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Canadian venture capital (VC) financing held strong in the first quarter, but Covid-19 will likely take a bite out of VC activity in Q2, according to a report from Toronto-based CPE Analytics.

There were 126 VC financings in Q1 that raised a total of $1.36 billion, CPE reported. That was down 36% from the $2.05 billion raised in Q4, although the decrease was “not that dramatic,” given that Q4 represented the “best quarterly disbursement in Canadian history.”

Covid-19 had a “limited” impact on Q1 financings since most deals had closed or were in the process of closing before the pandemic hit Canada, CPE noted. Preliminary data indicate that Q2 will be much weaker.

“Based on incomplete data, investment activity of April 2020 is on its way to overtake that of April 2019, but May and June are way down,” CPE reported. “The full impact of Covid-19 will likely manifest itself in Q2 and beyond.”

Q1 saw five large deals worth $50 million or more attract a total of $624.7 million, representing 46% of deal activity in the quarter. Ontario ($636.6 million), Quebec ($359.2 million) and B.C. ($275.9 million) attracted the most dollars.

Companies in the information and communication technology and biotech sectors attracted the bulk of investment dollars, raising $739.4 million and $354.7 million, respectively.

Foreign investors played a large role in Q1 financings. Canadian companies raised funds from investors in 23 foreign countries, led by the U.S. ($457.2 million), South Korea ($69 million), United Kingdom ($14.7 million) and China ($10 million).

In a release, Richard Rémillard, president of Rémillard Consulting Group, said it was “unclear” whether foreign investors would continue to invest in Canadian VC in the wake of Covid-19. A drop-off in foreign investment “could have direct consequences for the funding of Canada’s most promising firms,” Rémillard said.