Investments continue to be impacted by economic and geopolitical uncertainty, despite rate cuts.

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 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 potential benefits of lower interest rates, the current economic environment remains fragile, continuing to affect the private capital markets in Canada, including Quebec, across both venture capital and development capital segments.

In venture capital, Quebec recorded 58 deals totaling CAD $1.23 billion, with a notable slowdown in the deal count for the first half of 2024 compared to the same period in 2023. However, total funding remained comparable to H1-2023, driven by increased activity in the early stage, despite a decline in seed and later stage investments. With an average deal size of CAD $21.17 million in H1-2024, Quebec leads Canadian provinces in average investment per transaction.

In development capital, the deal count dropped by more than 48% in H1-2024 compared to the same period in 2023. However, the total value of investments rose by over 47%, with 187 deals totaling CAD $6.54 billion. This period was characterized by a strong prevalence of smaller deals, with 62% of the transactions involving amounts of CAD $5 million or less.

The economic environment continues to have a significant impact on investment capital activity. Despite the Bank of Canada’s interest rate cut on June 5 and some signs of recovery in Quebec, persistent economic instability and geopolitical risks may prompt investors to adopt a more cautious approach in the coming months.

Venture Capital Highlights:

• In Q2-2024, with 29 deals totaling CAD $641 million, the deal count remains low, while total funding shows a resurgence.
• Since the beginning of the year, Quebec represents 21% of the deal flow and 34% of the national VC investments in H1-2024. Quebec surpasses British Columbia, while Ontario remains the most active player.
• H1-2024 in Quebec is marked by a significant decrease in the deal count at the seed and later stages, with respective declines of 45% and 50% compared to H1-2023.
• The average size of VC investments in Quebec in H1-2024 stands at CAD $21.17 million, higher than the Canadian average of CAD $13.04 million, the British Columbia average of CAD $6.70 million, and the Ontario average of CAD $14.68 million.
• The total dollar invested in the ICT sector had its best performance for a second quarter since 2013, with CAD $456 million across 15 deals, while the life sciences sector faced challenges with 9 deals totaling CAD $84 million in Q2-2024.
• H1-2024 in Quebec is characterized by significant early stage rounds, representing 31% of the total dollar invested since the beginning of the year.

Private Equity Highlights:

• Since the beginning of the year, Quebec has recorded investments totaling CAD $6.54 billion across 187 deals.
• Quebec represents 57% of private equity deals in Canada, ahead of Ontario (24%) and British Columbia (10%), and 79% of the total dollar invested, again ahead of Ontario (13%) and British Columbia (5%).
• The average transaction size in H1-2024 (CAD $34.97 million per transaction) places Quebec in the leading position in the country.
• The industrial and manufacturing sector continues to attract a significant deal count (68 deals totaling CAD $746 million), but the ICT sector ranks first in terms of total dollar invested (19 deals totaling CAD $3.23 billion). The business services and products sector, agroforestry, and automotive and transportation sectors generated sustained activity.
• 8 of the 10 most active private equity investors in the first half of 2024 are based in Quebec.