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Q4'19 Venture Pulse Report - Outlook for Canada’s VC market remains strong

Outlook for Canada’s VC market remains strong

Robust Canadian VC investment shatters previous records

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Sunil Mistry

Audit Partner, Enterprise and TMT

KPMG Accountants B.V

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Venture Pulse Q4 2019

Canada's venture capital (VC) market crossed the US$1-billion mark in the fourth quarter for the second time in a row to finish 2019 at an all-time record of US$4.6 billion.

This really is a testament to the maturity of Canada's VC ecosystem. Canada's tech ecosystem is more independent and self-sustaining than it's ever been. Couple that with favourable tax credits, low interest rates, and concerns about public market volatility, investors are looking to put their money to work. Likewise, companies are increasingly creating their own VC funds as part of their effort to not only achieve above-average returns but establish strategic partnerships, and family offices continue to play a key role, particularly in early-stage deals between US$1 million and US$5 million.

“Looking across Canada, you can see a number of high-growth companies particularly in the AI space, but also in other areas such as fintech and biotech. The opportunities are there, and many of the VCs, PEs, and family offices already have their next fund monetized. They’re going to want — need — to invest. Despite some consternation about a potential slowdown, this suggests Canadian VC investment levels will remain pretty solid at least into the first couple of quarters in 2020.”

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

The fourth quarter of 2019 was powered by sizeable deals from 1Password, a Toronto-based password manager, Coveo, a Quebec City-based artificial intelligence startup, and Nuvei, a Montreal-based payment processing company.Many VCs, and private equity and family office investors already have their next fund monetized. They are going to want – need – to invest. Despite some consternation about a potential slowdown, this suggests the Canadian VC investment levels to pretty solid at least into the first couple of quarters of 2020. Areas of opportunity include a number of high-growth companies, particularly in the artificial intelligence space, but also in other areas like fintech and biotech.

While private valuations in the U.S. are near-unprecedented highs, similar to if not eclipsing those seen during the dot-come era, the Canadian market remains competitively priced. This bodes well for the outlook here: investors will keep investing where the economic climate makes the most sense, where the deal sizes are more reasonable, and where the venture ecosystem is reliable. Canada checks off all of those boxes.

More information on Canadian and global VC trends is available in KPMG Private Enterprise's latest quarterly Venture Pulse report.

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