Quebec’s technology sector had a record first quarter of 2022 in terms of venture capital financing. But this level may not be seen again soon if fears linked to the contraction of the global economy and more difficult macroeconomic conditions are confirmed.
Quebec technology start-ups — start-up, as they are often referred to, saw their venture capital funding reach a record $1.46 billion in the first three months of the year. This represents a 630% increase in this type of financing compared to the previous quarter, and 440% compared to the same quarter a year earlier, reveal data published by the specialized directory Briefed.in.
In total, investors concluded 29 financing agreements from January to March 2022 in Quebec, compared to 23 in the first quarter of 2021. And it was mainly pacts signed at a more advanced stage of the growth of certain companies that enabled the Quebec ecosystem to reach such a level.
Montreal-based Paper, which has developed a particularly popular online education solution in the US school system, notably raised $343 million in an advanced round of Series D funding. materials for construction professionals RenoRun for its part obtained 181 million, two years after raising 22.5 million US dollars in its first round of financing. Molecular medicine company Ventus Therapeutics, of Saint-Laurent, meanwhile, closed a Series C financing of US$140 million last February.
“This reflects the very good health of venture capital in Quebec,” summarizes Guillaume Caudron, CEO of Réseau Capital, the main Quebec group of investors in this area. “The year 2021 was, in general, very good everywhere [en Amérique du Nord]. The first quarter indicates that this good momentum could continue, because the level of activity remains high. »
“It’s in the longer term that the outlook is starting to worry,” he notes.
Refinance and recapitalize
The big boss of Réseau Capital does not necessarily fear for the financing of new Quebec technology companies, even if the average value of the financing stages granted to start-up since last November in the United States has fallen by 25%, according to the specialized site Carla.
More hesitant, some American investors have begun to revise downwards the value they attribute to companies that have not yet proven themselves and which are struggling to generate income, since it is more difficult – and therefore, more risky — to establish the value of a start-up that has not yet commercialized its technology.
This reflects the very good health of venture capital in Quebec. The year 2021 was, in general, very good everywhere [en Amérique du Nord]. The first quarter indicates that this good momentum could continue, because the level of activity remains high.
However, this wind is not yet felt in Quebec, where it is above all the recapitalization of investment funds that could prove difficult, believes Réseau Capital. The global economy is in danger of bogging down due to runaway inflation and the effects of the Russian invasion of Ukraine, making it difficult to find new financing.
“There is a bit of short-term concern on the part of investors, but this has not yet translated into a reduction in their investment,” assures Mr. Caudron. ” The start-up who have good plans should not worry in the short term. This could change in the longer term if funds struggle to recapitalize. »
Venture capital funds are often financed by large institutions that see in this type of investment a higher return potential than in other sectors. This is especially true in a context where central bank interest rates have remained very low for several years. The accelerated rise in these rates due to inflation could, however, encourage these institutions to look elsewhere.
Réseau Capital therefore recalls the importance of the role that public investment bodies can play in mitigating the risks associated with the health of the economy elsewhere in the world.
Together with the Canadian Venture Capital and Private Equity Association, the group also asked earlier this year that Ottawa step up the pace of its Venture Capital Catalyst Initiative, set up in 2021 to help young businesses to emerge from the COVID-19 crisis. “This program was already important and, there, its implementation suddenly becomes more urgent”, says Guillaume Caudron.