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‘A return to normalcy’ as VC investments take a breather in B.C.

Despite drop in venture capital dollars, private equity made gains during the first three quarters of 2023
Vancouver-based LayerZero Labs and Vetcare Canada received the largest VC and PE investment, respectively, in the first three quarters of 2023.

B.C. companies’ funding efforts have been on a bit of a teeter-totter ride so far in 2023.

West Coast firms secured venture capital (VC) to the tune of $888 million in the first three quarters of the year, according to a report released last month from the Canadian Venture Capital & Private Equity Association (CVCA).

That’s down 1.5 per cent from the $902 million B.C. firms received during the same period in 2022.

Meanwhile, B.C. companies secured $249 million in private equity (PE) investments during the first three quarters of the year, a 26 per cent increase from last year’s $197 million.

B.C. received the third-highest VC investments in Canada, after Ontario ($2.5 billion) and Quebec ($1.2 billion), which came from 72 deals. 

Tech (34 deals) and life sciences (14 deals) were the top two sectors in the province to lock in deals, while cleantech (12) made third place.

The surge of investment in the tech sector owed a significant portion of its funding to the number of megadeals that closed in 2023 “as innovations in AI and its potential continues to pique investors’ interest,” according to the report.

“The [cleantech] sector’s focus on net-zero targets and government initiatives is driving investment, and is expected to remain resilient through 2023 and grow further in the coming years.”

LayerZero Labs, a Vancouver-based blockchain company, secured the largest disclosed deal in B.C. this year through a $120-million Series B financing round from global investors.

A total of $5.4 billion in VC was invested across Canadian companies in the first three quarters of 2023, down 30 per cent compared with the same period last year ($7.8 billion). 

As a result, last year’s VC investment activity trailed the levels seen in 2022 “mainly due to continued economic uncertainties,” according to the report.

“We are witnessing a return to normalcy, mirroring the pre-pandemic era of 2019,” Kim Furlong, CEO of CVCA, said about the report on her organization’s website.

“Investor focus has transitioned from funding growth in 2021 to now funding profitability, spotlighting solid companies with sustainable plans or proven profitability.”

The report added that for VC, investment activity declined across early, late and growth stages in Q3, while pre-seed and seed-stage investments remained resilient.

PE investment increases in B.C. despite national decline

In the first nine months of 2023, B.C. companies received $249 million from 50 deals – a 26 per cent increase from last year – despite declining nationally. 

B.C. was fourth among provinces in terms of PE investments.

Quebec ($3.1 billion), Ontario ($1.6 billion) and Alberta ($587 million) all outperformed the West Coast. 

Life sciences (14 deals), financial (12 deals) and tech (seven deals) were the sectors that had the most investment deals in the province.

Vancouver-based Vetcare Canada Inc. received the largest investment in B.C., raising $100 million from undisclosed investors. 

Despite growth in B.C., the total value of PE investment in Canada in the first three quarters of 2023 declined by nearly 49 per cent from $11.3 billion last year to $5.8 billion this year, according to the report.

“With current deal values, 2023 is on track to become the lowest [PE] investment year on record,” said the report.

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