Q1 2021 VC & PE Québec Market Overview
Record venture capital amounts and Quebec’s leadership in development capital transactions is confirmed.
Réseau Capital, Quebec’s private equity association, and Canada’s Venture Capital Association (CVCA) published today their report on Quebec’s venture capital and private equity activity for the first quarter of 2021.
In venture capital, $468 million was invested in 39 transactions in Quebec since the beginning of the year, which is a record for a first quarter, both in terms of amounts invested and number of transactions. The amounts invested at the beginning of the year are particularly noteworthy, being far higher than the quarterly average of $316 million over the past five years. This situation can be explained by two mega-deals, one that reached $215M led by Inovia in Hopper, and another one which totalled $53M by Mackinnon, Bennett & Co, Caisse de dépôt et placement du Québec, Investissement Québec and Energy Impact Partners in AddEnergie Technologies Inc.
There were four total or partial venture capital-backed exits in Quebec, two of which were more significant in the technology sector, namely Element AI and Coveo Solutions. This first quarter also saw a remarkable IPO on the TSX for Dialogue Technology Inc. worth $779M, a company backed by White Star Capital, Portag3 Ventures, the Caisse de dépôt et placement du Québec, First Ascent Ventures, BDC Capital and Diagram Ventures.
In private equity, $1.1 billion has been invested in 107 transactions since the beginning of 2021, an increase of 21% compared to the average number of transactions per quarter observed in previous years, but a significant decrease in the amounts invested, notably due to the absence of mega-deals in the first quarter. Quebec remains the most active province, with nearly 42% of investments and 60% of the number of private equity deals in Canada.
“Given the economic context, the results for the beginning of 2021 are very positive. They demonstrate the maturity, robustness and resilience of the financing chain in Quebec,” declared Guillaume Caudron, CEO of Réseau Capital. “Quarter after quarter, we are seeing transactions that demonstrate the venture capital industry growing capacity to support and develop new economic champions, whether in terms of number, amount invested, nature or quality. The successive rounds of investment in Hopper and AddEnergie Technologies Inc., most of which are made up of Quebec funds, are examples of this. Dialogue’s IPO in the first quarter also demonstrates our venture capital industry’s ability and expertise to support these flagships in their growth, bring them to maturity and participate in the creation of wealth in Quebec,” he added.
Quebec’s strength in private equity was also confirmed in the first quarter. Activity remains very high, with the number of deals representing more than 60% of all deals observed in Canada. Although the amounts invested in the first quarter were slightly lower than the historical average, the Quebec industry has demonstrated over the past few years that its support increasingly allows Quebec’s leading companies to grow by acquisition and expand internationally, rather than being bought out. “There clearly is a paradigm shift, as illustrated by the investments in CAE and Eddify. Like venture capital, private equity funds are gaining in maturity and expertise and are creating new Quebec-based flagships in cutting-edge sectors with international reach, such as Lightspeed or Nuvei (Pivotal Payment), which were recently listed on the stock market after being supported and accompanied by Quebec funds.”
Venture capital highlights in Quebec:
- The average deal size is $12 million, well above the average of previous years (but within the average if you exclude the mega-deal).
- Venture capital investments by sector:
- Information and communication technologies take the largest share with 70% of investments ($330M out of $468M) and 60% of deals (23 out of 39)
- The cleantech sector, with 16% of investments ($73 million over 3 deals), is experiencing significant growth.
- Life sciences (5% of investments, $22M over 5 transactions) are off to a slower start after having well performed in 2020.
- Venture capital investments by stage:
- Advanced: 62% of investments ($288M over 6 deals)
- Start-up: 24% ($114 million over 14 deals)
- Seed: 8% of investments but 44% of deals ($35 million over 17 deals)
- Venture capital activities by province:
- Ontario continues to lead with 44% of venture capital investments in Canada ($1.2 billion out of 67 deals)
- British Columbia experiences very strong growth in the first quarter with 27% of Canadian investments ($709 million over 29 deals)
- Quebec: 18% ($468 million over 39 deals).
Private Equity Highlights:
- Development capital investments by sector:
- Industrial and manufacturing: 54% ($597 million for 29 out of 107 deals)
- Agriculture and forestry: 18% ($199 million over 17 deals)
- Life Sciences: 10% ($113 million over 9 deals)
- Private equity investments by province:
- Ontario: 44% of investments made in Canada ($1.2 billion over 35 deals out of a Canadian total of 177 deals)
- Quebec: 42% ($1.1 billion over 107 deals [60% of Canadian deals]).
- Alberta: 12% ($326 billion over 13 deals).