CVCA Releases Q1 2019 VC & PE Canadian Market Overview

On May 27, 2019, the Canadian Venture Capital and Private Equity Association (CVCA) released its Q1 2019 VC & PE Canadian Market Overview, providing an overview of venture capital (VC) and private equity (PE) activity in Canada for the quarter.

Canadian VC Activity in Q1 2019

A total of $1B was invested over 142 deals in Q1 2019, representing a 48% increase from Q1 2018. This represents the fifth billion-dollar quarter for the Canadian VC market since 2013. The average deal size was $7.4M, a 56% rise from Q1 2018 and a 34% increase when compared to the average deal size during the period between 2014-2018 ($5.5M).

Q1 2019 saw seven mega-deals ($50M+) which accounted for a 57% share of total dollars invested. These mega-deals included Toronto-based Vena Solutions Canada Inc.’s $115M growth equity financing from US investors including Centana Growth Partners and JMI Equity, Squamish-based Carbon Engineering Ltd.’s $90M round from two US cleantech investors, and Montreal-based Enerkem’s $76M round from a syndicate of investors including Cycle Capital Management/Ecofuel, Fondaction CSN, Fonds de solidarité FTQ, and National Bank of Canada.

Deals between $5M-20M totalled $234M, which captured 22% of total dollars invested. Approximately 70% of deals in Q1 were under $5M.   

Information communications technology companies saw the greatest amount of VC activity, receiving $619M over 80 deals (representing 59% of total dollars invested in Q1). The next most active were cleantech companies, receiving $201M over 11 deals (a 19% share, representing a 12% uptick from Q4 2019) and life sciences companies, receiving $145M over 26 deals (a 14% share). In terms of location, deals were concentrated in Toronto, Calgary, and Montreal with $416M across 47 deals (40% of total dollars disbursed), $154M across 5 deals (15%), and $146M across 35 deals (14%), respectively.

Later stage companies received the largest share of total investment since 2014 with $493M across 53 deals (47% of total investment). Growth equity deals received $138M across 4 deals (13%).

Montreal-based Lightspeed POS Inc. completed the largest and only IPO exit since 2017, listing on the TSX with a market cap of $1.1B.

“It’s great to see continued momentum across the Canadian VC industry with this fifth billion-dollar quarter in less than 10 years,” said Kim Furlong, Chief Executive Officer, CVCA. “We will be keeping an eye on the exit environment throughout the remainder of 2019.”

Canadian PE Activity in Q1 2019

PE investment slumped in Q1 2019, as $1.9B were invested across 130 PE deals -  a 72% decline from Q1 2018. All PE deals with disclosed values were below $500M, with 62% of deals valued at less than $25M. The largest deals included Torquest Partners’ $199M acquisition of BC-based Prepac Holdings Inc. with financing support from Export Development Canada (EDC), and Penfund Inc.’s $100M debt financing to Goodlife Fitness Centers Inc.

Information communications technology companies made up a fifth of all PE deals in the quarter (27 out of 130), totalling $929M (almost half of all dollars disbursed). Together, the industrial & manufacturing and the consumer & retail sectors received $562M over 43 deals (29% of total dollars disbursed). In terms of location, 19% of all PE deals went to Montreal-based companies ($840M across 25 deals) and 15% went to Toronto-based companies ($314M across 20 deals).

Four out of every ten PE deals were debt deals with an average deal size of $11.8M, which is 1.5 times greater than last year. Q1 2019 also saw nine M&A exits totalling $270M, compared to 82 exits totalling nearly $8.5B for the year in 2018.

Goodmans Tech Group

To assist clients in the technology sector, Goodmans brings together our acknowledged expertise in corporate/commercial, private equity, corporate finance, mergers and acquisitions, outsourcing, licensing, intellectual property, privacy, regulatory and media, cleantech, tax, litigation, human resources, corporate restructuring and administrative law. We do so both for innovative businesses in their start-up phase and for well-established businesses of all types. Goodmans continues to lead in the technology sector and is partnered with the DMZ at Ryerson University. The DMZ is a leading business incubator (selected by UBI as the top-ranked university incubator in North America, and third in the world), which connects its start-ups with resources, customers, advisors, investors, and other entrepreneurs. Goodmans is also a proud partner of IDEABoost, an initiative of the Canadian Film Centre’s Media Lab; building the next generation of technology-based media entertainment products, services and brands. Through these partnerships, Goodmans provides legal advice, mentorship and networking opportunities to assist start-ups in maximizing their potential.

Goodmans is also an internationally recognized leader in other aspects of technology law and transactions. From our thought leadership, through participation on the Boards of associations such as CanTech (Canadian Technology Law Association), CORE (Centre for Outsourcing Research and Education), CIEG (Canadian Institute for Exponential Growth, which organized the Summit) and iTechLaw (International Technology Law Association), to our involvement in major technology procurement, joint venture and outsourcing transactions, to our representation, in court proceedings and in arbitrations, of major technology providers, and users of technology, in ground-breaking cases, our Technology Group is consistently at the forefront of leading technology transactions and cases.

Members of our Technology Group are recognized as leading technology lawyers in Chambers Global, Lexpert, Legal 500 Canada, Legal Media Group’s The Best of the Best, The Best Lawyers in Canada, Law Business Research’s The International Who’s Who of Business Lawyers, and The Lexpert/American Lawyer Guide to the Leading 500 Lawyers in Canada, teach internet and communications law at Canada’s largest law schools, are regular lecturers at technology industry events and legal conferences, and have published articles in the technology law field.