Réseau Capital, in collaboration with the Canadian Venture Capital & Private Equity Association (CVCA), has released its quarterly Québec market overview for Q3 2023. The overview is based on data voluntarily submitted by a selection of venture capital and private equity firms within the Province of Québec and provides valuable and targeted insight specific to these markets. You can access the overview here. Our key takeaways were as follows:

Venture Capital (VC) Overview

  • In terms of VC deal activity, the first three quarters of 2023 saw a total of 101 deals with a total investment value of $1.19B. This represents a decline both as compared to the same period in 2022, as well as compared to the previous two quarters of 2023. In fact, Q3 2023 represents one of the lowest quarters in terms of VC-invested amounts that the Québec market has seen in the past decade.
  • In the VC world, seed-stage deals are one of the few areas that have seen a slight uptick in activity in terms of number of deals, though the invested amounts per transaction have marginally decreased. Overall, seed-stage rounds constitute 50% of VC deals, tracking significantly above its historical average of 39% since 2013. Apart from seed rounds, Q3 2023 has been marked by a notable decrease in early-stage funding rounds, with only three deals totaling $43M. This represents a 70% decrease in deals and an 86% dip in invested amounts compared to Q2 2023. Despite a loss of momentum in Q3 2023, these early-stage rounds have nevertheless maintained their significance in looking at the YTD figures, representing 25% of all deals and 51% of the total capital deployed in the province. A similar trend is observable with later-stage investments. Q3 saw only $118M invested across four deals, out of the 14 deals totaling $372M in investment value that have been recorded for 2023 YTD. No growth-stage deals were recorded in Québec during Q3 2023.
  • The average VC investment size in Québec stands at $11.87M. This value is higher than the national average of $10.91M and nearly on par with the Ontario average of $11.92M, though slightly lower than the British Columbia average of $12.33M. Québec accounts for 20% of the national VC deals and 22% of VC amounts invested since the beginning of the year, supported most notably by funding rounds in E2Ip Technologies ($120M), DalCor Pharmaceuticals Inc. ($108M), PEbel ($67M) and GHCSat ($60M).
  • In terms of sector activity, the Information and Communication Technology (ICT) dominated in 2023, contributing 46 deals and $624M in investment value. The Life Sciences sector followed with $319M invested across 32 deals. While Cleantech experienced a slight slow down in Q3 2023, it nevertheless maintained a positive trajectory, with 13 deals totaling $212M.

Private Equity (PE) Overview

  • In terms of PE deal activity, the first three quarters of 2023 saw a total of 274 deals with a total investment value of $3.10B. This represents a 34% decrease in deal count and a 40% reduction in investment value compared to the same period in 2022. In a quarter-over-quarter assessment of 2023 YTD, PE investment amount and deal size increased quite substantially as compared to Q2, through the number of deals decreased by 12%.
  • Despite these figures, Québec maintains its leadership position within Canada, making up 57% of all PE deals, surpassing Ontario (25%) and British Columbia (10%). However, with an average investment amount size of $11.32M per deal in 2023, Québec trails behind some other provinces in terms of the value of those deals including Ontario, Alberta, and Manitoba. In Québec, 62% of deals in 2023 have been at $5M or less. Small-scale investments therefore continue to characterize PE activities within the province. The most significant disclosed PE deals in Québec over the last three quarters are Nemaska Lithium ($250M), Lion Electric ($188M), EquiSoft Inc. ($125M), and Workleap ($125M).
  • In terms of sector activity, the Industrial and Manufacturing sector continues to attract the most deals, with 69 deals totaling $394M. However, the Information and Communication Technology (ICT) sector leads in terms of amount invested, with 42 deals totaling $514M. The Business Services & Products sector ranks second in amount invested and fifth in deal count, with 28 deals totaling $499M. The Consumer Goods and Services sector (37 deals, $360M) and CleanTech (17 deals, $271M), have also generated continued activity throughout the course of the last year.
  • There have been four PE exits since the beginning of the year, including three by way of acquisitions and one by way of a secondary acquisition.

Conclusion

Unsurprisingly, global market conditions and the national economic climate continues to have a major impact here in Québec. Nevertheless, certain key sectors continue to thrive with the support of Québec-based VC and PE firms, particularly in the form of early seed round investments for VC-backed companies and in smaller sized investments for more traditional PE-backed industries.

Look out for our full 2023 report in the coming weeks as we unpack how 2023 YTD reconciles with 2024 emerging trends.

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