Venture Pulse Q3 2020: Taking a breather

Venture Pulse Q3 2020: Taking a breather

Canadian investment takes a breather

Sunil Mistry

Audit Partner, Enterprise and TMT

KPMG in Canada


VC investment in Canada took a breather in the third quarter.

Canada tallied 115 deals, valued at US$865 million for the three months ended Sept. 30, compared to 139 deals at US$974 million in the previous quarter, according to KPMG Private Enterprise's recent Venture Pulse report. Considering the economic uncertainty in the market arising from the pandemic, geopolitical tensions, and the upcoming U.S. presidential election, the VC market here is proving its strength.

Nuvei Corp., a Montreal-based online payments-processing firm, showcased the Canadian market's underlying strength in September, raising US$805-million in gross proceeds from its initial public offering, the largest ever for a tech company in Toronto Stock Exchange history. The deal is the fourth new Canadian tech issue on the TSX since March 2019.

Despite fewer VC deals, we see activity brewing behind the scenes.

We do not expect this recent lull to be prolonged given the amount of dry power in the Canadian market. The dry powder is just waiting for the right moment to ignite. VC and private equity firms with fully capitalized funds will not be able to sit on the sidelines for long. Dealmakers have adapted to new ways of conducting business from holding virtual meetings to conducting remote due diligence processes.

But, even so, during this breather, it's essential that the government to continue to support Canada's technology startups to ensure the industry remains strong during and after the pandemic.

Many pockets of the global venture economy are insulated to some extent from the economic pain.

Across the Americas, VC investors continue to flock towards late-stage deals and companies with proven business models. Investors remain focused on companies in sectors that are growing because of the pandemic, including delivery and logistics, business productivity solutions, fintech, and health and biotech.

Worryingly, with late-stage companies attracted the lion's share of investment, funding for early-stage companies is faltering across the globe. The prolonged decline in early-stage deals activity is concerning as it will likely have negative impacts on the pipeline, particularly for Series B rounds, down the road. This bears watching.

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

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