Canadian Venture Capital Review Full Year 2017

Transcription

1 Fred Thornhill, Reuters Canadian Venture Capital Review Full Year 2017 Aaron Lynett, Reuters

2 Table of Contents Canada s VC Market in $ Invested and # Companies Financed 5 Top VC Deals 7 Top VC Investors 8 North American Rankings 10 Investor Type & Nationality 13 Canada by Sector & Stage 15 Canadian Dealmaking Abroad 18 VC Funds Raised 19 Public and M&A Exits 20 Venture Capital Returns 21 Explanatory Notes & Contacts 22

3 Canadian Venture Capital Market Activity in 2017 Canadian VC Market Trends Venture capital investment in Canadian companies continued at a strong pace in 2017 with $4.0 billion invested in 502 rounds of financing. In dollar terms, this represented a 12% increase over 2016, but with only $890 million disbursed in Q4, Canada s run of four consecutive quarters with over $1 billion invested came to an end. Deal volumes also fell 12% from 2016, marking a four-year low. With dollar disbursements up and deal volumes down in 2017, the average Canadian venture capital round soared to $8.0 million, an all-time high. While this is more than double the average round size just five years ago, Canada s average round size continues to lag behind all other top VCattracting nations except France. Despite the highest level of direct investment by Canadian governments, Canadian companies on average continue to secure less than their counterparts across all VC-intensive regions and less than half of the average US VC-backed company. While Canadian companies have been securing larger VC rounds, this growth could not be attributed to domestic investors. Canadian investors were responsible for approximately 47% of capital disbursed in 2017; United States-based funds accounted for an additional 38%, and the remainder was accounted for by overseas investors, mostly from Europe and East Asia. The last year in which Canadian investors accounted for such a low share of VC investment in Canadian companies was 1992, when 38% of VC investment in Canadian companies could be sourced to Canadian firms, with the remainder originating in the United States. Canadian Fund Performance While investment activity was on the rise, the performance of Canadian venture capital and growth equity funds had not reached the same heights. Final data provided by Cambridge Associates shows Canadian venture capital & growth equity funds with vintage years of 2000 or greater returned a since inception IRR of only 1.3% as of the end of Q3 2017, lagging far behind both US counterparts and public market equivalents. The improvement of Canadian VC fund returns over the past four years, however, has brought industry performance into positive territory.

4 Canadian Venture Capital Market Activity in 2017 Canadian VC Trends by Region The increase in venture capital investment in 2017 was led by two provinces in particular. Québec-based companies raised $1.4 billion in the year, an impressive 44% increase over the year prior; while British Columbia-based companies raised $926 million, an all time high for the province and a remarkable 93% increase over Ontario companies, however, did not reach the same heights. Investment in Ontario fell by 27% to $1.4 billion, knocking the province down to 8 th place in the North American state and province rankings, behind Québec, which placed 7 th. British Columbia ranked 14 th place while Alberta ranked 27 th. In a similarly close race, Montreal-based companies raised $1.2 billion in 2017, making it Canada s most attractive city for venture capital and the 10 th best in North America in terms of dollars invested, between San Diego and Denver. Of Canada s ten most active private independent VC firms in 2017, five were also located in Montreal. Toronto placed 13 th among North American cities, with $1.0 billion invested in 2017, behind Atlanta, GA; and ahead of Orange County, CA. Canadian VC Trends by Sector Canadian IT companies raised $2.5 billion in 2017, the most capital invested in the sector since 2001, and a 29% increase over the prior year. Life sciences companies followed second with $1.1 billion million invested, while Cleantech companies raised $218 million in The remainder of investment was rounded out by energy & industrial ($80 million) and consumer-related companies ($40 million). Canada VC Fundraising Trends Twenty one Canadian funds raised a total of $1.3 billion in While this was a comparatively poor showing as compared to 2016, when nearly $1.7 billion was raised, 2016 had represented the best year for Canadian VC fundraising since the height of the dot com era. Highlights of 2017 fundraising included OMERS Ventures Fund III at $300 million, Real Ventures Fund IV at $180 million, and the Yaletown Innovation Growth Fund at $100 million.

5 VC Deal Values ($ Billions) Historical Venture Capital Investment in Canadian Companies: Deal Values Canadian companies raised $4.0 billion in 2017, a sixteen-year high, but with only $890 million invested in Q4, a four-quarter run of deal values exceeding $1 billion came to an end. $4.5 $4.0 $4.2 $4.0 $3.5 $3.6 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $2.7 $1.6 $2.1 $1.8 $1.9 $2.4 $1.4 $1.0 $1.6 $1.6 $1.6 $1.9 $2.4 $2.8 $ Q1 Q2 Q3 Q4

6 # of Deals Historical Venture Capital Investment in Canadian Companies: Deal Volumes More VC being deployed to a shrinking pool of Canadian companies. Deal volume down 12% from last year, reaching a four-year low. 1, Q1 Q2 Q3 Q4

7 Top Canadian Venture Capital Deals, Full Year 2017 Portfolio Company Investors Rank Company Name Deal Value ($ Millions) Location Sector Investing Firms (Disclosed) 1 Aurinia Pharmaceuticals $231.1 Victoria, BC Pharmaceuticals ILJIN Life Sciences, Lumira Capital 2 Lightspeed POS $206.8 Montreal, QC Retail Software 3 Element AI $135.1 Montreal, QC Artificial Intelligence 4 Leddartech $122.5 Quebec, QC Sensor Technology Caisse de dépôt et placement du Québec, Investissement Québec, inovia Capital, Silicon Valley Bank Data Collective, Real Ventures, BDC Venture Capital, Fidelity Investments Canada, Hanwha Investment, Intel Capital, Microsoft Ventures, National Bank of Canada, NVIDIA, Tencent Delphi, Magneti Marelli, Fonds de solidarité FTQ, Integrated Device Technology 5 PointClickCare $110.9 Mississauga, ON Healthcare Software Dragoneer Investment Group, JMI Equity 6 Resverlogix $87.0 Calgary, AB Pharmaceuticals Shenzhen Hepalink Pharmaceutical Co. 7 Repare Therapeutics $90.0 Montreal, QC Pharmaceuticals 8 Zymeworks $86.6 Vancouver, BC Pharmaceuticals Versant Ventures, MPM Capital, Fonds de solidarité FTQ, Celgene Corporation, BDC Venture Capital BDC Venture Capital, Celgene Corporation, CTI Life Sciences, Eli Lilly & Co, Fonds de solidarité FTQ, Lumira Capital 9 estruxture Data Centers $80.0 Montreal, QC Cloud Computing Caisse de dépôt et placement du Québec, Canderel 10 Milestone Pharmaceuticals $69.0 Montreal, QC Pharmaceuticals Novo Holdings A/S, Forbion Capital Partners, Tekla Capital Management, Domain Associates, Fonds de solidarité FTQ, BDC Capital, Pappas Capital, GO Capital

8 Top VC Investors in Canadian Companies, Partnerships & Governments Canadian Private Independent Partnerships Full Year 2017 Rank Firm Name # Deals Estimated Investments ($ Millions) Location 1 Real Ventures 56 $49.9 Montreal, QC 2 Cycle Capital 18 $44.2 Montreal, QC 3 Anges Québec 16 $6.6 Montreal, QC 4 inovia Capital 14 $63.6 Montreal, QC 5 igan Partners 12 $15.8 Toronto, ON 6 Yaletown Venture Partners 9 $11.0 Vancouver, BC 7 Portag3 Ventures 8 $17.0 Toronto, ON 8 CTI Life Sciences 7 $12.1 Montreal, QC 9 Avrio Capital 7 $9.5 Calgary, AB 10 Relay Ventures 7 $9.3 Toronto, ON Canadian Government Funds Full Year 2017 Rank Firm Name # Deals Estimated Investments ($ Millions) Location 1 BDC Venture Capital 76 $133.0 Montreal, QC 2 MaRS Discovery District 29 $16.1 Toronto, ON 3 Sustainable Development Technology Canada 11 $34.0 Ottawa, ON 4 Investissement Québec 6 $30.0 Montreal, QC 5 Export Development Canada 5 $9.8 Ottawa, ON

9 Top VC Investors in Canadian Companies, Foreign & Other Non-Canadian Investors Full Year 2017 Rank Firm Name # Deals Estimated Investments ($ Millions) Location Startups 7 $1.8 Mountain View, CA 2 Connecticut Innovations 5 $5.2 Rocky Hill, CT 3 Uncork Capital 3 $16.3 Palo Alto, CA 4 BMW i Ventures 3 $8.9 Mountain View, CA 5 Accomplice 3 $6.5 Boston, MA 6 Union Square Ventures 3 $5.9 New York, NY 7 Domain Associates 3 $5.0 Princeton, NJ 8 White Star Capital 3 $4.8 London, United Kingdom 9 Norwest Venture Partners 2 $50.0 Palo Alto, CA 10 Versant Ventures 2 $33.0 San Francisco, CA Canadian Retail, Institutional & Other Investors Full Year 2017 Rank Firm Name # Deals Estimated Investments ($ Millions) Location 1 Desjardins Venture Capital 48 $32.7 Lévis, QC 2 New Brunswick Innovation Foundation 27 $4.8 Fredericton, NB 3 Fondaction 24 $30.8 Montréal, QC 4 Fonds de Solidarité FTQ 13 $96.6 Montréal, QC 5 Westcap 8 $2.8 Saskatoon, SK

10 North American VC Rankings, by Province & State North American Rankings 2017 Rank State / Province # Deals 2017 VC Invested ($ Millions) $ Change From 2016 North American Rankings 2017 Rank State / Province # Deals 2017 VC Invested ($ Millions) $ Change From California , % 16 Maryland % 2 New York , % 17 Virginia % 3 Massachusetts 365 9, % 18 New Jersey % 4 Washington 127 2, % 19 Minnesota % 5 Illinois 120 1, % 20 Michigan % 6 Florida 66 1, % 21 D. of Columbia % 7 Quebec 173 1, % 22 Ohio % 8 Ontario 188 1, % 23 Connecticut % 9 Texas 141 1, % 24 Oregon % 10 Colorado 101 1, % 25 Missouri % 11 Pennsylvania 162 1, % 26 Arizona % 12 Georgia 58 1, % 27 Alberta % 13 Utah % 28 New Mexico % 14 British Columbia % 29 Idaho ,666.9% 15 North Carolina % 30 Kansas %

11 Canadian VC Investment by Province & Region British Columbia set a new record with $926 million invested this year, up 93% over Québec saw a 44% gain, while Ontario disbursements tumbled by 27%. 5% Quebec 8% 3% Ontario 3% 35% 35% 23% $4,025 Million Invested British Columbia Alberta 14% 502 Deals Atlantic Canada 34% Manitoba- Saskatchewan 37%

12 North American VC Rankings, by City North American Rankings 2017 Rank Metro Area # Deals 2017 VC Invested ($ Millions) $ Change from San Jose , % 2 San Francisco , % 3 New York City , % 4 Boston 345 8, % 5 Los Angeles 215 3, % 6 Seattle 118 1, % 7 Washington D.C , % Montreal Median Investment: $795K Median Round Size: $2.0 M 8 Chicago 110 1, % 9 San Diego 92 1, % 10 Montreal 134 1, % 11 Denver 89 1, % Toronto Median Investment: $1.4 M Median Round Size: $3.0 M 12 Atlanta 58 1, % 13 Toronto 135 1, % 14 Orange County % 15 Austin % Vancouver Median Investment: $2.0 M Median Round Size: $5.5 M

13 Venture Capital Investment by Origin of Capital Corporate investors comprised 14% of VC activity in Canadian investors this year accounted for only 47% of dollars disbursed, a 25-year low. Investor Type 100% Investor Location 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% Private Independent Corporate Government Institutional Retail Angels & Individuals Other 0% Canada United States Other

14 Venture Capital Investment by Origin of Capital While US-based funds still accounted for 71% of Canada s VC investment from non-resident sources, Europe and East Asia shares grew quickly in % 13% 12% SF $110 M SJ $213 M Boston $177 M New York City $160 M Europe $240 M East Asia $219 M 10% 14% 9% 6% 34% San Jose Boston New York City San Francisco Other US Europe East Asia Other Regions

15 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 $ Billions $ Billions Information Technology Sector Driven by Software Dealmaking Canadian IT companies raised $2.5 billion in 2017, the most dollars invested in the sector since 2001, and an increase of 29% over All Sectors Information Technology $1.2 $0.9 $1.0 $0.8 $0.7 $0.8 $0.6 $0.6 $0.5 $0.4 $0.4 $0.3 $0.2 $0.2 $0.1 $0.0 $0.0 Information Technology Life Sciences Other Sectors Computer Software Semiconductors & Electrical Internet Specific Other IT Sectors

16 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 $ Billions $ Billions Biotech, Medical & Cleantech Sectors Round Out 2017 Investment Activity Canadian life sciences companies raised only $1.1 billion in 2017, down 4% from Cleantech investment up to $218 million, up 13% over last year. Life Sciences $0.60 Other Sectors $0.25 $0.50 $0.40 $0.30 $0.20 $0.20 $0.15 $0.10 $0.10 $0.05 $0.00 $0.00 Biotechnology Medical & Health Cleantech Consumer-Related Energy & Industrial Other

17 # of Deals VC Investment in Canadian Companies: Deal Stages With 502 deals in 2017, 12% fewer than the prior year, early stage deals took the greatest hit with an 18% decline year-over-year Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Seed Early Stage Later Stage Expansion Other Advanced Stage

18 $ Millions Canadian Dealmaking Abroad Canadian VCs invested over $1 billion in 108 non-canadian companies in 2017, representing a 50% increase over 2016, and a 135% increase over Portfolio Company Investors Rank Company Name Deal Value ($ Millions) Location Sector Canadian Investors (Disclosed) 1 Lyft $2,697.7 San Francisco, CA Transportation PSP Investments, Ontario Teachers Pension Plan 2 Avidxchange $405.5 Charlotte, NC Fintech Caisse de dépôt et placement du Québec 3 Convene Conference Centers $93.0 New York, NY Workspaces Brookfield Property Partners 4 SutroVax $85.9 San Mateo, CA Biopharmaceuticals CTI Life Sciences 5 Rover $82.7 Seattle, WA Petcare OMERS Ventures $400 $300 $200 $100 $0 $379 $341 $325 $180 $197 $150 $134 $143 $120 $138 $85 $56 $64 $60 $73 $87 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17

19 $ Millions VC Fundraising by Canadian Firms Twenty one funds raised $1.3 billion in 2017, a 42% decline from 2016 which was itself the strongest year for Canadian VC fundraising since the height of the dot com era. $1,000 $900 $890 $800 $700 $725 $600 $500 $569 $493 $553 $475 $453 $400 $300 $200 $100 $155 $185 $312 $238 $364 $118 $45 $144 $203 $0 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17

20 # of Exits Canadian VC-Backed Exits Canada saw 46 completed exits from VC-backed companies in 2017, a 28% improvement over the 36 exits completed the prior year. Portfolio Company Investors Rank Company Name Deal Value ($ Millions) Location Sector Investors (Disclosed) 1 Lumenpulse $531 Montreal, QC Lighting Products Fonds de solidarité FTQ, Desjardins 2 Clementia Pharmaceuticals $173 Montreal, QC Pharmaceuticals 3 Real Matters $157 Markham, ON Real Estate Software BDC Venture Capital, Fonds de solidarité FTQ, New Enterprise Associates, OrbiMed Advisors, RA Capital Management, EcoR1 Capital Kensington Capital Partners, Wellington Financial, Whitecastle Investments 4 Freshii $144 Toronto, ON Food Service Klass Capital 5 TIO Networks $141 Burnaby, BC Fintech Compaq Canada, Core Innovation Capital, IA Capital Group, Napier Park Global Capital Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 M&A Public Secondary Sale

21 Cambridge Associates: Venture Capital Fund Performance Canadian private independent funds holding slightly positive returns following long stretch of negative performance, but still lagging far behind US-based funds, public markets. Canada United States 10% 8% 10% 8% 8.2% 6% 6% 4% 2% 1.3% 4% 2% 0% 0% -2% -2% -4% -4% -6% -6% -8% -8% -10% Q Q Q Q Q Q % Q Q Q Q Q Q Venture Capital & Growth Equity Funds mpme: S&P/TSX 60 Index Venture Capital & Growth Equity Funds mpme S&P 500 Index Source: Cambridge Associates, Standard & Poor's

22 Explanatory Notes 1. Data collected and analyzed by Thomson Reuters for this statistical report were drawn from a variety of sources including Thomson Reuters M&A databases, regulatory filings, press releases, and proprietary reports from Canadian and non-resident venture capital firms, private equity firms, law firms, and other service providers. 2. The Thomson Reuters Canadian venture capital report measures cash for equity and quasi-equity investments by the professional venture capital community in emerging companies in Canada. These transactions are referred to as VCReporter Deals on Thomson Reuters databases. 3. The report includes the investment activity of professional venture capital firms, whether Canadian-based or not, including private independent funds, retail funds (LSVCCs and PVCCs), venture arms of corporations, institutions, government funds, angel funds, and similar entities whose primary activity is financial investing. Where there are additional participants such as angels, corporations, governments, or company officers in a qualified and verified financing round, the entire amount of the round is included. 4. The report excludes venture debt, buyouts, recapitalizations, secondary purchases, IPO exits, and other forms of private equity that do not involve cash such as services-in-kind. Investments in capital pool companies (CPCs & JCPs) are not eligible. Companies whose primary activity is the extraction of natural resources (agriculture, forestry, mining, and oil & gas exploration) without a specific focus on technology are not eligible. 5. Rounds are tracked based on investment location. This predominantly includes Canadian-headquartered companies, but companies headquartered outside of Canada with Canadian research & development facilities are also eligible. 6. Rankings of top VC investors include only investment activity made in Canadian portfolio companies. Estimated investment activity is based on the actual syndicate breakdown, where available, and is split equally among disclosed investors where actual breakdowns are not available. Private independent, government, and other funds are independently ranked in their respective categories. Rankings capture the twelve-month period from January 1 st, 2017 to December 31st, Fund performance data and public market equivalents are produced via the Cambridge Associates Benchmark Calculator, available through Thomson Reuters Eikon. Returns are for Canadian and US venture capital and growth equity funds with vintage years of 2000 or greater, on a first cash flow basis, in Canadian dollars, from inception to the end of the indicated quarter, under published data mode Q Pooled internal rates of return are net of fees, expenses and carried interest. CA Modified Public Market Equivalent (mpme) replicates private investment performance under public market conditions. The public index s shares are purchased and sold according to the private fund cash flow schedule, with distributions calculated in the same proportion as the private fund, and mpme NAV is a function of mpme cash flows and public index returns. 8. All current and previous years data is as of Friday, January 26th, Data is continuously updated and is therefore subject to change. All figures are in Canadian dollars unless otherwise noted. For further information on Thomson Reuters venture capital and private equity offerings, please visit us at: For further reports on private equity, venture capital, and other asset classes, please visit us at: Contributors to this analysis are provided with additional packages of data. If you would like to participate in the submission process, receive quarterly press releases, or have questions about our venture capital criteria, please contact us at: Gavin Penny Greg Beaman gavin.penny@thomsonreuters.com greg.beaman@thomsonreuters.com Tel: Tel: