A slowdown in Canadian exits in Q3, but funding at an all time high
Written by Laura Lenz and Charlie Renzoni
We’re back with our quarterly look at momentum in the Canadian tech ecosystem as marked by company exits. After a record-breaking first half of 2021, exit velocity of venture backed businesses in Canada slowed down in Q3 with only one company, LifeSpeak, edging into the top 25 Canadian Exits list.
Following a frenetic 12 months of working during lock-down — with little else to occupy their time — deal makers and founders alike could be forgiven for putting a few things on pause to make the most of the summer days.
But with children back in school and corporate Canada getting back to work, the last quarter of the year is shaping up to be a strong exit quarter for Canadian tech. Already we’ve seen Copperleaf Technologies and Q4 listing in September, and IPOs including adtech company Sharethrough, on-line car auction E Inc, and several others which are expected to happen before the end of the year.
LifeSpeak completed its IPO in July valuing the company at $385M at the time of listing. And Q3 financings were record-breaking, with Toronto tech alone raising over $1.6B over 53 deals. Year-over-year growth in fundraising was 431%, a formidable growth rate for any industry!
Though funding increased, we are seeing VCs clustering around the outperformers — those companies that have a great founding team, a massive market they are disrupting, and impressive month on month revenue growth. There’s no doubt that for those outperformers it’s a founder’s market. Rounds are being raised quickly (with limited data sharing) and at high valuation multiples — 20x forward revenue is not uncommon. With a massive amount of supply in the market, round sizes are getting larger.
The momentum we are seeing now has been generated over several years and reflects the desire and determination by Canadian founders to build big, global businesses. Three years ago (Q3, 2018, source CB Insights), series B deals were roughly 10% of the deal volume, now it is almost double that. And in 2018, only 7.3% of Canadian companies that raised an A went on to raise a B. Our guess is this number has doubled in 2021.
We do not believe the ‘lull’ in exits during Q3 is a signal of anything more than the ebb and flow of normal deal cycles. We believe the ecosystem remains stronger than we’ve ever seen before.
To see our first look at the exit data from March, check out this post. And for Q2, it’s here.
Methodology
The Top 25 Canadian Exits index is assembled quarterly by the OMERS Ventures team by ranking the top 25 VC-backed technology exits in Canada. The criteria for this list include that the company has its primary HQ in Canada, has been backed by at least one venture capital firm, and that technology iscore to the underlying value creation. For this list, we have omitted biotech, materials, and natural resource businesses. The list is ranked by the dollar value of the post money valuation at the time of exit.
