Venture Pulse Q2 2023

Canada’s venture capital funding ecosystem is experiencing a resurgence, with the second quarter of 2023 seeing a 44 per cent growth in funding compared to the previous quarter. According to the recent KPMG Private Enterprise’s Venture Pulse report, venture capital funding in Canada reached US$2.079 billion during the quarter, surpassing pre-pandemic levels after nearly a year of quarter-over-quarter declines.

There were four mega-deals, reflecting the continued interest and confidence of investors in the Canadian market. However, despite this surge in funding, dealmaking has been on a downward trend since the latter half of 2022, and this cautious approach is expected to persist through the year. Investors are likely more focused on higher-quality companies or those nearer to a shareholder liquidity event, seeking to mitigate risks and ensure sustainable returns.

Artificial intelligence (AI) is also driving deal activity. According to the report, AI investment experienced a boom, with 46 deals, in the second quarter, nearly doubling the previous quarter. This heightened interest is in-part attributable to major announcements in the industry recently and heightened interest in AI-centric consumer and enterprise use cases, further solidifying Canada's position as a global leader in AI research and innovation. Other sectors, such as cleantech and agtech, also garnered substantial funding, with 27 deals and 17 deals, respectively, this quarter.

Corporate venture capital (CVC) investment has also played a noteworthy role. There were 46 CVC deals valued at US$1 billion, compared to 51 deals valued at US$701.8 million in the first quarter.

The outlook for Canada’s venture capital landscape remains promising, driven by the sustained interest in the AI sector and the recent influx of CVC investments. So long as the economy continues to recover from the impacts of the pandemic and shows resilience in the face of high interest rates, investors will remain optimistic about the opportunities that lie ahead. The question is if this optimism will persist for the remainder of the year.

For more information on Canadian and global VC trends, see KPMG Private Enterprise’s quarterly Venture Pulse report.