Venture capital investment in Canadian startup companies had a stellar start to 2021. In the first three months of the year $3.1 billion was deployed across 157 rounds. In dollar terms, this was the single largest quarter ever recorded for the country, surpassing the previous record of $2.8 billion in the third quarter of 2019 by 10 percent. In volume terms, the number of rounds were flat year-over-year. This resulted in an average round cheque size of $23.1 million, up 77 percent from the first quarter of 2020 and the highest quarterly average ever.
Of the ten provinces, eight more than doubled their venture investment from the first quarter last year and three set new records for strongest quarters overall: Ontario, British Columbia, and Alberta. With $1.2 billion of financings, Ontario-based startups saw an increase of funding of 101 percent and captured a 41 percent share of the national total. British Columbia was the next most active with $1.0 billion of investment, a 106 percent increase year-over-year and a third of the national total. Alberta was the fourth most active province with $234 million of investment, an increase of 665 percent from last year and an 8 percent share of the total. Quebec and Saskatchewan were the only two regions that saw year-over-year investment declines with dollar values dropping 32 percent and 61 percent, respectively. Despite the decrease, Quebec-based companies still received a 14 percent share of all investment with $440 million of financings.
Computer related and internet specific sectors jointly received a 78 percent share of all investment during the quarter, whereas no previous annual share for the combined group had ever surpassed 70 percent. Internet specific companies alone received $1.4 billion of investment, or 44 percent of the total, while computer related businesses received $1.0 billion, or 34 percent. Much of these amounts were a direct result of the top five rounds for the quarter all belonging to one of the two groups, with these five companies alone bringing in $1.2 billion.
Nine rounds in the quarter saw investment values of $100 million or greater, surpassing the previous record of six such rounds in the third quarter of 2019 and ultimately representing a 55 percent share of the total with $1.7 billion of round values. The top round for the period was the $385 million investment into blockchain-based game and entertainment company, Dapper Labs. The funding received by the Vancouver-based business was the second largest Canadian venture capital round of all time and was led by Coatue with support from a large group of firms and individuals. The second largest round for the quarter was obtained by digital home equity platform, Fraction, also based in Vancouver. The $289 million round was backed by Impression Ventures, Primetime Partners, Global Founders Capital, Panache Ventures, and others. Rounding out the top three was the $214 million investment into Montreal-based travel platform, Hopper, led by Capital One with support from Inovia Capital, WestCap, Goldman Sachs, and Citi Ventures.
Canadian investors lost their status as top backers during the period once again after reclaiming it in 2020, contributing 42 percent of total venture investment in the first quarter, down from 57 percent in 2020 and less than the 46 percent contributed by investors based in the United States. Other nations actively providing cross-border support for Canadian startups during Q1 included funds from Germany with $134 million of investment, the United Kingdom with $54 million, and Singapore with $28 million.
Venture capital fundraising by firms also rebounded following a dip in 2020, with 14 Canadian venture funds raising a combined $1.5 billion in commitments. This was up 265 percent from the same period last year and the sixth largest sum historically, behind the first and fourth quarters of 2019 and a handful of quarters in the midst of the dot-com era. Inovia Capital’s second growth fund was the largest fundraise for the period, with a close of $560 million in March.
Venture-backed exits also set a new record with $5.7 billion of completed deal values from 16 transactions in the quarter, an amount higher than that of the previous three years combined. A large contributor to the increase was the top completed exit for the period, Nasdaq’s $3.6 billion cash purchase of Newfoundland-based financial security company, Verafin, announced in November and completed in February. The top newly announced exit for the quarter was the reverse takeover transaction to take Ontario-based lithium-ion battery recycling business, Li-Cycle, public via SPAC. The transaction valued the company at $1.2 billion prior to deal proceeds.
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Greg Beaman is a Private Equity Contributions Manager at Refinitiv and for 3 years has worked with the team responsible for the procurement of content and the communication of broad private equity and venture capital industry trends through the publication of regular research reports. Greg received his Bachelor of Business Administration from Wilfrid Laurier University