TLDR:
- Q1 Canadian VC funding saw mixed results as PE market rebounds.
- Pre-seed and seed-stage VC funding declined while late-stage investments continued to decrease.
The first quarter of 2024 saw mixed results in terms of venture capital (VC) funding and a significant pickup in private equity (PE) activity, according to a new report. Nearly $1.3 billion CAD in total VC financing was deployed into Canadian technology startups across 128 deals during Q1, with a focus on sectors like AI, healthtech, and cleantech. While total dollars invested increased by eight percent compared to the previous year, deal count dropped by 28 percent year-over-year, indicating a trend of fewer but larger deals. Investor caution, emphasis on profitability, and a focus on supporting resilient companies with demonstrated financials were key themes observed in the Q1 data.
Early-stage VC funding remained strong with Series A and Series B financing driving the activity, while pre-seed and seed-stage investments declined. Later-stage investing also saw a continued decrease, with the lowest deal count on record since 2017. Venture debt financing, however, remained stable. On the PE front, Q1 saw a resurgence following the lows of last year, with 140 PE funding transactions worth a combined $4 billion, fuelled partly by privatization deals. Exit activity on the PE side rebounded, surpassing the total exit value for all of 2023, signaling an optimistic outlook for the year ahead.
Challenges still lie ahead for Canada’s VC and tech sector, with the federal government’s capital gains inclusion rate hike seen as a blow to the industry. Despite the tough market environment, Q1 results indicate a strategic shift towards privatization in the PE sector, providing stability and growth in turbulent markets. Overall, the report paints a picture of a mixed Q1 for Canadian VC funding, with cautious optimism for the future.
