First quarter venture funding best since 2007 but fundraising suffers steep decline

Preliminary venture capital data indicate that Canada is on track to have its best first quarter for investment since 2007 – prior to the economic downturn – with $431 million in financings. Released by Thompson Reuters, the data show that the information technology sector received the greatest share of quarterly investment ($260 million/60.3%), followed by life sciences ($106 million/24.6%), clean tech ($55 million/12.8%) and traditional ($9 million/2.1%).

The funding was spread over 96 investment rounds – the worst result since Q1/10, suggesting the deals were larger than average.

The Q1 results fell short of the $794 million invested in Q3/14 — traditionally a strong quarter for VC investment. The clean tech sector has benefitted from 30 deals in the past six months — an all-time high.

The largest VC deal in Q1/15 was VarageSale ($34 million), a Toronto-based on-line garage sale platform. It was followed by Kitchener-based Miovision ($30 million) to develop technology to improve urban traffic flow, and theScore ($26.5 million), a Toronto-based creator of mobile sports applications.

While there are clearly investment deals to be made, the dwindling supply of VC is a growing concern. Q1/15 saw $224.8 million raised by Canadian companies, compared to $568.8 million in Q1/14. The steep decline in fundraising is likely due to the completion of federal and provincial VC investments pumped into the sector in recent years.

VC investment in 2014 was the healthiest in more than a decade. The year saw $2.36 billion allocated in 522 rounds (Canadian and foreign VC funds), up 21% from 2013 and the best year for VC since 2002.

That placed Canada fourth in North America for the year behind California ($30.7 billion), Massachusetts ($5.2 billion) and New York ($4.7 billion).

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