Venture capital investing drops sharply in 2022

Canadian venture capital (VC) investing in 2022 so far has dropped significantly compared to last year, says CPE Analytics, the data analytics division of Toronto-based CPE Media and Data Co., in a report.

For the first nine months of 2022, VC investing was $5.86 billion (from 410 financings) — a decrease of 46% over the same period last year, when investing reached $10.9 billion, the CPE report said.

“With the benefit of hindsight, 2021 is increasingly looking like an ultra-frothy peak driven by the sheer economics of very low real interest rates as well as by such well-known financial sentiments as FOMO (fear of missing out),” said Richard Rémillard, president of Rémillard Consulting Group, in the report, which he helped produce.

“With central banks set to continue raising interest rates in the face of stubbornly persistent inflationary pressures, it is likely that this difficult period will extend into 2023, at the very least,” he said.

VC investing is dropping as 2022 progresses. In Q3, VC investing was $950 million (from 102 financings), a decrease of 21% from Q2, and a decrease of 74% from Q1.

Notably, the share of VC investing attributable to U.S. investors also dropped — to 45% in Q3 from 56% in Q1, which is concerning because Canadian companies rely heavily on U.S. investors, a release said.

For the first nine months of 2022, by investor type, family office investors invested $549 million in Canadian companies, ranking third behind private VC ($2.48 billion) and corporate VC ($1.42 billion), and ahead of government funds ($347 million).

Among sectors, information and communications technology accounted for 57% of total VC investment in the first nine months, and cleantech accounted for 15%.

With two $20-million+ biotech deals in Q3, life science/biotech companies slightly overtook financial companies in VC funding so far this year, with the two sectors securing $681 million and $680 million, respectively.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.