Venture capital investment up 55% in first quarter

Venture capital highlights

CVCA reports that venture capital investment activity in Canada increased 55% versus the same period in 2012 to $460 million in the first quarter of 2013. The number of deals also grew 17% with 137 Canadian companies receiving new investment capital.

The size of Canadian VC financings increased to an average of size of $3.4 million, up substantially from the $2.5 million average in Q1 2012. Despite the increase, the average deal size was still only 49% of that seen for comparable firms in the United States in Q1 2013.

“It is gratifying to see the substantial growth in venture capital investment in Canada in the first quarter, particularly with respect to first time investments and clean tech,” said Peter van der Velden, president of the CVCA and managing general partner of Lumira Capital Corp.

Domestic and foreign VC fund exits from Canadian-based portfolio businesses got off to a strong start in 2013, with 15 liquidity/realization events, which was well ahead of 2012, a year in which there were only 30 such liquidity events for the entire year. Strategic sales accounted for the majority of exits.

In contrast to investment activity, Canada VC fund-raising activity in the first quarter of 2013 lagged activity of one year ago, when a significant number of major partnerships were closed. New capital committed to a dozen Canadian funds totaled $381 million in this period, down 44% from the same time in 2012.

Buyout and private equity highlights

With total disclosed investments $2.1 billion for the first quarter, the level of investment activity was in-line with amounts reported in Q1 2012. The key change for the period was a 47% decline in the number of deals, which was reflective of a handful of major transactions during the period.

In terms of sector allocations, resource extraction captured one-third of deals in the first three months of 2013, followed by construction-engineering and information-media sectors, which each took 11% of the total number. In terms of dollar flows, mining dominated in this period, accounting for 53% of the total largely because of the Arcelor Mittal Mines Canada transaction.

The pace of liquidity/realization events involving Canadian-based, PE-backed companies remained steady in Q1. Domestic and foreign fund realizations totaled 19, or effectively one-quarter of the 78 exits reported in all of 2012. Strategic sales continued to dominate exit activity, accounting for 74% of transactions in Q1 2013.

Canadian buyout, mezzanine and other PE fund-raising activity in Q1, 2013 mimicked activity in 2012, with a total of $1.1 billion of new capital being committed to ten partnerships and other funds. During the whole of last year, Canadian buyout-PE fund-raising brought $4.5 billion into the market.