The Canadian Venture Capital & Private Equity Association (CVCA) released its Canadian market overviews for Year End 2024, which are based on data voluntarily submitted by a selection of venture capital and private equity firms. Overviews can be accessed by visiting 2024 Canadian Venture Capital Market Overview and 2024 Canadian Private Equity Market Overview. Our key takeaways are as follows:
Venture Capital (VC) Canadian Market Overview
- 2024 saw a relative upwards shift in VC deal sizes, with $7.9B in the aggregate having been invested across 592 deals and $1.4B invested across 124 deals in the fourth quarter alone.
- Though Ontario, British Columbia and Québec maintained their positions as the top provinces for VC investments, collectively accounting for 88% of all dollars invested and 76% of total deals in 2024, British Columbia reshaped historic provincial investment trends by trailing Ontario with the narrowest gap ever encountered between the two provinces. With over $2.4B having been invested in the province alone across 88 deals, the average deal size in the province skyrocketed to record highs of $27.9M. This boost is partly attributed to British Columbia-based legal tech company Clio’s $1.24B VC funding round, the largest ever closed in Canadian history. With the Prairies remaining steady, Manitoba saw a 96% drop in investment, and most of Atlantic Canada had a decline in total investment by nearly half of 2023 levels.
- With respect to sector activity, 2024 saw the information, communications & technology (ICT) sector continuing to lead VC Investment activity, with $4.5B invested across 285 deals. This a 12.6% year-over-year increase in dollars invested despite a drop in deal count. The Life Sciences sector continued its multi-year growth trend with a 15.4% increase in dollars invested since 2023, mostly driven by investment in therapeutic drugs and biologics companies. Cleantech attracted $1.1B across 58 deals, leading to the highest average deal size on record of $18.4M, with the alternative energy equipment subsector leading nearly two thirds of overall investment activity. Agribusiness, however, saw a 41.6% decline in investment, recording $157M across 41 deals.
- “Mega-deals”, defined in the study as deals with a value of over $50M, continued to play a significant role in VC investment activity, with 24 accounting for 62% of all VC dollars invested in 2024. Though there were ten fewer mega-deals overall since 2023, the average size had doubled over the year to $203.8M.
- The exit environment remained lower from 2023, with $5.2B realized across 40 exits, predominantly driven by M&A transactions. The absence of venture-backed initial public offerings (IPO) for the third consecutive year highlights ongoing uncertainties in public markets and a trend towards companies staying private longer.
- 2024 saw a continued decline in the number of early stage (primarily A & B rounds) investment activity, despite it remaining the largest contributor to total dollars invested in 2024 with 37%. While deal count and total dollars invested dropped 31.4% and 18%, respectively, below the five-year average, the average deal size increased. This signals a focus from VC investors on quality over quantity. Similarly, seed investments activity, which made up for 34% of all transactions ($510M across 201 deals), declined by 14% in deal count and 47% in value compared to 2023. Later-stage companies did secure 27% of total investment value ($2.1B across 52 deals), but also declined in activity despite maintaining higher levels than pre-2020.
- Venture debt reached an all-time high with $881M invested across 35 deals, marking a staggering 99% surge in dollars deployed despite a drop in deal count. Notably, the latter half of the year accounted for 75% of all venture debt financing, indicating a move towards non-dilutive funding options as startups face lower valuation metrics in recent years.
- Despite a 2% year-over-year drop, U.S. investors continued to lead foreign participation, involved in 32% of all VC deals. Interest from Asian markets has also grown slightly, while European investor participation saw a slight decline to 6%.
Private Equity (PE) Canadian Market Overview
- 2024 marked a welcomed resurgence in the Canadian private equity market, with total investments reaching $27.5B across 658 deals, which surpassed all annual investment levels over the last 6 years. Large-scale transactions played a dominant role, with eight “Mega-deals”, defined in the study as a deal with a value over $500M, accounting for 67% of total PE dollars invested.
- Deals valued at under $25M continue to dominate current Canadian PE activity, highlighting PE’s essential role in supporting SMEs. Mirroring 2023, 84% of all deals with disclosed deal values were below $25M. Thirty-one deals exceeded $100M with seven transactions surpassing the $1B mark. With average deal sizes increasing by 169% year-over-year to $41.8M and 70% above the five-year average, this shift signals renewed investor confidence and a bigger appetite for larger and more capital-intensive transactions.
- Overall PE activity shifted toward buyout and add-on investments, with minority investments accounting for just over 10% of total PE capital invested, with 164 deals totaling $2.8B, marking a 14% decline in deal count and 47% in deal values in minority investments.
- Québec continues to be the most active province for PE in 2024, representing 59% of total deal flow and 60% of total dollars invested (being $19.1B invested across 385 deals), though a significant portion of Québec’s dominance of the PE landscape is driven by the privatization of Nuvei[1] which had a transaction value of $8.9B. Though Ontario attracted $5.4B across 145 deals accounting for only 19% of total capital invested (as opposed to 40% in 2023), investments remained 47.8% higher than the five-year averages, suggesting a sustainable growth trend despite a lower overall market share across the country. New Brunswick had the third highest capital invested with $1.6B across four deals, mostly driven by a single mega-deal, while British Columbia ranked third with regards to deal volume with 67 transactions totalling $470M.
- Interest in Canadian tech companies remained robust in 2024. The ICT sector led with nearly $15.3B across 117 deals, representing 55.5% of all dollars invested. The consumer & retail sector followed with $4.1B across 59 deals, driven by high-value transactions in key retail and consumer-facing businesses. Investment activity in this sector was particularly high in the latter half of the year with Q3 and Q4, contributing to 97% of the dollars invested. Other notable sectors include industrial & manufacturing ($1.1B invested across 157 deals, representing a 31% reduction in capital invested compared to 2023) and life sciences ($978M invested across 62 deals, representing a 73% increase over the five-year average), further diversifying the Canadian investment landscape.
- There were 86 PE exits totaling $6.7B in 2024, nearly 10 times the exit value from the previous year. M&A transactions remained once again the dominant exit strategy, representing 74% of exits. Conversely, secondary buyouts accounted for 70.6% of the actual exit value, driven by an increase in the average secondary buyout exit at $213.9M relative to the overall average exit value at $77.5M for the year. This dominance of secondary buyouts suggests a strong market preference for established PE-backed businesses, as Canadian companies are being held private for longer. This is in line with the lack of IPO exits in 2024, marking the third consecutive year of low IPO activity.
- Q4 of 2024 was the most active, accounting for 56% of total capital invested ($15.4B) and 26% of all deals transacted (174 deals), demonstrating a significant acceleration in deal flow. This is the highest dollar amount ever recorded in a single quarter in Canadian PE history, largely driven by the privatizations of Nuvei1 and Sleep Country.
Conclusion
In a time with notable shifts in Canada’s economic landscape and the federal election in H1 2025, the two studies published by the CVCA provide valuable data on the trends observed in the VC and PE landscapes, as well as provide some important insights on where markets may be heading.
The Canadian VC market demonstrated resilience and adaptability in 2024, with significant investments in key sectors like ICT, life sciences, and cleantech. Despite downward shifts in early-stage funding and challenging exit environments, VC investment activity has shown a trend towards larger deals and companies staying private for longer. That being said, the study highlights that the reduction in early-stage and seed investments may present concerns about the long-term pipeline of high growth startups in Canada.
The Canadian PE market experienced a remarkable recovery in 2024, driven by large-scale transactions and significant investments in the ICT, consumer & retail and automotive & transportation sectors. Despite strong PE exit activity, the lack of PE-backed IPOs is in line with the trend of Canadian companies remaining private for longer. Following such a strong year for PE, it will be intriguing to watch how PE markets and trends will evolve over the coming months.
Stay tuned for more insights and key takeaways as we delve into 2025!
