Canadian VC market has strongest first quarter on record

Industries seeing significant investment in Canada

Similar to the global and US VC landscape, Canada continues to attract significant VC investment in the technology space, which accounted for 105 of the 213 deals achieved this quarter.

“The pandemic has accelerated digital innovation and use of technology across industry verticals with continued investment in AI, security tools, fintech, edtech and healthtech,” says Dan Wilson, National Leader – Technology sector, KPMG Canada.

The majority of deals were in AI and machine learning (30 deals) valued at over US$1.2 billion, followed closely by fintech (28), and then crypto/blockchain (17), life sciences (10), health tech (9), agtech (7) and real estate tech (7).

Also noted was a clear momentum building in cleantech, while VC investment in cybersecurity surged further this quarter led globally by a US$650m raise by Canada-based 1Password. Not surprising given that cyberattacks have grown significantly, and will continue to grow. Something that will likely keep VC investment in the space quite high for the foreseeable future.

Corporate VC and exits take a hit this quarter

Despite the uptick, corporate venture capital investment dropped significantly in the first quarter coming in at just US$966m, much lower than the previous three quarters, though still up from last year. There were 41 deals in Q1 2022, down from 68 deals this time last year.

And following a record for exits in 2021, this first quarter has seen a notable decline with just 27 exits worth US$77.5m in the first quarter, down from 34 exits worth US$3.4bn in the previous quarter.

Describing last year’s market where many companies went public as “frothy”, Sunil says that this frothiness has now dissipated as valuations have dropped, adding that a lot of the companies that went public last year simply aren’t living up to expectations.

“With inflation and interest rates going up, supply chain issues and geopolitical concerns could affect the IPO market,” concludes Sunil.

KPMG Venture Pulse Q1 2022 report