A Look at Canadian Venture Capital Market in 2019

A Look at Canadian Venture Capital Market in 2019
With the end of 2018 quickly looming, businesses and entrepreneurs across Canada are planning for the upcoming year by analyzing current trends.

In its H1 2018 VC & PE Canadian Market Overview, the Canadian Venture Capital and Private Equity Association (CVCA) studied private capital investing for 2018. Overall, the report highlights several uncertainties clouding the outlook for Canadian growth.

Ongoing trade negotiations with the United States, household debt, and the generally wide and volatile discount of Canadian crude oil prices relative to global benchmarks are a few prime examples.

Despite these challenges, the economy has shown a certain level of “resilience,” as Bank of Canada (BoC) Senior Deputy Governor Carolyn Wilkins remarked in a recent speech

The latest RBC Economic Outlook Report indicates that Canada’s uncertain trade backdrop has not had the dampening effect on the economy one might expect. Consumer spending and business sentiment remains high, and there are signs of a modest firming in wage gains. RBC projects real GDP growth of 2.1 percent in 2018 and slowing slightly to 2.0 percent in 2019.

Perhaps most importantly, venture capital investment continues to rise. CVCA reports that C$1.7 billion was invested across 308 venture capital deals in the first half of 2018. This figure represents a 7 percent expansion in total venture capital investment over the first half of 2017, continuing a five-year upward trend in both size and volume.

Investors from U.S.-based venture capital firms are traveling north to Canada more than ever, with Canadian startups attracting a record amount of U.S. investment in recent years, according to PitchBook’s 1H 2018 Canadian PE & VC FactBook.

“The biggest growth market will be in Canada, and it’ll be Toronto and Montreal,” Lerer Hippeau partner Graham Brown told PitchBook. “I imagine we are only going to see [them] grow over the coming years.”

Relations between Canadian startups and U.S.-based venture capital firms are thriving, says Toronto’s Mark Attanasio, co-founder and managing partner of Hillcrest Merchant Partners, a Toronto-based merchant bank focused on early stage and mid-market growth companies.

Mark Attanasio points, as an example, to the Canadian Technology Accelerator Initiative, which accelerates international venture capital opportunities for high growth, export-ready Canadian companies in information and communications technology, sustainable technologies and the life sciences.

The logic is simple, explains Hillcrest Merchant Partners’ co-founder Donato Sferra. “It all leads to creating jobs back in Canada.”

Tim Schumann, founder & CEO, Buddy Ventures, says less investment capital is required to get into foreign startups at the same stage of development as a comparable U.S. startup.   

Brown adds that AI talent in Canada, as well as the government’s efforts to prevent brain drain, have contributed to the spike in VC funding.