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VC investment in the Americas was very strong in Q1’21, with record levels of investment in the US, Brazil, and Mexico. Canada also saw investment reach a five-quarter high during the quarter. While investment in the US was robust throughout 2020 despite the pandemic, the surge in VC investment in the other jurisdictions was quite pronounced in Q1’21 compared to previous quarters.

Strong VC investment in Mexico in Q1’21

VC investment in Mexico was very robust in Q1’21. While fintech continued to be the hottest area of investment, online supermarket Justo raised the country’s largest deal of the quarter: a $65 million Series A raise. While Mexico's economy is struggling with Pandemic effects, the lack of support related to COVID-19 has caused many businesses to fail, which could have a negative impact on future investment. Political uncertainty is also causing some concern for investors, particularly related to emerging sectors like clean energy. All eyes will likely be on Mexico’s congressional election in June, as the election’s outcomes could affect key priorities.

VC activity in Brazil hot as several companies attract big funding rounds

VC investment in Brazil got off to a very strong start to the year, far exceeding previous quarterly totals. Low interest rates, global investors looking for cheaper investment opportunities, and an increasingly diverse range of companies looking for funding helped to lift VC investment during Q1’21. Corporate participating investment was particularly impressive, accounting for $1.5 billion in Q1’21 – an amount already higher than 2020’s total.

Venture financing in the Americas, Q1'21

Q1’21 saw a handful of $100 million+ megadeals in Brazil, including a $530 million raise by patient assistance platform WeCancer, a $425 million raise by real estate platform Loft, a $400 million raise by digital bank Nubank, a $212 million raise by logistics company Loggi, and a $190 million raise by online home goods platform MadeiraMadeira. The number and size of these deals for one quarter was unprecedented for the Latin American region. Interest in edtech and healthtech remained strong; In Q1’21, edtech Descomplica raised $84.5 million and, in addition to WeCancer, healthtech Alice raised $33 million. Government support for innovation has also grown in Brazil. In Q1’21, government agency Sebrae, the Ministry of Economy, and other partners launched Projeto Ideiaz – a new program aimed to support innovative startups.

VC investment in Canada soars to record high

In Q1’21, Canada saw almost $2.5 billion in VC investment, almost double its previous quarterly record, including a $305 million raise by blockchain-focused Dapper Labs and two large raises by edtechs: a $130 million raise by Top Hat and a $124 million raise by Prodigy. The size of VC deals in Canada continued to grow, with 21 deals over $25 million in Q1’21, compared to 38 deals during all of 2020.

Corporate-affiliated VC investment was also very strong, accounting for $826 million in Q1’21 – near to half the total amount of CVC investment Canada saw during all of 2020.

Canada’s IPO market was incredibly strong during Q1’21. Innovators that built successful startups in the past are now achieving similar successes with new companies. This second wave of successful entrepreneurship is expected to help drive follow-on waves of innovation as serial entrepreneurs move on to found new startups.

I don’t believe that anyone in Canada – or globally for that matter – thinks that the business environment is going to go back to the way it was. The question now is will there be a bump for companies that saw activity plummet during the pandemic? And for industries that saw high levels of activity, will that activity come down or have consumer and business behaviors changed enough to keep the ball rolling? There are going to be a lot of big bets made by VC investors related to these questions over the next few quarters.

Sunil Mistry
Partner, KPMG Private Enterprise, Technology,
Media and Telecommunications, KPMG in Canada

Canada’s technology ecosystem continues to diversify and grow across the country, attracting world-class executive teams and larger growth-stage funding rounds that enable building an increasing number of globally meaningful businesses. The shift to remote work is also benefiting them. They can now not only hire experienced leaders to help them scale up, but also offer college or university graduates exciting opportunities. Domestic VC investors are also becoming increasingly capable of cutting big cheques. Historically, big funding rounds in Canada were driven by US VC investors. Now, while US investment remains strong, domestic Canadian VC firms are becoming more active in larger and later stage rounds.

Trends to watch for in Q1’21

With a strong sense of optimism permeating the VC market, VC investment is expected to remain robust across the Americas heading into Q2’21 – with corporate investment expected to remain particularly strong. Exit activity is also expected to remain high, including strategic M&A and IPO activity. SPAC transactions will likely also gain steam given the number of SPACs being created, with heightening interest from companies outside of the US.

  • Americas hits record high $74.4 billion invested across 3310 deals

  • Late-stage median round size nearly doubles year over year

  • Canada sees 5 mega-deals led by largest deal by DapperLabs

  • Brazil sees over $2 billion invested with mega deals to WeCancer, Loggi and Nubank

  • USA dominates biggest of big deals – including 10 over $600 million