A NEW COLLABORATION FOR A SHARED VISION OF QUEBEC

The financing of Quebec-based companies relies on a dynamic ecosystem where multiple stakeholders play a key role. To provide a clear and integrated perspective on its evolution, Réseau Capital, Anges Québec, and Québec Tech have joined forces to publish an annual report starting this year. This initiative marks an important milestone in our commitment to offer a comprehensive vision of Quebec’s ecosystem.

By leveraging their combined networks, the three organizations aim to provide to as many readers as possible with not only a global overview of the landscape but also a more coherent and accessible analysis of key trends shaping Quebec’s entrepreneurial ecosystem and financing chain.

DESPITE LOWER INTEREST RATES, INVESTMENTS REMAIN IMPACTED BY ECONOMIC AND GEOPOLITICAL UNCERTAINTY

While the decline in interest rates may be beneficial, the current economic environment remains fragile and continues to impact markets and private capital activities in both Canada and Quebec, affecting both venture capital and private equity.

In tech entrepreneurship, Quebec now accounts for 22% of new startups in Canada, aligning with our demographic weight, marking a four-percentage-point increase over the past decade. However, over the same period, we have only captured about 20 Quebec-based startups surpassing the $10M annual revenue threshold, compared to over 150 at the national level. This means that Quebec currently represents only 14% of Canadian scaleups.

For angel investors, follow-on rounds account for 72% of the deal count and 65% of the total amounts invested in 2024 by Anges Québec members. Geographically, Montreal remains the primary investment hub. The IT sector is the preferred industry among members, representing 54% of the deal count.

In venture capital, with 108 transactions and $2.0 billion invested, the slowdown in the number of transactions observed since the beginning of the year continues. The decline is particularly noticeable in the seed and  later stages. Despite this drop in the number of transactions, investment amounts have increased by 35% compared to 2023. The year 2024 is marked by a rebound in early stage transactions and an increase in investment amounts in the ICT and life sciences sectors, with respective increases of 43% and 42% compared to 2023.

Private equity is experiencing a historic year, with the number of transactions rising by 7% and investment amounts soaring by 597% compared to 2023, reaching 385 transactions and $19.07 billion invested. The year 2024 is also characterized by buyout transactions, which are also having a record year. Compared to the past twelve years, 2024 ranks first (1/12) in buyouts, both in terms of the number of transactions and investment amounts.

Despite some positive aspects, such as the strong performance of buyout transactions and an increase in investment amounts, the economic and geopolitical environment continues to impact investment capital activity. Beyond macroeconomic and geopolitical factors, the lack of exits and the slow pace of closing venture capital funding rounds remain concerning. Given the current situation, particularly in the United States, it is crucial that governments in both Quebec and Canada swiftly implement measures to encourage investment and reduce uncertainty. This includes canceling the increase in the capital gains inclusion rate and quickly deploying the funds allocated to the Venture Capital Catalyst Initiative (VCCI) and mid-market businesses as outlined in the latest Economic Statement.

Venture capital highlights:

• The year 2024 presents a mixed picture, with 108 deals totaling $2B. Venture capital investments in Quebec saw a 25% decline in deal volume but a 35% increase in invested amounts compared to 2023.
• In 2024, Quebec represents 18% of all venture capital deals in Canada and 25% of total invested capital. This places the province second in deal volume, trailing Ontario, and third in invested amounts, behind both Ontario and British Columbia.
• Q4-2024 in Quebec saw a significant decline in seed-stage rounds, with only 6 deals totaling $27M.
• In 2024, Quebec recorded 43 deals in early stage totaling $692M, representing a 34% increase in deal volume and a 12% rise in invested amounts compared to 2023.
• The IT sector remains dominant, with 58 deals totaling $1.02B, representing 54% of total deals and 51% of total invested amounts.

Private equity highlights:

• Québec recorded $19.07 billion in total dollars invested this year across 385 transactions. The amounts invested in 2024 have reached their highest level since 2013.
• Quebec represents 59% of Canadian private equity deals, ahead of Ontario (22%) and British Columbia (10%), and 69% of total investments.
• Quebec accounted for 6 of the 10 largest private equity deals in Canada.
• The industrial and manufacturing sector continues to attract a high number of the deals, with 131 deals totaling $968M. However, the IT sector ranks first in total investment, with 35 deals accounting for $12.83B. The automotive & transportation, retail, and financial services sectors also showed strong activity.
• 2024 was a record year for buyout deals in Quebec, with 28 deals totaling $4.11B. This places 2024 at the top (1/12) in buyout activity, both in deal count and total investments.
• The most significant private equity deals of 2024 include Nuvei Corp ($8.87B), eStruxture ($1.8B), Logistec Corporation ($1.2B), Plusgrade ($1B), and Energir ($575M), highlighting a strong year for high-value transactions.