Québec Captures A Third of All Canadian VC Deals and More Than Half of All PE Deals.

Montreal-based Lightspeed POS Inc. is largest IPO since 2017; Desjardins Capital the most active PE investor

The momentum for venture capital deals in Quebec continued in the first quarter of 2019 with CAD $198M invested over 51 deals, 80% higher than Q1 2018. While private equity activity slowed across the country, Quebec experienced a billion-dollar quarter across 70 PE deals, only 9% lower than the CAD $1.1B in the same quarter last year.

The blockbuster VC-backed Lightspeed POS Inc. IPO took place in the first quarter of the year, debuting with a CAD $1.1B market capitalization. Some of the investors of Lightspeed included Caisse de dépôt et placement du Québec (CDPQ), iNovia Capital, Investissement Québec and Teralys Capital.

Quebec was also home to more than half of all the private equity deals across Canada in Q1, 70 out of 130 deals, which is more than twice than Ontario’s 30 Deals.

Contrary to the Canadian sectoral distribution, VC-backed Cleantech companies took the lion’s share of invested dollars (42%) with CAD $83M, significantly higher than the 10% average from 2014-2018. Life Science companies received a quarter of all VC dollars in Q1.

Desjardins Capital took the position of most active private equity investor in Q1 with 32 deals involving Quebec-based companies. Fonds de solidarité FTQ followed with 11 deals.

Quebec Venture Capital Highlights

• $198M was invested over 51 deals in Q1 in Quebec, 80% higher than the same quarter last year ($109M)
• The average VC deal size ($3.9M) dropped 40% from last year ($6.4M) and was 32% lower than the average for the 5-year period 2014-2018 ($5.7M)
• 1 $50M+ mega-deal accounted for 39% of total VC investment in the province:
  • Montreal-based Enerkem’s $76M round from a syndicate of investors including Cycle Capital Management/Ecofuel, Fondaction CSN, Fonds de solidarité FTQ, Investissement Québec and National Bank of Canada
• Quebec captured a third of the number of VC deals (51 out of 142) and 19% of dollars invested ($198M out of $1B)
• 4 out of 10 deals were between $1M-$5M, followed by deals between $100K-$500K capturing a 18% share (9 out of 51 deals).
• Cleantech companies garnered $83M, a 42% share of total dollars, up significantly from its average 10% share over the 5-year period 2014-2018; Quebec-based companies in life sciences received a quarter ($48M) of total dollars
• Montréal-based companies received $146M over 35 deals second only to Toronto-based companies that received $416M over 47 deals
• Within the province, Montréal-based companies received 69% (35 out of 51 deals) of VC deal flow followed by Laval and Québec each with a 8% share (4 out of 51 deals)
• 22 later stage deals captured 71% ($141M) of total dollars and 19 early stage deals 19% ($37M); there were 8 seed stage deals that totaled $9M
• There were 8 exits involving VC-backed companies the largest of which was the IPO of Lightspeed POS Inc. on TMX with a market cap of $1.1B – investors included Caisse de dépôt et placement du Québec (CDPQ), iNovia Capital, Investissement Québec and Teralys Capital

Quebec Private Equity Highlights

• $1B was invested over 70 deals, 9% lower than the $1.1B from the same quarter last year
• The average deal size increased 18% from $12.2M in Q1 2018 to $14.4M
• The largest deals included:
  • $20M follow-on deal into Québec-based agri-forestry company Hortau Inc. from investors Fonds de solidarité FTQ and Export Development Canada (EDC)
  • $17M growth deal in cleantech company Gestion Groupe Bouffard Inc. based in Bas St. Laurent from Desjardins Capital
• Québec captured more than half of all Canadian PE deals (70 out of 130), more than twice than Ontario’s 23% share (30 deals).
• Almost 1 out of every 2 deals were between $1M-$5M, with deals between $500K-$1M capturing a 23% share of the province’s deal flow
• 23% of deals (16 deals) went to companies in the Industrial and Manufacturing sector with a 14% share going to both ICT and agri-forestry sectors (10 deals each)
• Desjardins Capital was the most active investor with 32 deals involving Québec-based companies followed by Fonds de solidarité FTQ with 11 deals