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Canadian Startups Getting Shown the Money

Canadian Startups Getting Shown the Money

Posted by PanamericanWorld on May 25, 2016

According to PitchBook Data, 103 Canadian startups raised a record $880.7-million in the first quarter. The activity was driven by deals closed by Blockstream ($55-million), Real Matters ($70-milion) and Vidyard ($35-million).

“Canadian startups enjoyed a remarkably strong run of venture funding to kick off 2016, with a bevy of large raises pushing total capital invested to a decade high of C$880.7 million across 103 rounds. Even though the volume of funding was below previous quarterly highs, it decreased less than what has been observed in many other VC markets. 2016 is unlikely to see levels of financing similar to 2013 or 2014, but its strong start speaks to some of the key differentiators of the Canadian venture scene, which include geographic fragmentation, access to capital, proximity to the U.S., recently increased government focus and a broader economy that is trying to re-shift from being overly dependent on commodities.”

There are different ways to consider the financing activity in the first quarter. You could argue it was skewed by a small number of mega-deals made the financing landscape look really good. At the same, you could also argue the activity – regardless of the size of the deals – is a sign that Canada’s venture capital landscape is gaining much-needed momentum. While Canada’s startup community is flourishing with a growing number of innovative startups, there has not been enough capital to properly support and nurture them.

While Canada’s startup community is flourishing with a growing number of innovative startups, there has not been enough capital to properly support and nurture them. As Canada moves to become an innovation-driven economy, capital is going to be a key ingredient. While the Canadian government has been providing financial support, the private sector will need to get more involved.

For startups, the growth in private-equity investments is clearly great news. 

In the short-term, it will push up the valuations. Canadian startups will likely be able to secure better deals rather than having to accept lower valuations or give away too much equity to get the capital required for growth.

For early-stage startups, there could be more money to transform ideas into products that can be effectively marketed and sold. For fast-growing startups, there will be capital to slam on the accelerator rather than being throttled by a lack of capital.

If you’re an entrepreneur, the financial pendulum may finally be swinging their way.

For new funds being established, a more robust financing landscape could make it more difficult for them to generate strong returns. With deals getting more expensive, there will be fewer bargains. As a result, VCs will have to get more active to find attractive opportunities and prepared to move quickly on deals. They will no longer have the luxury of waiting to see significant traction to invest or hold off until a syndicate can be created.

In some respects, Canadian VCs have already seen changes in the marketplace dynamics as a growing number of international VCs such as Sequoia, Hyde Park Venture Partners and Horizon Ventures pursue deals.

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