Canada s Venture Capital Market in 2014

Canada s Venture Capital Market in 2014

Table of Contents Canada s VC Market in 2014 3 $ Invested and # Companies Financed 5 Top VC Deals & Investors 7 North American Rankings 10 Canada by Province & Sector 11 International VC Context 16 VC Funds Raised 18 Public and M&A Exits 19 Explanatory Notes & Contacts 20

Canada s Venture Capital Market in 2014 Canadian VC market trends Deal-making in Canada s venture capital (VC) market surged ahead in the final quarter of 2014, with the strongest Q4 since 2002. Canadian companies received $627 million in 138 rounds in Q4, up 16% in dollar terms from the third quarter, and over the 2014 year received over $2.36 billion, a 21% increase from the year prior, and nearly doubling the $1.2 billion invested just five years ago. Indeed, 2014 was the best year for Canadian venture capital financing since 2002. Canadian companies received 522 rounds of financing in 2014, up 12% from the 468 financings last year, and racking up the most deals since 2005. Growth in dollars invested in 2014 was driven by several large-sized VC deals. These included financings of Kitchener, Ontario s Desire2Learn, Vancouver s Hootsuite Media, St. John s-based Verafin, and Edmonton s Aurinia Pharmaceuticals. As a result, amounts invested per company tended to be greater in this period. In 2013, financing sizes averaged $4.2 million, compared to financing sizes that averaged $4.5 million this year, the greatest since 2007. Despite this growth, Canadian average deal sizes continued to lag far behind those in other countries. Of the world s top ten nations in attracting venture capital in 2014, Canada s average round size of $4.5 million ranked ninth place, far behind the USA at $12.5 million, Israel at $10.0 million, and the United Kingdom at $8.9 million. Canada bested only Finland, which had an average VC deal size of $1.1 million. Canadian venture capital funds investing in non-canadian companies saw a spike this year, with $409 million invested, an increase of 76% over 2013 levels. This level of global deal-making among Canadian VC investors has not been so robust since 2008. Trends in the US VC market VC market activity in the United States continued to expand in the final quarter of 2014, with an annual grand total of US$48 billion invested in 4,356 deals, or 61% more than the US$30 billion invested the year prior. With the five largest VC deals in US history all occurring in 2014, the United States saw VC investment activity that fell short only of the year 2000. Uber Technologies raised two US$1.2 billion rounds in the year, followed by Cloudera with US$900 million, Magic Leap with US$537 million, and Vice Media with US$500 million. Until this year, the largest VC financing in US history went to DreamWorks Animation, which received US$500 million in 1995. 3

Canada s Venture Capital Market in 2014 Canadian VC trends by region Investment activity in Canada s VC market continued to show wide diversification by region in 2014. Ontario continued to lead national trends, with $906 million invested in total, up 33% from 2013. Québec-based VC market activity remained flat in 2014. A total of $604 million was invested in 2014, up 1% from the $599 million invested in Québec companies in the year prior. Led by several large deals this year, British Columbia companies raised $506 million in 2014, up 13% from 2013 and the greatest annual total for the province since 2001. Canadian VC trends by sector As with last year, the information technology sector continued to drive Canada s VC market. A total of 226 companies received $1.45 billion in 2014, up 38% over last year. Software led most of this activity, with $772 million and a 33% share of VC investment across all sectors. Internetspecific companies came in second, raising $366 million during the year. Life Sciences companies also continued an upwards trajectory with $451 million invested in 49 companies in 2014, an increase of 78% over 2013 when $253 million was invested in the sector. Human biotechnology companies comprised the bulk of investment activity with $212 million invested, or 47% of the total. Cleantech investment activity showed a decline in 2014 as compared to the year prior. With only $153 million invested in 30 companies, the average deal size was half that of 2013, when $327 million was secured by 29 companies. Canada VC fundraising trends Fundraising by Canadian VC funds totaled $1,220 million in 2014, falling short 15% from 2013, and down by 30% as compared to 2012 when Canadian VC funds raised $1,748 million. Highlights included CTI Life Sciences which raised $134 million for its second fund, and Georgian Partners Growth Fund II which announced a $100 million fund closing. Private Independent funds led fundraising activity with $798 million, but retail funds raised another $400 million earmarked for VC investment. 4

Deal Value (CAD Millions) Canadian VC Deal Values Top $2.3 Billion Up 21% Over 2013, Best Year Since 2002 $2,500 $2,364 $2,000 $1,947 $1,500 $1,000 $1,191 $1,529 $1,525 $500 $0 2010 2011 2012 2013 2014 Q1 Q2 Q3 Q4 5

Number of Deals Venture Capital Deal Volumes Up 12% Most Canadian Deals Since 2005 600 500 400 392 445 444 468 522 300 200 100 0 2010 2011 2012 2013 2014 Q1 Q2 Q3 Q4 6

Top Canadian Venture Capital Deals 2014 Rank Company Name Province Deal Value (CAD $ Mil) Investor Participants (Disclosed) 1 Desire2Learn, Inc. ON $85.0 2 HootSuite Media, Inc. BC $66.7 New Enterprise Associates, OMERS Ventures, Columbus Nova Technology Partners, Graham Holdings, Four Rivers Group, Aurion Capital, Silicon Valley Bank New Enterprise Associates, OMERS Ventures, Silicon Valley Bank 3 Verafin, Inc. NL $60.0 Spectrum Equity 4 Aurinia Pharmaceuticals, Inc. BC $57.1 venbio, New Enterprise Associates, Redmile Group, RA Capital Management, Great Point Partners, Apple Tree Partners, Lumira Capital, ILJIN Life Science, Difference Capital. 5 Wattpad ON $50.2 6 BuildDirect Com Technologies Inc. BC $50.2 OMERS Ventures, August Capital, Raine Ventures, Northleaf Venture Catalyst Fund, Union Square Ventures, Khosla Ventures, Golden Venture Partners Mohr Davidow Ventures, OMERS Ventures and BMO Asset Management 7 Énergère QC $48.3 Fondaction, Fonds de Solidarite FTQ 8 Kik Interactive, Inc. ON $38.3 Valiant Capital Partners, Millennium Technology Value Partners, SV Angel, Foundation Capital, RRE Ventures, Spark Capital, Union Square Ventures 7

Most Active Canadian VC Firms Private Independent Firm Name 2014 Rank Estimated Amount Invested (CAD $ MIL) # of Deals Market Share (By # of Deals) Private Independent Funds Yaletown Venture Partners 1 $22.3 27 4.8% inovia Capital 2 $44.8 25 4.4% Relay Ventures 3* $25.7 24 4.2% Real Ventures 3* $23.8 24 4.2% Avrio Capital Management 5 $18.7 17 3.0% Version One Ventures 6 $19.3 13 2.3% Cycle Capital Management 7 $19.8 12 2.1% Georgian Partners 8 $31.0 10 1.8% Chrysalix Energy Venture Capital 9 $27.3 9 1.6% Lumira Capital 10* $19.6 8 1.4% Golden Venture Partners 10* $11.9 8 1.4% * tie 8

Most Active Canadian VC Firms Government & Other Fund Types Government Funds Firm Name 2014 Rank Estimated Amount Invested (CAD $MIL) # of Deals Market Share (By # of Deals) Business Development Bank of Canada 1 $124.1 111 19.6% Mars Discovery District 2 $15.7 29 5.1% Export Development Canada 3 $26.9 15 2.7% AVAC, Ltd. 4 $7.3 8 1.4% Innovacorp 5 $3.2 7 1.2% Pension, Retail, Corporate & Other Public Funds Fonds de solidarité FTQ 1 $77.5 88 15.5% Desjardins Venture Capital Inc 2 $11.7 20 3.5% New Brunswick Innovation Foundation 3 $4.1 19 3.4% Fondaction 4 $34.9 17 3.0% Difference Capital Financial 5 $44.5 14 2.5% 9

Canadian Provinces Slipping in North American Rankings State / Province 2014 Rank 2013 Rank 2014 VC Invested (CAD $ Millions) 2014 North American Market Share Market Share Change From 2013 California 1 1 $30,698.9 54.3% +6.7% Massachusetts 2 2 $5,181.8 9.2% -0.4% New York 3 3 $4,725.6 8.4% -0.5% Texas 4 4 $1,664.1 2.9% -1.2% Washington 5 5 $1,384.5 2.4% -0.5% Illinois 6 12 $1,193.5 2.1% +0.7% Florida 7 14 $960.5 1.7% +0.4% Ontario 8 6 $905.9 1.6% -0.5% Colorado 9 10 $881.6 1.6% +0.1% Utah 10 17 $880.5 1.6% +0.6% Pennsylvania 11 11 $857.6 1.5% +0.1% Quebec 12 9 $604.4 1.1% -0.7% Connecticut 13 22 $572.4 1.0% +0.3% Georgia 14 15 $558.6 1.0% -0.2% Virginia 15 8 $526.2 0.9% -1.1% British Columbia 16 13 $505.7 0.9% -0.5% 10

Deal Values (Full Year 2014, $ Millions) Domestic Canadian Sources Provide 59% of Capital, US Investors 38% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% $506 $213 $48 $906 $604 $85 British Columbia Alberta Manitoba - Saskatchewan Ontario Quebec Atlantic Canada Canadian Investors U.S. Investors Other Foreign Investors 11

Deal Values (Full Year 2014, $ Millions) Private Independent Funds Provide 58% of Capital Invested 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% $506 $213 $48 $906 $604 $85 British Columbia Alberta Manitoba - Saskatchewan Ontario Quebec Atlantic Canada Private Independent Government Retail Corporate Angels & Individuals Institutional Other 12

Deal Values (Full Year 2014, $ Millions) IT Sector Accounts for 61% of Investments Life Sciences Takes 19% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% $506 $213 $48 $906 $604 $85 British Columbia Alberta Manitoba - Saskatchewan Ontario Quebec Atlantic Canada Information Technology Life Sciences Cleantech Traditional 13

Deal Value (CAD Millions) IT Sector Up 38% Over 2013 - Software Takes 47% Share of IT Disbursements $1,600 $1,446 $1,400 $1,200 $1,048 $1,000 $800 $600 $400 $200 $623 $762 $869 $0 2010 2011 2012 2013 2014 Computer Software Internet Specific Semiconductor/Electr Computer Hardware Communications 14

Software Companies Take 33% of All VC Investment $55 $52 $51 $66 Software $83 $105 $124 $161 $197 $277 $420 $772 Industrial/Energy Biotechnology Media and Entertainment Medical Devices and Equipment Semiconductors Computers and Peripherals Consumer Products and Services Business Products and Services IT Services Telecommunications Other Sectors Deal Values (Full Year 2014, $2,364 Millions) 15

Average Amount Invested per Round (Full Year 2014, CAD $ Millions) Of Top Ten Venture Capital-Attracting Nations, Canada s Round Sizes Rank 9 th $25 $20 $15 $10 $5 $0 India China United States Israel United Kingdom Japan Germany France Canada Finland 16

Amount Invested (CAD $ Millions) # of Rounds Canadian VC Funds Investment in Foreign Companies Up 76% Best Year Since 2008 $450 $400 $350 $409 120 100 $300 $287 $273 80 $250 $200 $227 $233 60 $150 $100 $50 $0 2010 2011 2012 2013 2014 40 20 0 Total Deal Values # of Deals 17

By Fund Type Funds Raised ($ Millions) By Source Venture Capital Fundraising Down 15% From 2013, 30% Since 2012 2014 $1,220 2013 $1,433 2012 $1,748 $0 $500 $1,000 $1,500 $2,000 Individual Fund of Funds Government Corporations Foreign Pensions Other 2014 $1,220 Private Independent Retail 2013 $1,433 Government 2012 $1,748 Other 18

Exits from Canadian Companies Hold Steady Top Exits 2014 Company Name Type Province Proceeds ($ Millions) Investors (Disclosed) Skywave Mobile Communications M&A ON $130.0 Desjardins, GTI Capital, McLean Watson Capital Kinaxis, Inc. IPO ON $115.7 CDP Capital, HarbourVest, Intel Capital, Technocap, Fulcrum Partners, GE Finance Lumenpulse Inc. IPO QC $115.0 Fonds de Solidarite FTQ, XPND Capital Wolf Trax M&A MB $95.0 Avrio Capital, ENSIS Growth Fund Bioriginal Food & Science Corp. M&A SK $77.4 Victoria Park Capital, Crown Capital, Manvest Trupanion Inc. IPO BC $76.6 Aquinox Pharmaceuticals, Inc. IPO BC $58.4 Xenon Pharmaceuticals, Inc. IPO BC $47.2 BDC Capital, Highland Capital, Maveron Equity Partners BC Advantage Funds, Ventures West, Pfizer, Johnson & Johnson, Baker Brothers GrowthWorks, Ventures West, RBC Capital, Takeda Ventures, Roche, Pfizer, Panorama Capital, Fidelity Ventures, Invesco, Novo Ventures, JP Morgan Partners, Genome Canada Number of Exits (Disclosed) 50 25 0 45 48 32 43 42 2010 2011 2012 2013 2014 19

Explanatory Notes 1. Rankings of top VC investors include only investment activity made by Canadian firms, regardless of the nation of the portfolio company. 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. Market share is based upon the number of deals per firm as compared to the total number of VC deals globally involving one or more Canadian investors. Private independent, government, and other funds are independently ranked in their respective categories. 2. All current and previous years data is as of Friday, January 23rd, 2015. Data is continuously updated and is therefore subject to change. 3. All figures are in Canadian dollars unless otherwise noted. 4. For further information on Thomson Reuters venture capital and private equity offerings, please visit us at: http://thomsonreuters.com/financial/venture-capital-and-private-equity/ 5. 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 E-mail: gavin.penny@thomsonreuters.com Tel: 416-687-7577 20