CVCA Q3 2016 Results: VC Continues Upward Trend, PE Remains in Holding Pattern

At $716M, 2016’s top 10 VC deals to date run 29% higher than top 10 deals in 2015 ($557M)

TORONTO--()--2016 has been a year of highs and lows for Canada’s VC and PE industries. With one quarter to go, things are hot on the VC side, with $2.1B in investments recorded in the first three quarters of 2016. This is just 9% shy of the total invested in 2015 and there’s every indication that 2016 VC investment will surpass last year’s numbers.

With more than 111 deals in Q3 valued at $605M in total, VC investment increased 8% over the quarterly average of $562M since 2013. Average deal sizes in several sectors reached high-water marks since 2013. ICT average deal sizes increased 24% to $5.6M, life sciences went up 17% to $6.9M and agribusiness soared 260% to $7.6M. In fact, VC investment in agribusiness has been on the upswing since 2013, growing from $14M to $27M in 2014, $42M in 2015 and $153M in the first three quarters of 2016.

Ontario and Quebec continue to lead all other provinces in terms of dollars invested. More notable were the spikes in the average deal sizes: up 44% in Ontario (to $7.5M) and 46% in Quebec (to $5.7M).

“The higher average deal size we’re seeing for VC investment demonstrates continued confidence in Canadian entrepreneurs,” says Mike Woollatt, chief executive officer, CVCA. “Canadian VC is on a much needed upswing.”

However, on the PE side, the high relative valuations in the current environment have contributed to a fairly slow first three quarters of 2016. Just $9B was invested over 271 deals, down 55% from the same time last year when $20B was invested over 311 deals. Quebec was a contrarian bright spot with much of the investment activity supported by local investors; 5 of the top 10 PE investors were Quebec-based, investing a total of $1.6B over 169 deals in the first three quarters of 2016.

Ontario captured 42% of the PE dollars invested with $3.8B over 60 deals. Quebec was second in dollars invested, capturing 25% with $2.3B invested and first in deals with over 140 transactions. Oil and gas captured almost a third of all YTD PE investments ($2.8B, 26 deals) but still remains well off the pace in activity. ICT was close behind at 25% ($2.3B, 41 deals), followed by cleantech at 21% ($1.9B, 19 deals).

Tough market conditions continue to hamper exits; there was only $3.5B in exits YTD 2016 compared to $11B last year.

“PE remains in a bit of a holding pattern, particularly in its leading category of oil and gas,” Woollatt says. “It’s looking like 2016 will end up more like 2013 than the huge levels we saw in 2014 and 2015.”

Venture Capital Highlights:

  • The $2.1B invested in the first 3 quarters of 2016 is 9% shy of the total invested in all of last year and more than any previous single year since 2007.
  • Average VC deal size this year is $5.83M, the highest since 2013.
  • $605M invested over 111 deals in Q3 2016, 8% higher than the quarterly average ($562M) since 2013.
  • Ranked first and second respectively in terms of both YTD number of deals and dollars invested, Ontario ($1B invested over 134 deals) and Quebec ($629M invested over 115 deals) saw their average VC deal size average spike by 44% (to $7.5M) and 46% (to $5.7M).
  • There was $1.4B (over 241 deals) invested in ICT companies, just 3% less than last year’s total, and higher than the amounts invested in all of 2014 ($1.3B) and 2013 ($1.1B).
  • VC Investments in agribusiness shows an upward year-over-year trend: $14M in 2013, $27M in 2014, $42M in 2015 and $153M in the first three quarters of 2016.
  • High-water marks not seen since 2013 for: ICT - $5.6M (up 24%); life sciences - $6.9M (up 17%); agribusiness - $7.6M (up 260%) and others - $5.9M (up 117%).
  • Of the $716M invested in the top 10 VC deals of 2016, $454M (63%) was invested in early-stage companies and $262M (37%) in later-stage companies.
  • The largest YTD disclosed exit involving Canadian investors involved the acquisition of Privacy Analytics Inc. by IMS Health for $44M. Investors included BDC Capital Inc., Fight Against Cancer Innovation Trust (FACIT), IMS Health, MaRS IAF, Purple Angel and Vanedge Capital Partners Ltd.

Private Equity Highlights:

  • Ontario captured 42% of PE dollars invested with $3.8B (over 60 deals); Quebec was second capturing 25% with $2.3B invested (over 140 deals).
  • 5 of the top 10 PE investors were Quebec-based, investing a total of $1.6B over 169 deals in the first three quarters of 2016.
  • Oil and gas had nearly a third of all PE investments in Q3 with $2.8B invested in 26 deals. ICT was a close second (25% share) with $2.3B invested over 41 deals, followed by cleantech (21% share) with $1.9B over 19 deals.
  • There were 41 PE exits this year totalling $5.5B: 35 M&A exits ($3.5B) and 6 secondary sales ($2.0B).
  • PE firms raised $4.7B to date in 2016, down 25% from the $6.2B raised during the same time last year.
  • The largest disclosed PE exit of the year involved the $1.6B buyout of Ontario-based TRADER Corporation by PE firm Thomas Bravo LLC.

READ THE YTD Q3 2016 VC & PE CANADIAN MARKET OVERVIEW

About the CVCA
The CVCA is the voice of Canada’s venture capital and private equity industry. We are focused on improving the private capital ecosystem by broadening industry awareness and providing market research, networking, and professional development opportunities. We also advocate on behalf of the industry to ensure sound public policy that encourages a favourable investment environment. The CVCA works alongside its members, who represent the vast majority of private capital firms in Canada, to improve the industry and drive innovation and growth. Please visit: http://www.cvca.ca.

CVCA Methodology

Venture Capital: Dataset includes verified completed equity or quasi-equity venture capital deals only (non-equity or project-based government funding, pharmaceutical product development deals, senior debt, venture capital-backed acquisitions and angel financing are not included)

Private Equity: Dataset includes only completed private equity deals (announced, but yet to be completed deals, are not included)

Contacts

CVCA
For more information or to arrange an interview, please contact:
Carolyn Goard
Direct: 416-487-0519, ext. 204
Mobile: 416-706-7879
Senior Manager, Communications
cgoard@cvca.ca

Contacts

CVCA
For more information or to arrange an interview, please contact:
Carolyn Goard
Direct: 416-487-0519, ext. 204
Mobile: 416-706-7879
Senior Manager, Communications
cgoard@cvca.ca