VC investment across the Americas remained quite strong in Q1’22, despite a dip from Q2’22. While the US accounted for the vast majority of VC investment in the region, both Canada and Brazil also saw strong quarters of investment, as evidenced by Canada-based 1Password raising $650 million and Brazil-based Neon raising $300 million.

Volatility driving concern, particularly for companies looking to exit

Q1’22 saw a significant amount of uncertainty battering the Americas – from the Omicron wave to start off the year to the Russia-Ukraine war and rising inflation and interest rates. Jurisdictional concerns – such as the scaling back of COVID-19 restrictions across Canada in March – also added an additional layer of uncertainty. The combination of factors stressed the public markets quite strongly, causing volatility in the stock market during Q1’22 and a pull-back of companies looking to exit through IPOs. Despite concerns about the IPO market, VC investment continued at a very healthy pace across the Americas during Q1’22, with a strong number of $100 million+ funding rounds across the region, including in Canada and Latin America.

Crypto continues to attract attention in Americas

Crypto and blockchain continued to attract attention and investment in the Americas, with Bahamas-based FTX raising $400 million during Q1’22. US-based Aptos also raised $200 million on a $1 billion valuation during the quarter – only four months after being formed. In addition to cryptocurrency platforms and solutions, investor interest in alternative areas where blockchain can be utilized is also growing. While interest in NFTs has declined significantly, there is some interest in their applicability as a mechanism for event ticketing in order to reduce fraud and scalping.

Canada attracts second highest quarter of investment in Q1’22

VC investment in Canada was very strong in Q1’22. While cybersecurity firm 1Password attracted the largest deal of the quarter, the country also saw edtech Paper raise $270 million, fintech Koho raise $166 million, e-commerce platform Shoplazza raise $150 million, drug discovery company Ventus Therapeutics raise $140 million, and battery recycling company Lithion Recycling raise $125 million – among other large deals. The broad mix of sectors that attracted $100 million+ deals during Q1’21 highlights the incredible depth of Canada’s startup community and the growing strength of its VC market. Canadian startups are growing and scaling very rapidly, attracting larger deal sizes and a growing mix of foreign VC investors.

After skyrocketing in the second half of 2021, VC investment in Brazil comes down to earth

After two stellar quarters, VC investment in Brazil moderated somewhat in Q1’22 as VC investors became more cautious with their investments amid rising inflation and interest rates and the growing shadow of a federal election later in 2022. Despite the decline from Q3 and Q4’21, however, VC investment in Brazil remained very strong compared to historical trends. The country also continued to attract attention from VC funds; during the quarter, Bamboo Capital Partners forged a partnership with Brazil-based VC firm KPTL in order to create opportunities focused on technology and social transformation1.

Fintech continued to attract the vast majority of VC investment in Brazil during Q1’22, including a $300 million raise by Neon, a $260 million raise by Creditas, a $200 million raise by Velvet, and a $100 million raise by Flash. Recent regulatory changes have also led to increasing investments in the gaming space, particularly related to soccer – such as the $31 million raise by betting company Rei do Pitaco in Q1’22.

Trends to watch for in Q2’22

Looking forward, investor anxiety in the Americas is expected to be quite high until there is a resolution to the Russia-Ukraine war. The large amount of dry powder in the market will likely help keep VC investment relatively steady over the next quarter as funds raised will need to be deployed. Fintech, healthtech, and alternative energy are expected to be hot areas of investment across much of the region.

   

Venture Pulse Q1 2022 Americas chart

Cybersecurity is a major challenge in Canada — and around the world for that matter — right now. Every company, from large corporations to small not-for-profits, has to take it seriously. Given how cyber is affecting both companies and people on a day-to-day basis, it isn’t surprising at all to see so much VC investment going into the space. It’s an incredibly hot sector for investment and I expect that is only going to continue.

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

  • VC investment reaches $95.2 billion invested across 3946 deals

  • Valuations remain near record highs

  • Canadian VC boom continues with surge in mega deals

  • Blockchain and biotech well represented in top 10 deals

  • Venture financing in Brazil surpasses $1.5 billion for third consecutive quarter

   


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