Although 2016 was a challenging year for global venture capital (VC) investment activity, Canada closed off the year with its highest level of VC funding in seven years, according to a new report from KPMG Enterprise.
VC investment in Canada for 2016 reached US$2.1 billion over 356 deals compared with US$1.8 billion over 520 deals in 2015, states KPMG’s Venture Pulse Q4 2016 study.
Mega-financings including the raising of US$225 million by Toronto-based BlueRock Therapeutics, a regenerative medicine company, drove the significant increase for 2016. The deal was the biggest funding round in the Americas in the fourth quarter (Q4) of 2016.
“This deal, in addition to an undisclosed funding round by Hubba Inc., led by Goldman Sachs Group Inc., illustrate how the country is gaining attention on [the] investment radar of international VC investors and corporates,” the report states.
Q4 was also notable for Canadian VC activity thanks to a significant seed investment for Element AI, a Montreal-based incubator, which should “go a long way toward growing the city’s burgeoning artificial intelligence tech hub,” the study notes
Overall, global VC activity was challenged in 2016 with the number of deals declining by 24% year-over year and funding decreasing to $127.4 billion from a peak level of $140.6 billion in 2015. Venture-backed exits into the initial public offering (IPO) market also fell by 26% year-over-year.
Asia was the only one of the major regions studied in the report that was able to maintain its level of VC funding year-over-year at US$39 billion — although it did the see the number of deals decline to 1,742 in 2016 from 2,266 in 2015.
VC funding in the U.S. reached US$69 billion across 8,136 deals in 2016, lower than the US$79 billion raised over more than 10,000 deals in 2015. And Europe saw a decline in VC activity to US$16 billion over 3,142 deals in 2016 compared with US$18 billion over 4,378 deals the year prior.
Although global VC funding in 2016 began strong, investor optimism declined over the second half of the year with market uncertainty over the U.K.’s vote to leave the European Union and the U.S. presidential election contributing to investors’ caution, the report notes.
However, the VC funding market for 2017 appears to be optimistic. Successful IPOs of Nets A/S, a payments firm in Denmark, and Shop Apotheke, an online pharmacy in Germany, bode well for future IPOs in Europe. In the U.S., Snap Inc., the parent company of social media giant Snapchat, has filed to launch its IPO in early 2017.
The success of these IPOs may convince other mature companies that did not go public in 2016 to do so in 2017, the report suggests.
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