OVERVIEW OF THE QUEBEC VENTURE CAPITAL AND PRIVATE EQUITY MARKET FOR Q1-2024

May 2024

Investments continue to be impacted by economic and geopolitical uncertainty, despite the resilience of some sectors.

Réseau Capital and its Centre of Expertise presents the quarterly report on private equity industry activities in Québec. Produced in collaboration with the Canadian Venture Capital Association (CVCA), this report provides a detailed view of venture capital (VC) and private equity (PE) investments in Quebec for the first quarter of 2024. It provides a review of private investment activity in Quebec companies by type of investment, industry sector, stage and size of investment.

 

 

Despite the Bank of Canada’s decision in April 2024 to maintain its policy interest rate , the private capital industry in Canada, including Quebec, continues to be affected by rising inflation.

In venture capital, Quebec stands out as the top Canadian province for VC investments in the first quarter of 2024, with 29 deals totalling CAD $583 million. Although the deal count reached its lowest level since 2016, investments reached their second-highest level for a first quarter since 2013, notably due to the performance of the life sciences sector.

In the first quarter, Quebec emerged as the best-performing Canadian province in private equity, with 77 deals totaling CAD $2.94 billion. This period was marked by five deals exceeding CAD $100 million, representing over 90% of the total value. The Industrial & Manufacturing sector accounted for more than 40% of the deals completed during the quarter.

The global economic and geopolitical environment continues to impact the private capital industry in Canada and around the world. This uncertainty, particularly concerning interest rate cuts and the recent decline in consumer confidence, continues to weigh on prospects despite the resilience of certain sectors. The recent decision by federal and provincial governments to increase the capital gains inclusion rate  adds a negative factor in an already challenging context, which may contribute to slowing the pace of investments in the coming months.

 

Venture Capital Highlights:

  • In Q1-2024, VC investments continue to increase totaling CAD $583 million across 29 deals.
  • Quebec represents 23% of the deal flow and 45% of the VC investments.
  • Q1-2024 in Quebec is marked by a significant decrease in the deal count at the seed and late stages, with respective declines of 50% and 66% compared to Q4-2023.
  • The total invested dollar at the early stage experienced growth of 117%, recording CAD $153 million.
  • The average size of VC investments in Quebec stands at CAD $20.09 million, the highest in Canada.
  • The life sciences sector ranks first for total dollar invested with 7 deals totaling CAD $309 million.

 

Private Equity Highlights:

  • Quebec has recorded investments totaling CAD $2.94 billion spread over 77 deals.
  • Quebec represents 55% of private equity deals in Canada, ahead of Ontario (23%) and British Columbia (12%), and 73% of the investment amounts.
  • Although the volume of deals remains on a downward trend, the average transaction size has reached its highest level since 2019.
  • The 5 deals of CAD $100 million and above represent more than 91% of the invested amounts in Q1-2024, while they account for only 6% of the private equity deals.
  • The industrial and manufacturing sector continues to attract a significant deal count (31 deals for CAD $131 million), but it is the automotive and transportation sector that leads in terms of investment amounts (3 deals for CAD $1.23 billion).