The CVCA reports mixed results in Canadian VC funding for Q1, alongside a rebound in the PE market

The latest report from the Canadian Venture Capital and Private Equity Association (CVCA) highlights the contrasting trends observed in the first quarter of 2024, with venture capital (VC) funding showing a mixed performance while private equity (PE) activity experienced a notable upswing.

The data reveals that approximately $1.3 billion CAD was invested in Canadian technology startups through 128 deals in Q1, indicating a decrease compared to the previous quarter, Q4 2023. This shift in funding dynamics underscores the evolving landscape of investment in the Canadian tech sector and suggests potential shifts in investor sentiment and strategies.

The decline in VC financing, coupled with the surge in PE activity, may reflect changing market conditions and priorities among investors, signaling a need for continued monitoring and analysis to understand the broader implications for the startup ecosystem and the overall economy. The total dollars invested in Canadian technology startups during the first quarter of 2024 marked an eight percent increase compared to the same period in 2023.

This growth was primarily driven by investments from artificial intelligence (AI) startups such as Ideogram, Spellbook, and Borderless AI, as well as healthtech companies like PocketHealth and Flosonics Medical. Additionally, FinTech firm Helcim and last-mile delivery provider UniUni also contributed to the rise in funding.

These notable investments in key sectors reflect the ongoing momentum and investor interest in innovative technologies and solutions, positioning these companies for potential growth and impact in their respective industries.In terms of deal count, the first quarter of 2024 saw a significant decline of 28 percent compared to the previous year, with a total of 128 deals recorded. This figure represents the lowest quarterly number since the onset of the pandemic in Q3 2020, indicating ongoing challenges within the Canadian tech sector amidst a tough market environment.

Despite the decrease in deal count, the average deal size surged to $10 million in Q1, marking a substantial 47 percent increase from the same period in the previous year. This trend suggests a shift towards larger and potentially more strategic investments in Canadian technology startups, reflecting changing investor preferences and market dynamics as companies navigate the evolving landscape of the tech industry.

In the first quarter of 2024, Canadian VC funding exhibited mixed results while the private equity (PE) market experienced a notable rebound, as reported by the CVCA. During this period, approximately $1.3 billion CAD was invested in Canadian technology startups through 128 deals. Notably, pre-seed and seed-stage VC funding declined, contrasting with the continued descent in late-stage investments. This dynamic highlights the evolving investment landscape and shifting priorities within the Canadian tech sector.

During the first quarter of 2024, early-stage VC funding in the Canadian tech sector maintained its strength, with Series A and Series B financing playing a significant role in driving this activity. However, the CVCA reported a decline in pre-seed and seed-stage investments, with pre-seed funding dropping back to levels last seen in 2020.

Additionally, later-stage investing continued to decrease, with Q1 recording the lowest deal count since 2017. Despite these fluctuations, venture debt financing remained stable during this period, indicating a mix of trends and challenges within the Canadian tech investment landscape.