Canadian exit velocity reflects market momentum

Written by Laura Lenz and Charlie Renzoni

There was a record number of funding rounds announced in the first half of 2021, a total of 414 deals (compared with 617 in all of 2020). According to Refinitiv, the average size of disclosed rounds was C$26.3 million, up 77% from C$12.8 million a year ago. This increase in funding enables Canadian companies to compete on a global scale by hiring top talent and scaling quickly. These are great milestones to be celebrated.

But, to fuel and sustain the ecosystem in a meaningful way, as a community, we need to ensure that we are putting capital back in the hands of shareholders by way of cash-on-cash returns. So while the market celebrates the record amount of funding going into Canadian companies in Q2, we also keep an eye on the exit numbers as this is what truly speaks to the momentum and economic success that our industry is experiencing right now.

Earlier this year, after acknowledging the reverberations of something special happening in the Canadian technology market, we took a close look at the data of venture backed technology businesses in Canada. Our research highlighted that venture backed companies were achieving scale and sizeable exits at a velocity unseen ever before in our market. And, unsurprisingly, that pace has accelerated in Q2.

Since our last update on the top 25 venture-backed tech exits in Canada, there have been five new companies added to this list:

• #4 is MDA based in Brampton who completed an IPO valued at $1.3B on April 7th
• #10 is Dialogue Health, based in Montreal who completed an IPO valued at $779M on March 30th
• #11 is Thinkific, based in Vancouver who completed an IPO valued at $778M on April 27th
• #18 is Magnet Forensics, based in Waterloo, who completed an IPO valued at $535M on May 3rd
• #20 is Absorb LMS, based in Calgary who completed an LBO valued at $500M on June 1st

By its nature, keeping track of data like this means, if the velocity continues, some companies will get bumped off the list. But unlike most lists — that isn’t something to hide! The fact that the exits are getting so big that there are companies being moved off the list speaks volumes about the maturing of our ecosystem. For example, among those no longer in the top 25 we’ve seen founders who have now become even more active seed stage investors and another who has gone on to be CEO of a huge business and joined the board of a startup. It means our ecosystem is thriving.

The exciting implication in the most current set of data is yet more proof of our own ecosystem maturing — Canadian companies are moving away from the trend of being acquired by incumbent US players. Every month our team learns from our portfolio companies about acquisition offers on the table, but now, these management teams acknowledge that big companies can be built and scaled in Canada and are not being lured by a sizeable dollar figure when there is more opportunity in the business to achieve a larger exit in future.

The Canadian market continues to pick up its pace in 2021, with 20% of Canada’s Top 25 venture-backed companies being listed since our last update. In fact, since January 1st 2020, we have seen over 52% or 13 companies being added to this Top 25 List that represents 65% of the total value.

Overall, Canadian exit momentum remains at an all-time high and is continuing to accelerate. We are past the inflection point identified in our last post, and we expect the momentum to continue, both within OMERS Ventures portfolio, as well as in the broader ecosystem.

OMERS Ventures Canadian exit velocity index

Methodology

The Exit velocity 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 has technology be core 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.