2013 Canadian Startups Landscape Analysis: Full of US VCs and Still Low Investments (Mattermark Data Analysis)
I have just analyzed 93 Canadian tech startups that received capital funding, using the Mattermark database, from January 1st to Oct 15th 2013, excluding Biotech, Cleantech, Pharma, Oil & Gas, and Medical Devices. Aside from 4 seed deals where the amounts weren’t public yet, the total raised was $438 Million (including the HootSuite Series B $165 Million swing deal). Contrast that with $190 Million on 89 deals with 2012.
Is that good or bad?
Even if we back out the HootSuite’s numbers, 2013 funding has already eclipsed 2012 by $83 Million, and that will put Canada on a projected 35-40% growth rate, but the total numbers are still very small compared to the USA. Even with the HootSuite deal, Canada could finish the year with a projected $500 Million of investments, but that is only 3.3% of the total US equivalent investments of approximately $15 Billion per year.
For comparison, just in September alone, $1.3 Billion were invested in the US across 207 deals (source: my private Mattermark analysis).
But Canada’s GDP was 11% of the US in 2012 ($US 16.62 T vs. $US 1.82 T)! This means the Info Tech VC investments in Canada could be 4 times what they are today, i.e. $1.6 Billion, if we are to track the US levels.
Understatement: Canada is lagging.
Let’s dive into this data.
The distribution of deals is heavily tilted towards seed/pre-A, with 52 deals in that segment or 61%, but that’s lower than 69% (56 deals) in 2012. Here’s the distribution graph:
Deals Dollars Distribution
You may want to mentally back-out $165 M from the B segment, because it represented a single deal (HootSuite). The Average Seed/Pre-A deal in Canada was $594K (based on 47 deals with data), the Average A deal was $5.4M, the Average B deal was $9.2 M. These are respectable ratios.
Not surprisingly, Ontario has the largest number of deals and investment levels (excluding counting the HootSuite deal, which is in Vancouver), but BC is a good second overall, easily beating Quebec, even without the HootSuite deal.
# of Deals
|BC||24||$214 M (incl. $165M HootSuite)|
The Waterloo-Toronto-Ottawa corridor (if there is one), has always been a point of comparison. Here’s how these 3 pivotal regions stacked in the table below. It is noteworthy to see that Waterloo has garnered over half of Toronto’s investments, with only about a quarter of the number of deals. This shows that Waterloo has definitely emerged as a place with a steady and quality level of startups.
# of Deals
Ave. $ / Deal
|Ottawa||6||$29.4 M||$4.9 M|
|Toronto||26||$87.8 M||$ 3.37 M|
|Waterloo||6||$52.4 M||$8.7 M|
Top Deals of the Year
Let’s focus on the deals that raised over $5 Million. The key revelation is that 11 out of the top 20 top deals were lead by US VC firms.
|1. HootSuite (Vancouver)||$165 Million (B)||Social Communications||Insight Venture Partners (USA)||August 2013|
|2. Replicon (Calgary)||$20 Million (A)||Timesheet SaaS||Social + Capital (USA)||June 2013|
|3. Kik Interactive (Waterloo)||$19.5 Million (B)||Mobile Messaging||Foundation Capital (USA)||April 2013|
|4. Keek (Toronto)||$18 Million (C)||Social Sharing||AGF Investments (Canada)||January 2013|
|5. theScore (Toronto)||$16 Million (public)||Sports Content||Relay Ventures (Canada)||April 2013|
|6. Visier (Vancouver)||$15 Million (B)||Workforce Analytics||Foundation Capital (USA)||May 2013|
|7. Thalmic Labs (Waterloo)||$14.5 Million (A)||Wearable Hardware||Spark Capital (USA)||June 2013|
|8. Indochino (Vancouver)||$13.5 Million (B)||Custom Clothing||Highland Capital (USA)||March 2013|
|9. RANOVUS (Ottawa)||$11 Million (B)||Cloud Telecommunications||Azure Capital Partners (USA)||September 2013|
|10. BTI Systems (Ottawa)||$10 Million (C)||Networking Software||Bain Capital Ventures (USA)||February 2013|
|11. 500px (Toronto)||$8.8 Million (A)||Photography Content||Andreessen Horowitz (USA)||August 2013|
|12. ScribbleLive (Toronto)||$8 Million (B)||Live Blogging||Georgian Partners (Canada)||June 2013|
|13. 360incentives (Toronto)||$7.65 Million (A)||Incentives SaaS||OMERS Ventures (Canada)||January 2013|
|14. Drivewyze (Edmonton)||$7.5 Million (A)||Trucking App||Emergence Capital Partners (USA)||August 2013|
|15. InteraXon (Toronto)||$6 Million (A)||Wearable Hardware||Horizon Ventures (USA)||August 2013|
|15. Sprylogics (Toronto)||$6 Million (public)||Mobile Search||Beacon Securities (Canada)||September 2013|
|15. Vidyard (Wateroo)||$6 Million (A)||Video SaaS||OMERS Ventures (Canada)||March 2013|
|18. Auvik Networks (Waterloo)||$6 Million (A)||Network Automation||Celtic House VP (Canada)||May 2013|
|19. TeamBuy.ca (Toronto)||$5 Million (A)||Group Buying||BEST Funds (Canada)||August 2013|
|20. Dissolve (Calgary)||$5 Million (A)||Video Marketplace||iNovia Capital (Canada)||September 2013|
Canadian vs. US Venture Firms
It is not possible to extract exact amounts coming from US vs. Canadian firms, because the amount splits are never disclosed during rounds with multiple firms, but the US firms were quite well represented. We counted 31 distinct US VCs vs. 30 Canadian VCs that participated in the 89 deals. One could reasonably assume that the US VCs probably contributed to about half of the $438 Million.
The most active Canadian VCs, with 2 or more deals:
- BDC Venture Capital (9)
- OMERS Ventures (7)
- Real Ventures (7)
- iNovia Capital (7)
- Full Stack (5)
- MaRS IAF (4)
- Yaletown Venture Partners (3)
- Version One Ventures (3)
- Rho Canada Ventures (3)
- Klass Capital (2)
- GrowLab (2)
- Relay Capital (2)
- Covington Capital (2)
- Georgian Capital Partners (2)
The most active US VCs in Canada, with 2 or more deals:
- ff Venture Capital (2)
- SoftTech VC (2)
- Horizon Ventures (2)
- Felicis Ventures (2)
- Spark Capital (2)
- Foundation Capital (2)
- Social + Capital (2)
- Still not enough Seed/pre-A investments. We need to fill the funnel with lots more, because that how it works. A smaller percentage of companies make it into the A, B, C rounds. Seed/pre-A is like the laboratories of startups.
- US VC firms are scooping Canadian deals, often in the A & B stages, when the de-risking is done.
- BDC Venture Capital, Real Ventures and iNovia emerge as the top Canadian VC firms taking risk with Canadian startups, with a combined total 20 pre-A/Seed investments, but they are followed by a handful of other firms. This is good for Canada, as you typically won’t see US firms there.
- Canadian VCs and Angels are still not aggressive enough in taking risks with the entrepreneurs.
- Lots of agony over seed level/angel-ready startups. The Canadian Accelerators haven’t produced runaway startups, yet.
- There is hope, with some early investments in up and coming companies, such as Trendr, Mover, pplConnect, OMsignal, Pathful, Tulip Retail and Upverter. (Disclaimer: these are my personal choices, and I have no affiliation with any one them, except for mentoring Pathful, a Techstars Chicago graduate, and knowing the founders or early investors in Mover, OMsignal and Tulip Retail)
- 2 startups went crowdfunding for their seed rounds: Blacksumac received $300K from Indiegogo, and Fabule raised $150K from Kickstarter.
- Waterloo is definitely on the map. It wasn’t 2 years ago.
- Montreal still doesn’t have any big deals in 2013.
- It’s an open field for US VCs. As much as the borders are transparent for Canadian companies that are doing well in the US, the same applies to US VCs who are coming to Canada.
(Note: This analysis is published with permission from Mattermark. If I have missed any deals, or made errors in this analysis, please let me know. Disclaimer: I’m an advisor to Sprylogics, but haven’t voiced an opinion about them, and only provided factual public data.)