OVERVIEW OF THE QUEBEC VENTURE CAPITAL AND PRIVATE EQUITY MARKET FOR THE THIRD QUARTER OF 2022
THE ECONOMIC ENVIRONMENT CONTINUES TO HAVE A SIGNIFICANT IMPACT 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 third quarter of 2022. It provides a review of private investment activity in Quebec companies by type of investment, industry sector, stage and size of investment.
In Q3 2022, Québec saw nearly $1.74 billion invested across 141 deals in venture capital and private equity investments. These numbers show a slowdown in both venture and private equity activity. As reported in the last quarter, inflation, rising interest rates and supply chain issues are creating uncertainty that is impacting the business environment.
The deal count is holding steady compared to the first two quarters, while the investment value dropped not only compared to the first quarters of the year, but also compared to the quarters of previous years. Quebec is not in a unique situation; a steep decline has also been noticed in the rest of Canada. Quebec’s third quarter performance is notably supported by investments in Kaloom ($27M), Nolk ($30M) and Connect&Go ($17M). Despite a sharp decline in Q3 late-stage investments, the overall 2022 outlook for late-stage funding is promising in Québec with a current total of $1.19 billion invested.
On the private equity front, the third quarter was characterized by a slight increase in the amounts invested compared to the second quarter. A total of $1.6 billion in investments across 104 deals were recorded in Q3. While investment volume remains below historical averages, investments are holding steady for a second straight quarter after a low point in Q1 2022.
Investment capital activity is being affected by the overall economic environment, including rising interest rates and a slowdown in the equity markets. As in previous quarters, these risks could continue to dampen investment activity in the coming months.
Venture Capital Highlights:
- With 37 deals totalling $180 million, the number of deals increased slightly compared to the first two quarters, but, like the rest of Canada, investments decreased significantly.
- After three quarters, as a proportion of national activity, Quebec accounted for 19% of deals and 28% of VC investments. Ontario remains by far the most active player, but Quebec is well ahead of British Columbia.
- There were no mega-deals (over $50M) in this quarter. Early-stage deals were the mainstay of venture capital activity in Q3, with a total of $60 million invested across 3 deals.
- After only three quarters, late-stage investments in 2022 ($1.19 billion) have surpassed the entirety of 2021 late-stage investments ($1.12 billion), setting a new record in Quebec.
Private Equity Highlights:
- A total of $1.6 billion in investments across 104 deals were recorded in Q3, confirming the recovery in terms of amounts invested observed in the second quarter. Québec continues to lead the Canadian private equity sector.
- Since the beginning of the year, Quebec represents 55% of Canadian private equity deals, ahead of Ontario (23%) and British Columbia (14%), and 56% of the amounts invested.
- After only three quarters, investments in the business products and services sector is well positioned to surpass the 2021 level ($1.46 billion) with a current total of $1.22 billion invested. The industrial and manufacturing sector continues to dominate in terms of deal count with 32% of the deals in Quebec. The agroforestry, ICT, and consumer products and services sectors are experiencing a noticeable decline compared to 2021, particularly in terms of amounts invested.
(Report only in French)