Tracking Canada’s booming venture capital investment

Venture capital investment in Canadian startups surpassed $13.6 billion in 2021, more than double the previous high of $5.8 billion in 2019, according to PitchBook data. So far this year, the ecosystem has continued that pace, with $3.5 billion raised in the first quarter.
 

 

While the total number of transactions has increased in recent years, much of the growth in deal value is owed to ever-larger deals. Rounds of $25 million or more accounted for 75% of the total capital invested in 2021, up from 51% the year prior. Meanwhile, the average deal size shot up from $6.8 million in 2020 to $15.5 million in 2021.

As America’s northerly neighbor, Canada has long suffered from a “brain drain” of entrepreneurs flocking to greener pastures like the Bay Area and New York, said Matt Cohen, founder and managing partner at Toronto-based Ripple Ventures.

“The pandemic just really accelerated the adoption of remote deal sourcing as well as remote hiring,” Cohen said. “It helped break down that barrier for us.”

Since 2020, more than half of all Toronto-area VC deals have included at least one US investor. Canadian founders can easily target the US market and—thanks to remote work—compete for US talent, Cohen added.

In recent years, fintech companies like Wealthsimple and Clearco have attracted some of the largest rounds. Fintech startups accounted for nearly a quarter of the total VC raised by Canadian companies last year.

Other highly valued Canadian companies include identity verification platforms 1Password and Trulioo, as well as blockchain gaming pioneer Dapper Labs and travel booking startup Hopper.

Canada’s startup ecosystem also benefits from immigration policies that are attractive to foreign-born entrepreneurs and an affordable education system for students coming from abroad, Cohen said.

Featured image by Naeem Jaffer/Getty Images