture Catalyst fund, which closed at its hard cap of $300 million.
Canadian VC Trends by Region
British Columbia-based companies received $620 million of VC investment between January and June, an 86% increase from the same period one year ago. In the context of the North American state and provincial rankings, this placed it in 15th, behind Québec and ahead of Connecticut.
Ontario was the highest ranking Canadian province, with companies inside its borders receiving $1.3 billion, a 7% increase from the H1 2018 total, and placing it 7th in the rankings, behind Washington and ahead of Florida. Despite the increase in provincial investment, financings in the Greater Toronto Area saw a decline of more than 19% down to $849 million, resulting in a 12th place city finish, behind Denver and ahead of Houston.
Québec-based companies raised $632 million, a decrease of 21% from the prior year. This earned it a 14th place ranking overall, behind Utah and ahead of British Columbia.
Canadian VC Trends by Sector
Following a successful first quarter, Canadian life sciences companies raised $309 million in the second, up 278% from Q2 2018 and resulting in the first half of 2019 raising more investment than the entirety of 2018. Cleantech companies received $139 million in Q2, up 46% from the year prior.
Despite retaining the bulk of all VC investment, IT-company financings remained flat year-over-year at $1.7 billion received across 181 rounds. This represented at 59% of total dollar flows flows during the period, which was down from the 67% share seen throughout the first half of 2018.
Canadian Fund Performance
Although investment activity continued to reach new heights, the performance of Canadian venture capital and growth equity funds had not quite attained the same levels. Published data provided by Cambridge Associates shows Canadian venture capital & growth equity funds with vintage years of 2000 or greater returned a since inception IRR of only 4.8% as of the end of Q1 2019, lagging behind both U.S. counterparts and public market equivalents. Despite a dip in performance during the starts to 2017 and 2018, returns have shown a slight recovery in 2019, up 1.5% for the year.