OVERVIEW OF THE QUEBEC VENTURE CAPITAL AND PRIVATE EQUITY MARKET FOR Q2 2023
UNCERTAINTY CONTINUES TO WEIGH ON PRIVATE EQUITY ACTIVITY ON CAPITAL ACTIVITY IN QUÉBEC
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 second quarter of 2023 and overviews private investment in Québec based companies by investment type, activity sector, funding stage, and investment size.
After two quarters, venture capital and private equity investments in 2023 totalled almost $2.6B in 251 deals. Despite a historically active 2022, the first two quarters of 2023 ended with a slowdown in investment.
In venture capital, the first half of 2023 ends with a slowdown in the number of deals, while amounts invested remain within the historical average, closing a first quarter that recorded a total of 67 deals and $841M invested. The quarter was characterized by a return of later-stage rounds. Despite a slight easing of early-stage investment in the final quarter, early-stage investment remains significant in H1 2023.
In private equity, the deals count and amounts invested dropped by about 40% compared with the same period in 2022, with 184 deals and $1.79B invested. As we saw in previous quarters, the second quarter was characterized by small investments, with 62% of deals receiving investments of $5M or less.
The current economic situation continues to affect markets and activities in Canada and Quebec, in both venture and development capital.
Venture Capital Highlights:
- With 32 transactions totalling $462M in the second quarter, the number of rounds remains low, while the amounts invested are picking up.
- Quebec accounts for 20% of deals and 21% of VC investments nationwide in H1 2023. Quebec is ahead of British Columbia, while Ontario remains the most active player.
- Q2 2023 in Quebec is characterized by a return of later-stage rounds, with 7 deals totalling $169M.
- The average size of venture capital investments in Québec is $12.55M, which is higher than the Canadian average of $11.92M.
- CleanTech is off to a good start this year, with 7 deals totalling $104M.
- S1 2023 in Quebec is characterized by significant later-stage rounds, representing 52% of the amounts invested since the beginning of the year.
Private Equity Highlights:
- In the first six months of the year, Quebec recorded investments of $1.79B in 184 deals. After record deal volumes in 2021 and 2022, the number of deals is back to pre-pandemic levels (Q3-2020).
- Quebec accounts for 58% of Canadian private equity transactions, ahead of Ontario (24%) and British Columbia (11%), and 50% of amounts invested.
- The average size of amounts invested per transaction in H1-2023 ($9.73M/deal) places Québec second to last in the country.
- The industrial and manufacturing sector continues to attract a significant number of deals (50 deals for $26M), but it is the ICT sector that leads the way in terms of amounts invested (29 deals for $451M). Business services and products, agroforestry and CleanTech generated sustained activity.