Canadian venture capital (VC) investment soared to its highest level in 15 years in 2016 as a result of its seventh consecutive year of growth, according to the latest data from the Canadian Venture Capital & Private Equity Association (CVCA).
The CVCA reports that VC investment totalled $3.2 billion in 2016, up 41% from the previous year, reaching its highest level since 2001. Mega deals, which are worth more than $50 million, were the catalyst for the strong showing in VC investment as 11 mega deals were consummated during the year accounting for a combined $1 billion, up from five deals totaling $335 million in 2015.
By sector, tech and life sciences were the hottest areas in 2016. The tech sector generated six of the 10 largest deals during the year and contributed 330 deals overall, representing $2 billion in VC investment.
Says Mike Woollatt, CEO of the CVCA: “2016 was a banner year for VC investment levels. Canadian VC is supporting entrepreneurs at levels we haven’t seen in quite some time. We certainly hope this trend can continue and are watching some pivotal upcoming government policy decisions closely.”
In terms of private equity, the CVCA reports that deal volume increased by 26% year-over-year in 2016, but that deal value was down by about 40% over the same period due to an absence of mega deals. Total private equity investment for the year came in at $13.7 billion in 536 deals compared with 424 deals worth $22.9 billion in 2015.
The energy sector led the way in private equity, generating $4.4 billion worth of deals during the year, followed by tech with $2.5 billion, and cleantech, at $2 billion. The CVCA notes that the value of energy sector investment dropped by 49% year-over-year, but that tech and cleantech soared, with the value of their dealmaking up by 352% and 200%, respectively.
“Private equity investment levels have come off the huge years in 2014 and 2015, largely as a result of the decline in oil and gas activity,” Woollatt says. “However, activity continues to climb in mid-market deals in other sectors.”
By province, Ontario and Quebec are leading the way in both the VC and private equity markets, the CVCA reports, noting that VC investment rose by 55% and 47% year-over-year, respectively, in 2016.
Similarly, Ontario led the way in private equity investment, with $5 billion worth of deals in 2016, followed by Quebec at $3.8 billion and Alberta at $3.3 billion. The CVCA notes that eight of the top 10 private equity investors are based in Quebec and that Quebec-based institutional funds “contributed the lion’s share of investment” in small private equity deals, “participating in 80% to 90% of the deals between $100,000 and $5 million.”
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