FinTech investment in Canada rebounded from a slow first half of the year to hit a record quarter in Q3
Investment in Canada-based FinTech companies more than tripled YoY reaching $251m across 16 deals in Q3 2017
Since dropping to $50.4m in Q1 2017, FinTech funding in Canada has increased for the second quarter running. Q3 2017 saw $250.7m invested in Canadian FinTech companies making it the strongest quarter to date.
The growth in investment is mainly driven by a shift towards larger deals. The number of deals valued above $30m increased from 1 to 5 QoQ, while the total funding raised from deals in this category increased fivefold. The largest deal went to Toronto-based FreshBooks, a provider of cloud-based accounting software. The company raised $45.1m in a Series B funding round led by Georgian Partners with co-investment from Oak Investment Partners and Accomplice.
Despite the upwards trend in total amount invested, deal activity remained fairly steady throughout 2017 with an increase of just one deal each quarter.
FinTech funding in Canada is on pace for a steady year after progressively increasing since 2014
Investment in Canada-based FinTech companies increased at a CAGR of 25.4% between 2014 and 2016. However, funding for the first three quarters of the year reached only 71.3% of the total for 2016, suggesting that investment levels in 2017 will remain in range of last year’s.
In contrast, funding from deals valued above $30m has already surpassed last year’s total, with $222.5m raised so far across 6 deals. This resulted in the average deal size increasing by 22.8% YoY from $9.2m to $11.3m.
Deal activity is set to decrease in 2017 as the number of deals between Q1 and Q3 this year equates to just 61.6% of the total for 2016.
The size of FinTech deals in Canada has increased consistently since 2014
The share of deals valued below $1m fell by 12.5% between 2014 and 2016. This trend continued in the first three quarters of 2017 as the share of sub-$1m deals decreased a further 8.9% compared to the previous year.
Between 2014 and 2016, the decline in small deals was mainly offset by deals valued between $5-25m which increased in share by 22.1% over this period.
However, the further decline in small deals in 2017 was not accounted for by deals valued between $5-25m as this category decreased in share by 15.8%. Instead, mid-sized deals valued between $2.5-5m tripled compared to 2016. This included a $5m deal to RentMoola, a Vancouver-based company that enables users to pay rent by credit card. Additionally, deals valued over $25m increased their deal share by 10.2%.
The top 10 Canadian FinTech deals in the first three quarters of 2017 raised over $300m
The top 10 investments in Canadian FinTech companies raised $303.6m during the first three quarters of the year, equating to 74.9% of the total funding for this period.
Three of the top 10 deals went to companies focusing on Infrastructure & Enterprise Software including the previously mentioned FreshBooks funding rounds, the largest deal of 2017 thus far. Furthermore, Wave received $23.8m in a Series D round led by NAB Ventures, while Sensibill raised $17.3m in a Series A round led by Information Venture Partners and The OpenText Enterprise Apps Fund.
Eight of the top 10 deals went to companies based in Toronto. Of the remaining two deals, one went to a company headquartered in Vancouver and the other in Ottawa.
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