2021 was a banner year for venture capital activity in Canada, with 1,053 VC deals inked worth $12.72B, both record highs in terms of deal count and deal value. Last year's furious pace of activity eclipsed the previous record high in 2019 (which saw 873 deals worth $5.7B), and 2020 (802 deals worth $4.2B), and occurred even as activity dropped significantly in the final quarter of the year.
Canada's maturing innovation ecosystem is attracting more domestic and global investors than ever before. That, along with high valuations, low interest rates, and a nearly 22 per cent rise in the S&P/TSX Composite helped propel the VC market to new highs.
Despite a dip in VC activity in the fourth quarter, it was, remarkably, still the strongest Q4 on record in terms of deal value. In the fourth quarter, there were 202 deals worth $1.9B (down from 248 deals worth $3.1B in Q3), with healthcare and fintech areas of strong interest. The drop in deal counts and deal value in Canada in Q4 mirrors similar trends in the U.S. and globally. Seasonal holiday slowdowns, as well as the emergence of a new COVID-19 variant, persistently high inflation, and supply chain disruptions likely diminished investor appetites.
Corporate venture capital activity in Canada also hit new record highs in 2021, with 238 deals worth $6.1B, despite a slowdown in last three months. 40 deals worth $799M were recorded in the fourth quarter, a significant drop from the previous three record quarters. CIBC, Thomson Reuters, Spin Master and Clio announced the creation of venture capital operations in Q4, joining other Canadian firms like Telus, Shopify and Power Corp. in the CVC space.
2021 also saw a record number of exits, with 135 initial public offerings worth $8.5B, shattering the previous year's record high. Q4 was quieter in the IPO space in Canada, with only 27 exits worth $3.5B, a notable drop from the first nine months of the year.
Many Canadian companies that went public last year have traded below their IPO price, in many cases due to to market volatility driven by daily headlines about COVID-19 variant, supply chain disruptions and inflation concerns. While these may continue to be headwinds in 2022, IPO activity in the first two quarters of the year is expected to remain strong, as more firms seek exits as valuations remain elevated.
For more information on Canadian and global VC trends, see KPMG Private Enterprise's quarterly Venture Pulse report.