A Record-Setting Year for Venture Capital and Private Equity Investments

Venture capital investments in Canadian companies broke records last year while private equity deals hit an all-time high, according to the Canadian Venture Capital & Private Equity Association (CVCA).

Explosive Growth in Venture Capital Funding

Venture capital funding in Canada shattered records in 2021, with $14.7 billion invested across 751 deals – more than double the previous record of $6.2 billion invested across 539 deals in 2019, according to the CVCA’s year-end market overview.

Last year saw a record 71 “mega-deals” – deals valued at more than $50 million – which accounted for 72% of the venture capital funding raised last year. There were 72 VC-backed exits valued at $10.6 billion, and a record eight initial public offerings (IPOs) valued at $3.9 billion.

The hottest sector for venture capital investment was information, communications and technology, which raised $9 billion over 430 deals – more than doubling the previous record of $4 billion raised in 2019. Meanwhile, the life sciences sector raised $1.8 billion over 102 deals – a 50% increase over the $1.2 billion raised in 2020.

In Western Canada, British Columbia had the highest volume of venture capital deals (105 deals valued at $2.9 billion), followed by Alberta (87 deals valued at $561 million), Saskatchewan (17 deals valued at $210 million) and Manitoba (8 deals valued at $57 million).

Private Equity Deals Break Records, But Deal Value Dwindles

Private equity investment in Canadian businesses rebounded to pre-pandemic levels last year, with $18 billion invested across 799 deals – breaking the previous record of 661 deals set in 2019. But the average deal value was relatively low. Eighty-four per cent of deals with disclosed values were under $25 million, and three quarters of private equity investments went into small and medium-sized enterprises (SMEs).

The CVCA said baby boomers transitioning to retirement accounted for a large share of capital flows into SMEs, noting that almost 60% of SME owners in Canada are retired or approaching retirement. A 2019 survey by the CVCA and the Business Development Bank of Canada found that 49% of SME owners planned to sell their business in the next five years.

There was a record number of private equity exits in 2021 (88 exits totaling $6.4 billion) and a record 6 IPOs – but those IPOs raised only $1.9 billion, the second-lowest amount on record. A similar trend emerged in the secondary buyout market, with 18 buyouts (a 200% increase over 2020 levels) raising a total of $2 billion (a 24% decrease from 2020).

Most sectors saw an increase in investment dollars over 2020, led by the financial services sector (up 1412%), followed by business products and services (up 312%) and cleantech (up 189%).

In Western Canada, British Columbia had the highest volume of private equity deals (52 deals valued at $660 million), followed by Alberta (42 deals valued at $999 million), Saskatchewan (16 deals valued at $37 million) and Manitoba (six deals valued at $96 million).

What Does This Mean for Investors?

As the CVCA data indicates, Canadian companies are attracting venture capital and private equity investors in record numbers, and many sectors with a strong presence in Western Canada – including cleantech and life sciences – continue to be viewed as attractive investments.

The MLT Aikins Private Equity and Venture Capital practice group has extensive experience advising investors on accessing world-class opportunities that are unique to Western Canada, from businesses in the energy, industrial and agriculture sectors to Indigenous-owned businesses, technology start-ups and emerging growth companies. If you’re looking to invest in Western Canada, contact us to learn more.

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