VC investments in Canada experience great growth in 2016

Venture capital (VC) investment in Canadian companies reached a 15-year high in 2016, which is a very different outcome from Canada’s buyout and related private equity (PE) market and its significant decline, according to a report from Thomson Reuters Corp.’s Canadian arm on Monday.

A total of 459 Canadian companies closed 571 rounds of VC financing totalling $3.7 billion in 2016. In addition to this being the highest level of dollars invested in the past 15 years, the total value of the combined deals was also 36% higher in 2016 than it was in 2015.

Growth in the VC market was driven by large-cap deals in which 14 companies raised around $50 million or more, which smashed a record from 2000 when 12 companies were able to reach that level of fundraising.

Information technology (IT) continues to be the driving force behind Canadian VC investment as IT companies raised $2.1 billion and accounted for 56% of total VC activity in 2016.

VC investment by Canadian funds in non-Canadian companies also had a strong showing in 2016, with more than $680 million invested in 92 deals. This represents an increase of 54% in dollars invested from 2015.

On the other hand, Canada’s buyout and PE market saw significant declines both in terms of deal volume and value. There were a total of 303 completed transactions in 2016, which is a decline of 28% from 2015, and a total value of $18 billion, which is 19% lower than the total value of transactions in 2015.

Canadian oil and gas companies accounted for 45 transactions and 15% of total buyout-PE activity, making this the largest share of the activity. Companies based in Ontario saw their share of national PE activity rise to 30% in 2016, which is the province’s highest level in five years. Quebec retained its status as the area of most PE activity, although its 37% share represents the province’s lowest level in four years.

Despite reduced deal volumes, 31% of lead investors were non-Canadian, which is a high that has not been seen since 2011 when 33% of Canadian deals were led by non-resident firms, the report notes.

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