Canadian venture capital and private equity activity way up

The strong growth in venture investment came as exit values hit a record high of $4.3 billion, up from $1.5 billion in 2014, powered by a trio of large initial public offerings — Shopify, ProNAi, and Davids Tea.

By sector, information technology led the way, accounting for almost two-thirds of the volume and transaction value, the CVCA report says. As well, the life sciences sector saw particularly strong growth, with deal volume up 39%, and deal value up 35%, from 2014.

Funding trends shifter toward earlier stage deals at the expense of later stage transactions in 2015, the CVCA report says. There were 178 seed-stage deals during the year, it says, up 30% year over year. Early-stage deals led the growth in deal value, up by 46% from 2014, the report says, citing “significantly larger round sizes.” At the same time, investment is later-stage companies declined from the previous year, the report adds.

“Venture capital investment is going through a much needed resurgence in Canada”, said Mike Woollatt, CEO of the CVCA. “The future looks brighter as exits climbed through 2015 and fundraising numbers were strong, thanks in large part to government activity on the fund of funds side.”

In terms of private equity, the CVCA reports that deal volume rose 19% in 2015 to 399 deals, but that deal value dropped to $22.8 billion from $42.2 billion a year ago.

By sector, the energy sector continued to lead the way in terms of deal value, with $8.6 billion worth of activity in 48 deals. However, this is down significantly from 82 deals and $13.1 billion in 2014, the CVCA says. As a result, the energy sector now only ranks fourth in terms of deal volume, trailing industrials, tech, and mining.

“Private equity investment in Canada is leaping from strength to strength right now, despite the impact of oil and gas prices”, said Woollatt. “We are seeing robust activity in deal volume, amounts invested, and fundraising levels, which bode well for future investments.”

As for private equity exits, mergers and acquisitions transactions lead the way, the CVCA report says, representing approximately 60% of both volume and overall value. However, the IPO market for private equity “remains slow”, the report says, noting that there were only four deals during the year, amounting to $2.5 billion.

A survey of CVCA members reveals firms expect the strong deal activity to continue in 2016. Sixty-four per cent believe current economic conditions favour private capital, according to the survey, and 54% say that a lower Canadian dollar improves the business outlook for the upcoming year.