H1 2015 Venture Capital Financing in Canada

Amir Bashir

Toronto startups continue to lead the country, attracting $157M (43%) out of $360M in H1 2015

Venture Capital Financing by City(CAD $ Millions Invested)

Venture Capital Financing by City(# of Companies Financed)

1

1

3

1

2

1

13

4

1

1

35

16

1

13

Burnaby

Calgary

Edmonton

Halifax

Mississauga

Moncton

Montreal

Ottawa

Quebec City

St. John

Toronto

Vancouver

Victoria

Waterloo/Kitchener

Toronto and Waterloo/Kitchener combined capture 60% ($220M) of all VC financing in H1 2015. This super-cluster of talent and capital has the ability to compete on the world-stage alongside other major innovation hubs

Source: Crunchbase, Media Press Releases See slides 9 & 10 to understand the methodology

$17.0

$1.2

$9.4

$0.2

$4.0

$3.0

$36.7

$10.3

$2.5

$3.3

$157.2

$48.0

$4.5

$62.6

Burnaby

Calgary

Edmonton

Halifax

Mississauga

Moncton

Montreal

Ottawa

Quebec City

St. John

Toronto

Vancouver

Victoria

Waterloo/Kitchener

Seed and Series A rounds saw strong activity, with the average round at $1.1M and $5.7M respectively

Despite rising valuations, Canadian financing opportunities still remain attractive. The average global seed financing deal as of H1 2015 is estimated at $1.4M, 27% higher than the average seed round in Canada

Venture Capital Financing by Stage (CAD $ Millions Invested) Average Financing Per Round

Seed

Series A

Series B

Series C

Series D

$1.1M

$5.7M

$18M

$15M

$30M

StageAverage

Financing

$45.0

$131.8

$90.0

$60.0

$30.0

Seed Series A Series B Series C Series D

Venture Capital Financing by Stage (# of Companies)42

23

5 4 1

Seed Series A Series B Series C Series D

Source: Crunchbase, Media Press Releases, Prequin See slides 9 & 10 to understand the methodology

Analytics is hot – Storing, organizing, and driving insights from massive datasets is big business

Trends driving this activity: 1) “Dumb” devices across all industries are coming online, 2) Online platforms can now connect buyers with sellers at scale, and 3) Corporations do not want to change, creating disruptive opportunities

Source: Crunchbase, Media Press Releases

$63.4

$57.7

$48.9

$39.7 $37.1

$21.7 $20.5 $19.2

$14.1

$7.7 $7.0 $6.9 $5.1 $3.8 $2.7 $2.1 $1.2 $0.5 $0.5 $0.0

Venture Capital Financing by Technology Trend (CAD $ Millions Invested)

See slides 9 & 10 to understand the methodology

Venture Capital Financing by Technology Trend (Seed Stage Only, CAD $ Millions Invested)$7.8

$5.7

$5.0 $4.4

$3.4 $3.2 $3.1

$2.7 $2.7 $2.1

$1.7 $1.2 $1.2

$0.5 $0.4 $0.1

However, buzz words like mobile, cloud, and analytics will fade as they become commoditized

Startups today have two options: To take an existing business model and copy it into a new vertical or geography (fast growing stuff), or innovate and develop a product (or service) unlike anything that exists (the hard stuff)

Source: Crunchbase, Media Press Releases

This stuff is growing fast. We have figured out business models that work and are leveraging them to build value

This stuff is becoming a commodity. All startups have cloud, analytics, mobility, etc. Defining your startup this way does not derive value

This stuff is hard. We are just figuring it out now. Only brightest survive here

See slides 9 & 10 to understand the methodology

66% of startups focus on a specific industry, with retail receiving the most attention in H1 2015

As the “Internet of Things” brings machines and equipment online, dinosaur industries like financial services, government, health care, energy, and utilities will create large opportunities for startups to disrupt

Source: Crunchbase, Media Press Releases

% of Startups that received financing in H1 2015 by focus

66%

34%

Focused on specific vertical

Not Vertical Specific

VC Financing by Vertical (Canadian startups focused on a specific vertical, CAD $ Millions Invested)

$71.6

$39.7 $34.0

$11.0 $8.9 $8.0 $6.0 $6.0 $5.7 $5.1 $3.7 $3.3 $2.5 $1.5 $1.2 $1.2 $0.9 $0.3 $0.2 $0.1 $0.0 $0.0 $0.0

See slides 9 & 10 to understand the methodology

8.1%

0.0%

3.0%

0.0%

4.2%

18.8%

16.1%

2.8% 2.7%0.6% 0.0%

33.9%

0.1% 0.0%

9.6%

2.1% 1.6%0.7%

7.0%5.2%

7.1% 6.7% 6.8%

10.5%

8.1%

12.7%

5.5%3.2% 2.5%

20.3%

Hospitality &Food

Agriculture Arts,Entertainment,

Recreation

Construction Education FinancialServices

Government Health Care Manufacturing Metals, Mining,Oil & Gas

Real Estate Retail Technology Utilities Others

VC Financing by Sector as a % of total GDP by Sector as a % of total

Capital is over indexing in retail, food and hospitality while forgetting the “boring” industries

Startups have begun the attacking slow moving industries like Financial Services and Government Services, but opportunities are still abundant. These “boring” industries make up 90% of Canada’s GDP and cannot be forgotten

Source: Crunchbase, Media Press Releases, Statistics Canada

Venture Capital Financing by Vertical Compared to GDP by Vertical (Canadian startups focused on a specific vertical, % of total CAD $)

See slides 9 & 10 to understand the methodology

Despite consumer startups receiving lots of media and fanfare, VC dollars are largely invested in B2B

7 out of the 10 largest financing rounds in H1 2015 were B2B including companies like MioVision, SecureKey Technologies, Vidyard, and Bit Stew Systems. Many of these players are unknown to average Canadian

Source: Crunchbase, Media Press Releases

72%

28%

B2B B2C

% of B2B vs B2C Startups that received financing in H1 2015

% of Venture Capital dollars in H1 2015 that was invested in startups with a focus on:

Consumers

29% 15% 30% 26%

Small Businesses

Large Businesses

Small & Large Businesses

71%

See slides 9 & 10 to understand the methodology

Methodology & FAQ (1/2)Q: How was this information collected?A: All financing rounds were pulled from public sources including Crunchbase, AngelList, company press releases, and media websites like Betakit and TechVibes. This creates a bottom-up approach to the market where I have attempted to track down every publicly available financing deal I could find. As a result, this is not a 100% complete picture of the financing landscape - many financing rounds are completed privately and can not be included. This includes the majority of angel rounds as they are unlikely to be reported

Q: Does this capture all categories of venture capital?A: This only includes technology (ICT) specific venture capital. This does not include venture capital related to biopharmaceuticals, clean energy, agriculture, or other sectors. These sectors often attract larger financing rounds due to the capital-intensive nature of their business. Also the players in these sectors tend to be different from the investors seen in the technology sector

Q: What is included in H1 2015?A: All financing rounds from January 1st 2015 to June 30th 2015

Amir Bashir, @amirbashir42, www.amirbashir.ca

Methodology & FAQ (2/2)Q: How did you assign technology categories to each company?A: I assigned based on which category each company derived its value from; of course not all companies fit into just one category. For example company X can be a retail big data company (analytics) that runs on a cloud platform (SaaS) and collects data on customer interactions through the use of in-store beacons (IOT). For the sake of simplicity, I chose the category where the most value is being created for the company. In this example, the analytics segment is what will drive the value proposition as the engine will turn data points into actionable insights that will help retailers grow

Q: What do you mean by automation?A: Taking a complex process that often involves manual input from employees and automating the process to remove friction. One example would be Checkfront, a company based out of Victoria, BC that is automating booking and payments for tour companies (sightseeing), accommodations and equipment rentals. These service based companies can use Checkfront to quickly set up an availability calendar on their website, allowing customers to choose when they want their service, and giving them the ability to pay for their service online. This reduces a lot of friction for the customer making it a more enjoyable experience right from the discovery stage

Amir Bashir, @amirbashir42, www.amirbashir.ca