Mega Deals Drive VC investment;  Quebec-based companies received 3 out of every 5 of all Canadian PE deals

Réseau Capital and the Canadian Venture Capital and Private Equity Association (CVCA) today released their report on venture capital and private equity in Québec. Québec saw the most venture capital dollars invested in the first half of 2020 compared to previous years, with CAD $599M invested across 81 deals (36% more dollars invested than the H1 average for the five-year period between 2015-2019).

The number of VC mega deals that closed in Q2 2020 (4 mega deals raising CAD $310M) were behind the boost in activity for H1 2020. The largest disclosed deals included:

• Montreal-based Hopper Inc. raised a CAD $98M round from Westcap, inovia Capital, BDC IT Venture Fund, Investissement Québec, Caisse de dépôt et placement du Québec, and OMERS Ventures
• Montreal-based Ventus Therapeutics raising an CAD $80M Series A financing led by Versant Ventures

CAD $935M of private equity dollars was invested across 90 deals in Q2 2020, 13% more dollars invested than the same quarter of last year (CAD $831M).

There were 3 mega deals (CAD $500M+) that closed in H1. Among them was:

• The CAD $840M secondary buyout of Groupe Canam Inc. by Caisse de depot et placement du Quebec and Fonds de solidarité FTQ
• A follow-on investment into Eddyfi/NDT by Novacap Management Inc. and Caisse de dépôt et placement du Québec totaling over CAD $600M

Québec Venture Capital Highlights

• The average VC deal size was $10.7M, a 40% increase from the same quarter last year ($7.6M), and 3.7 times higher than Q1 of this year ($2.9M)
• Quebec captured 31% of the number of VC deals (81 out of 264) and a 24% share of all dollars invested ($599M out of $2.5B) second only to Ontario, with 90 deals and $1B invested
• The ICT sector received the largest share of the activity in Quebec, with 34 deals and $268M raised (representing 42% of total deals and 45% of total dollars invested in the province); investment activity in life sciences came second, garnering $207M across 20 deals, a 35% share of total dollars invested and 25% of total deals
• In Canada, Montreal-based companies completed 24% of all deals and collected 23% of all dollars invested.
• SLater stage deals collected the largest share of dollars invested in the province, collecting 71% of total dollars ($423M out of $599M)
• There was a VC-Backed IPO in the province of Quebec, with Montreal-based Repare Therapeutics listing on the NASDAQ with a market value of $1.5B

Québec Private Equity Highlights

• Quebec-based companies received 3 out of every 5 of all Canadian PE deals and 44% of all PE dollars invested in Canada ($4.6B of $10.3B)
• The average deal size in Q2 ($10.4M) was 35% higher than the same quarter last year, ($7.7M) however, was 75% lower than the average for the preceding 5-year period between 2015-2019 ($24M)
• In Canada, Montreal had the most PE investment activity, with companies closing 29% of all PE deals and collecting 13% of all PE dollars invested. 3 out of every 10 deals with disclosed amounts were between $1M-$5M, with deals between $5M-$25M capturing a 27% share of the province’s deal flow
• 24% of deals (42 out of 177) went to companies in the Industrial and Manufacturing sector, with a 14% share (24 deals) going to ICT companies and 11% share to the Consumer & Retail sector (20 deals).

Satisfied with these encouraging results, the new President and CEO of RC wanted to point out that: “It is reassuring to note that the investment capital industry has demonstrated a certain resilience in recent months, despite the economic uncertainty that remains and continues to be a concern for companies in Quebec. It is therefore important for the investment chain to remain robust and benefit from a business environment conducive to its development. Maintaining a solid supply of investment capital will help reassure businesses and entrepreneurs, reinforce its important role in the development and financing of businesses and contribute to Québec’s economic recovery”.