Canadian Venture Capital Review First Nine Months 2018

Carlos Osoriov, Reuters

2

Table of Contents

Canada’s VC Market in First 3Q 2018 3

$ Invested and # Companies Financed 5

Top VC Deals 7

Top VC Investors 8

North American Rankings 10

Investor Type & Nationality 14

Canada by Sector & Stage 16

Canadian Dealmaking Abroad 18

VC Funds Raised 19

Public and M&A Exits 20

Venture Capital Returns 21

Explanatory Notes & Contacts 22

3

Canadian Venture Capital Market Activity in the First Nine Months of 2018

Canadian VC Market Trends

Canadian venture capital activity slowed somewhat in the third quarter of 2018, with $694 million invested in 105 rounds of financing. While the third quarter is traditionally

the weakest for Canadian dealmaking, the three month period from July to September saw the least capital invested in a single quarter since Q2 2015, and the fewest

deals completed since Q3 2012. However, this marked only the second time in the past two years when quarterly Canadian investment volumes fell below $1 billion. In

year-to-date terms, Canadian companies raised $3.2 billion in the first nine months, the strongest first three quarters since 2001. Deal volumes were also up 4% from the

same period last year.

Leading the Top Deals list for the first nine months of the year was the $280 million February round into Montréal-based Enerkem, a company that turns solid waste into

biofuels and renewable chemical products. The round, which was Canada’s largest cleantech deal ever, included a consortium of Canadian investors including Cycle

Capital, Fondaction, Investissement Québec, and Fonds de Solidarité FTQ. Other top deals for the first nine months included cloud-based medical care platform

PointClickCare’s $187 million investment by Dragoneer Investment Group, and AI-powered search technologies company Coveo Solutions, which secured a $100 million

investment by Evergreen Coast Capital in April.

Canadian investors slightly outpaced United States-based investors in the first nine months of 2018, accounting for 48% of invested capital, a share that has been

consistently declining since 2014 when Canadian investors accounted for 57% of invested capital. United States-based investors accounted for 43% of venture capital

invested in Canadian companies in the first three quarters, while other overseas investors mostly from Asia and Western Europe accounted for the remaining 10% of

capital invested.

Canada VC Fundraising Trends

Though the third quarter saw only $392 million in fund closings, it came off the heels of a wildly successful second quarter, which saw $1.6 billion in venture capital funds

raised. Leading the way was the $715 million close of Georgian Partners Growth Fund IV, which will be used to expand the firm’s presence across the entirety of North

America. Other substantial closings during the year include the $257 million closing of Brookfield Ventures, White Star Capital’s oversubscribed Fund II at $233 million,

and BDC’s Women In Technology Fund at $200 million.

4

Canadian Venture Capital Market Activity in the First Nine Months of 2018

Canadian VC Trends by Region

Ontario-based companies received $1.6 billion, or half of all disclosed investment dollars during the first nine months. The represented a 45% increase from the same

period last year and landed Ontario in fifth place in North American rankings, behind Washington and ahead of Texas. Québec-based companies raised $940 million

during the same period, a decrease of 9% from the prior year. This earned Québec an eleventh place ranking overall, behind New Jersey and ahead of Florida. British

Columbia also made the top twenty with $539 million, earning it the 18th spot, between Connecticut and Minnesota, although this was a 27% decrease from the

investment level in the region during the first nine months of 2017.

Toronto-based companies were the reason behind Ontario’s surge, as they raised $1.4 billion during the first nine months, a solid 60% increase from the same period in

2017. Three quarters of all Ontario financings took place in the greater Toronto area, and this earned the city a 9th place finish in the North American rankings, ahead of

Denver and behind the Washington metro area. Montréal ranked 14th with $724 million invested in 97 deals, ahead of the Research Triangle but behind Orange County.

Canadian VC Trends by Sector

Canadian information technology companies continued to be the main driving force behind VC investment, raising $2.2 billion in the first nine months, representing a 17%

increase year-over-year. Information technology companies also accounted for a 70% share of overall VC in the period, a share that has consistently risen from a 50%

share in 2009.

The life sciences sector on the other hand saw its seventh straight quarter of declines, with only $71 million invested, the worst quarter for the sector since Q4 2015.

Cleantech companies raised $491 million during the first nine months, up 149% year-over-year, largely led by the $280 million Enerkem investment.

Canadian Fund Performance

Although investment activity continues to reach new heights, the performance of Canadian venture capital and growth equity funds had not quite attained the same levels.

Published data provided by Cambridge Associates shows Canadian venture capital & growth equity funds with vintage years of 2000 or greater returned a since inception

IRR of only 4.6% as of the end of Q2 2018, lagging behind both US counterparts and public market equivalents. The improvement of Canadian VC fund returns from 2014

through 2016 has not maintained momentum, and returns since have held flat.

5

Historical Investment in Canadian Companies: Venture Capital Deal Values

$3.2

$6.4

$4.2

$2.7

$1.6

$2.1 $1.8 $1.9

$2.3

$1.4

$1.0 $1.2

$1.6 $1.6

$1.9

$2.4

$2.8

$3.7

$4.1

$0

$1

$2

$3

$4

$5

$6

$7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

VC

De

al V

alu

es

($

Bil

lio

ns

)

Q1 Q2 Q3 Q4

Canadian companies raised $3.2 billion in the first three quarters, the strongest first nine months since 2001, but investment in

Q3 2018 was the weakest individual quarter since Q4 2015.

6

Historical Investment in Canadian Companies: Venture Capital Deal Volumes

393

1,332

972

855

774

674 679

512 499 490

409 388 442 447

475

569 595 576

509

0

200

400

600

800

1,000

1,200

1,400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Q1 Q2 Q3 Q4

A total of 393 venture capital deals were completed in the first three quarters. While this was up 4% over the same period last

year, Q3 saw only 105 transactions, the weakest individual quarter in six years.

# o

f V

C D

ea

ls

7

Top Canadian Venture Capital Deals, First Nine Months 2018

Portfolio Company Investors

Rank Company Name Deal Value

($ Millions) Location Sector Investing Firms (Disclosed)

1 Enerkem $280.0 Montréal, QC Biofuels &

Renewables

Blackrock, Braemar Energy Ventures, Cycle Capital,

Fondaction, Fonds de Solidarité FTQ, Investissement

Québec, National Bank, Rho Capital Partners, Sinobioway,

Waste Management, Westly Group

2 PointClickCare Technologies $187.3 Mississauga, ON Healthcare Software Dragoneer Investment Group

3 Coveo Solutions $100.0 Québec, QC Enterprise Search Evergreen Coast Capital

4 Ritual Technologies $85.6 Toronto, ON Dining App Georgian Partners, Greylock Partners, Insight Venture

Partners, Mistral Venture Partners

5 Ecobee $78.8 Toronto, ON Smart Thermostats

Energy Impact Partners, Amazon Alexa Fund, Export

Development Canada, GXP Investments, Northleaf Capital

Partners, Ontario Capital Growth Corp, Relay

Ventures, Tech Capital , Thomvest

6 TouchBistro $67.8 Toronto, ON Mobile POS Solutions JPMorgan Chase, OMERS Ventures, BDC Venture Capital,

Relay Ventures, Napier Park Global Capital, Recruit

Holdings

7 Kira $65.9 Toronto, ON Machine Learning Insight Venture Partners

8 Wealthsimple $64.8 Toronto, ON Robo-Advisor Power Financial

9 Tilray Canada $63.5 Nanaimo, BC Cannabis Not Disclosed

10 Wattpad $63.0 Toronto, ON Multiplatform

Entertainment Tencent Holdings, BDC Venture Capital, Kickstart

Ventures, Peterson Group, The Raine Group

8

Top VC Investors in Canadian Companies: First Nine Months 2018

Canadian Private Independent Partnerships

Rank Firm Name # of Deals Estimated Investments

($ Millions) Location

1 Real Ventures 55 $83.8 Montréal, QC

2 iNovia Capital 21 $38.8 Montréal, QC

3 Cycle Capital - Ecofuel 18 $41.1 Montréal, QC

4 Anges Québec Capital 13 $9.1 Montréal, QC

5 Yaletown Venture Partners 9 $34.1 Vancouver, BC

6 Relay Ventures 8 $34.0 Toronto, ON

7 Vanedge Capital 8 $10.9 Vancouver, BC

8 iGan Partners 7 $11.2 Toronto, ON

9 Golden Ventures 6 $11.5 Toronto, ON

10 GeneChem 6 $6.8 Montréal, QC

11 Panache Ventures 6 $1.4 Montréal, QC

12 Espresso Capital Partners 4 $19.5 Toronto, ON

13 Genesys Capital 4 $18.9 Toronto, ON

14 Fonds Innovexport 4 $2.3 Québec, QC

9

Top VC Investors in Canadian Companies: First Nine Months 2018

Other Investors

Rank Firm Name # of Deals Estimated Investments

($ Millions) Location

Non-Canadian Investors

1 Whitestar Capital 4 $13.0 London, United Kingdom

2 Pallasite Ventures 4 $3.4 San Francisco, CA

3 Intel Capital Corp 3 $9.4 Santa Clara, CA

4 500 Startups 3 $4.8 San Francisco, CA

5 Accomplice 3 $3.3 Cambridge, MA

Canadian Government Investors

1 BDC Venture Capital 67 $113.3 Montréal, QC

2 MaRS Investment Accelerator Fund 11 $3.8 Toronto, ON

3 Export Development Canada 6 $17.7 Ottawa, ON

4 Sustainable Development Technology Canada 5 $23.8 Ottawa, ON

5 Innovacorp 3 $3.5 Halifax, NS

Other Canadian Investors

1 Desjardins VentureCapital 48 $40.0 Québec, QC

2 New Brunswick Innovation Foundation 13 $3.1 Fredericton, NB

3 Westcap 7 $6.2 Saskatoon, SK

10

North American VC Rankings, by Province & State

North American Rankings – First Nine Months 2018

Rank State / Province # of Deals Deal Values

($ Millions)

Year-Over-Year

Change in $

Invested

1 California 1,323 $46,147 ▲ 46.2%

2 New York 418 $10,889 ▼ -14.3%

3 Massachusetts 308 $10,311 ▲ 54.9%

4 Washington 101 $1,987 ▲ 23.2%

5 Ontario 133 $1,565 ▲ 45.0%

6 Texas 126 $1,399 ▲ 17.4%

7 Colorado 91 $1,343 ▲ 34.9%

8 Maryland 50 $1,123 ▲ 93.9%

9 Illinois 78 $1,059 ▼ -5.4%

10 New Jersey 32 $964 ▲ 135.8%

11 Québec 132 $940 ▼-8.5%

12 Florida 43 $893 ▲ 51.1%

13 Pennsylvania 123 $873 ▲ 45.8%

14 North Carolina 49 $686 ▼ -0.2%

15 Ohio 66 $639 ▲ 85.5%

11

North American VC Rankings, by Province & State

North American Rankings – First Nine Months 2018

Rank State / Province # of Deals Deal Values

($ Millions)

Year-Over-Year

Change in $

Invested

16 Oregon 25 $632 ▲ 264.8%

17 Connecticut 38 $565 ▲ 92.0%

18 British Columbia 74 $539 ▼ -26.7%

19 Minnesota 31 $522 ▲ 17.5%

20 Utah 37 $494 ▼ -36.1%

21 Virginia 53 $458 ▼ -5.3%

22 Michigan 32 $397 ▲ 23.9%

23 Georgia 26 $306 ▼ -68.6%

24 District of Columbia 13 $283 ▼ -35.4%

25 Arizona 21 $254 ▲ 28.9%

26 Tennessee 23 $243 ▲ 163.0%

27 Missouri 22 $207 ▼ -13.9%

28 Kansas 4 $144 ▲ 773.3%

29 Indiana 28 $131 ▲ 45.0%

30 New Mexico 12 $115 ▼ -2.4%

12

34%

34%

19%

13%

Ontario Quebec British Columbia Other Regions

50%

30%

17%

3%

Canadian VC Investment by Province & Region With seven of the top ten deals of the first nine months falling within its borders, Ontario saw not only a 45% increase in

disbursements year-over-year, but also vaulted into 5th place in the North American rankings, between Washington & Texas.

$3,207

Million

Invested

393 Deals

13

North American VC Rankings, by Metro Region

North American Rankings – First Nine Months 2018

Rank Metro Region # of Deals Deal Values

($ Millions)

Year-Over-Year

Change in $

Invested

1 San Francisco 586 $20,594 ▲ 68.3%

2 San Jose 445 $16,543 ▲ 19.8%

3 New York City 451 $11,941 ▼ -8.5%

4 Boston 298 $10,231 ▲ 59.6%

5 Los Angeles 173 $5,282 ▲ 73.7%

6 San Diego 62 $2,538 ▲ 107.5%

7 Seattle 97 $1,942 ▲ 26.0%

8 Washington Metroplex 116 $1,864 ▲ 24.1%

9 Toronto 100 $1,398 ▲ 59.7%

10 Denver 82 $1,248 ▲ 36.7%

11 Chicago 75 $1,057 ▼ -4.1%

12 Philadelphia 71 $900 ▲ 89.4%

13 Orange County 41 $824 ▲ 24.9%

14 Montréal 97 $724 ▼ -15.8%

15 Research Triangle 35 $663 ▲ 267.9% Toronto Avg.:

$14.0 Million

Montréal Avg.:

$7.5 Million

14

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015 2016 2017 2018

Canada United States Other

Venture Capital Investment by Origin of Capital Over two thirds of VC investment was attributable to private independent funds in the first nine months of 2018. Canadian funds

accounted for under half of all investment in Canadian companies for the second consecutive year.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015 2016 2017 2018

Private Independent Corporate Government

Institutional Retail Angels & Individuals

Other

15

Venture Capital to Canadian Companies from Non-Canadian Investors

UK: $32 M

China: $39 M

Hong Kong: $27 M

Singapore: $24 M

Australia: $24 M

California: $253 M New York: $251 M

Investment by United States-based firms accounted for 43% of all VC investment in Canadian companies. Other non-Canadian

investors, mostly from Europe and Asia, accounted for 9% of all activity, down from 15% in all 2017.

$3.2 B

16

Venture Capital by Sector

$0

$1

$2

$3

$4

$5

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Annualized

VC

De

al V

alu

es

($

Bil

lio

ns

)

Information Technology Life Sciences Other Sectors

Information Technology investment continued to grow in both gross and proportional terms, comprising less than 50% of all VC

investment in 2009 to over 70% in the first nine months of 2018.

17

0

100

200

300

400

500

600

700

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Annualized

Seed Early Stage Later Stage Expansion Other Advanced Stage

# o

f V

C D

ea

ls

Venture Capital by Stage With 212 early stage VC deals in Canada in the first nine months, early stage deals took a 40% share of all rounds of

financing, setting a new record.

18

Canadian Dealmaking Abroad, First Nine Months 2018

Portfolio Company Investors

Rank Company Name Deal Value

($ Millions) Location Sector Investing Firms (Disclosed)

1 Katerra $1,068 Menlo Park, CA Building Development

Optimization Canada Pension Plan Investment Board

2 Tradeshift $325 San Francisco, CA Supply Chain Platform Public Sector Pension Investment Board

3 Stem $200 Millbrae, CA Energy Storage

Intelligence Ontario Teachers’ Pension Plan

4 Convene Conference Centers $199 New York, NY Meeting Spaces Brookfield Property Partners

5 Collective Health $141 San Francisco, CA Workforce Health

Management Sun Life Financial

$0.0

$0.5

$1.0

$1.5

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Annualized

VC

Deal

Valu

es

($ B

illio

ns)

Canadian funds’ investments abroad in the first three quarters already doubled the amount invested in non-Canadian

companies in the entire 2016 calendar year.

19

Canadian Venture Capital Fundraising

$890

$45

$725

$563

$144

$475

$203

$453

$157

$1,576

$392

$0

$500

$1,000

$1,500

$2,000

Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018

VC

Fu

nd

s R

ais

ed

($

Millio

ns

)

With 23 individual Canadian VC funds holding a closing in the first three quarters, Canada stays on pace for a record

fundraising year.

20

Exits from Canadian Portfolio Companies, First Nine Months 2018

Portfolio Company Investors

Rank Company Name Deal Value

($ Millions) Location Sector Investing Firms (Disclosed)

1 AurKa Pharma $736.6 Montréal, QC Pharmaceutical

Research TVM Capital

2 Napec $395.7 Drummondville, QC Energy & Industrial Business Development Bank of Canada, Caisse de dépôt et

placement du Québec, Fondaction, Fonds de Solidarité

FTQ, Investissement Québec

3 AlarmForce Industries $163.2 Toronto, ON Security Solutions Clearspring Capital Partners, GrowthWorks Capital

4 Bonfire $140.3 Kitchener, ON Sourcing Enablement Battery Ventures, Crosslink Capital, Spider Capital Partners

5 Jempak Canada $117.1 Oakville, ON Chemicals Roynat Capital, Acasta Enterprises

0

20

40

60

80

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Annualized

With 28 deals recorded in the first 9 months of 2018, Canadian exits were led by Eli Lilly’s buy of AurKa Pharma.

# o

f E

xits

21

-4%

-2%

0%

2%

4%

6%

8%

10%

Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018

U.S. Venture Capital & Growth Equity Funds

mPME S&P 500 Index

Cambridge Associates: Venture Capital Fund Performance

-4%

-2%

0%

2%

4%

6%

8%

10%

Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018

Canadian Venture Capital & Growth Equity Funds

mPME: S&P/TSX 60 Index

Canadian private independent funds holding positive returns following long stretch of negative performance, but still lagging

behind US-based funds and public markets.

22

Explanatory Notes

1. Data collected and analyzed by Refinitiv for this statistical report were drawn from a variety of sources including Refinitiv M&A databases, regulatory filings, press releases, and proprietary reports from Canadian and non-resident

venture capital firms, private equity firms, law firms, and other service providers.

2. The Refinitiv Canadian venture capital report measures cash for equity and quasi-equity investments by the professional venture capital community in emerging companies in Canada. These transactions are referred to as VCReporter

Deals on Refinitiv databases.

3. The report includes the investment activity of professional venture capital firms, whether Canadian-based or not, including private independent funds, retail funds (LSVCCs and PVCCs), venture arms of corporations, institutions,

government funds, angel funds, and similar entities whose primary activity is financial investing. Where there are additional participants such as angels, corporations, governments, or company officers in a qualified and verified

financing round, the entire amount of the round is included.

4. The report excludes venture debt, buyouts, recapitalizations, secondary purchases, IPO exits, and other forms of private equity that do not involve cash such as services-in-kind. Investments in capital pool companies (CPCs & JCPs)

are not eligible. Companies whose primary activity is the extraction of natural resources (agriculture, forestry, mining, and oil & gas exploration) without a specific focus on technology are not eligible.

5. Rounds are tracked based on investment location. This predominantly includes Canadian-headquartered companies, but companies headquartered outside of Canada with Canadian research & development facilities are also eligible.

6. Rankings of top VC investors include only investment activity made in Canadian portfolio companies. Estimated investment activity is based on the actual syndicate breakdown, where available, and is split equally among disclosed

investors where actual breakdowns are not available. Private independent, government, and other funds are independently ranked in their respective categories. Rankings capture the nine-month period from January 1st, 2018 to

September 30th, 2018.

7. Fund performance data and public market equivalents are produced via the Cambridge Associates Benchmark Calculator, available through Refinitiv Eikon. Returns are for Canadian and US venture capital and growth equity funds

with vintage years of 2000 or greater, on a first cash flow basis, in Canadian dollars, from inception to the end of the indicated quarter, under published data mode Q2 2018. Pooled internal rates of return are net of fees, expenses and

carried interest. CA Modified Public Market Equivalent (mPME) replicates private investment performance under public market conditions. The public index’s shares are purchased and sold according to the private fund cash flow

schedule, with distributions calculated in the same proportion as the private fund, and mPME NAV is a function of mPME cash flows and public index returns.

8. All current and previous years data is as of Wednesday, October 24th, 2018. Data is continuously updated and is therefore subject to change. All figures are in Canadian dollars unless otherwise noted.

For further information on Refinitiv venture capital and private equity offerings, please visit us at:

– https://financial.thomsonreuters.com/en/products/tools-applications/trading-investment-tools/eikon-trading-software/private-equity-data.html

For further reports on private equity, venture capital, and other asset classes, please visit us at:

– http://dmi.thomsonreuters.com/DealsIntelligence/QuarterlyReviews

Contributors to this analysis are provided with additional packages of data. If you would like to participate in the submission process, receive quarterly press releases, or have questions about our venture capital criteria, please contact us at:

Gavin Penny Greg Beaman

E-mail: gavin.penny@refinitiv.com E-mail: greg.beaman@refinitiv.com

Tel: 416-687-7577 Tel: 416-687-7510