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Canadian venture capital at 10-year high

February 25
1:33 AM 2016

Venture capital (VC) investments in Canada soared to 10 year high in 2015 with the technology sector mostly contributing to the growth. The VC funding is at its best since 2008 financial crisis. Canadian venture capitalists are exploring several options of investment potential in Canada.

According to the latest data from Canadian Venture Capital & Private Equity Association (CVCA), 536 deals in funding for entrepreneurs raised $2.25 billion in 2015. Canadian startups are witnessing a robust growth rate of venture capital funding since financial crisis in 2008. CVCA President Mike Woolatt forecasts the ongoing trend to continue throughout 2016. 

Information and Communication Technology (ICT), life sciences, clean tech and agribusinesses are attracting a major chunk of venture capital. About 325 deals with $1.37 billion were recorded in ICT segment. The life sciences segment witnessed 110 deals worth $647 million funding. However, the clean tech funding dropped in the past three years, as reported by The Globe And Mail.

Woollatt said "The world needs to pay attention to Canada. If you're not paying attention, you're missing out." The latest major deals in ICT segment included Montreal point-of-sale software firm Lightspeed POS Inc raised $79 million round. Cryptocurrency startup got $73 million funding. 

In life sciences segment, the biggest deal was with Montreal-based Clementia Pharmaceuticals Inc, which recorded $74 million round. Lifesciences segment picked up during the past two years. It witnessed only 54 deals involving an investment of 272 million two years ago. 

Ontario was leading all provinces in Canada in attracting venture capital investment. It covered 38 percent and 42 percent of deal numbers and disbursement, respectively. Quebec investment activity was also picked up in 2015. Quebec's national share of VC activity rose to about 31 per cent and up 51 percent and 102 percent respectively in number of deals and dollars invested over 2014, according to PR Newswire.

Contrary, Clean tech funding has been declining in three years. It fell from $394 million in 39 deals in 2013 to $135 million in 44 deals in 2015. The major was $21 million follow-on fund for General Fusion. The oversupply situation in global oil market is the major reason for drop in funding for clean tech segment. Cheaper oil prices reduced the need to diversification in Canadian energy segment. 

Early-stage companies received the most of venture capital in 2015. The share of early-stage firms is growing as $1.16 billion was invested in 2015 from $794 in 2014 and $636 million in 2013. Seed-stage investments rose to $154 million from $133 million in 2014 and $85 million 2013. However, later stage financing seems to be moving in the opposite direction, falling to $530 million in 2015 down from $785 million in 2014 and $931 in 2013, as stated by Tech Vibes.

Though 2015 was an encouraging year for venture capitalists, it witnessed hype in valuations in the technology segment. The high valuations are fast eroding their value in 2016 and the writedown of valuations at technology unicorns are impacting in a more negative way. 

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