Montreal investors, startups entered ‘a new era of growth’ after huge 2016

Five to six years after Real Ventures and other Montreal investors began making their first bets in seed-stage companies, it appears that they’re finally allowing themselves a bit of self-congratulation.

Real Ventures’ John Stokes recently told PE Hub’s Kirk Falconer that his sector’s “record number of large rounds” was long in the making. Several Real Ventures portfolio investments were among last year’s top deals, including Blockstream, Breather and League.

John Stokes

“Five-plus years ago, investors and founders believed that software and internet-powered companies could disrupt incumbents across all industries,” Stokes told the website. “Many usurping startups are now showing they can win — something that is being recognized in large scale-up financings.”

By all accounts 2016 was an excellent year for venture capital in Canada, and objectively-speaking, it was record-breaking.

Canadian venture investing hit a 15-year high in 2016 thanks to several huge rounds, “many of them the outcome of years of heavy lifting by local investors,” wrote Falconer.

VC funds invested $3.7 billion in 459 companies in 2016, up 36 percent in value from 2015, according to data from Thomson Reuters.

The numbers ran counter to global trends, represent the largest VC deployment in Canada since 2001, as well as the largest year-over-year growth rate since 2000.

“The key variable was big financings. Fourteen rounds sized north of $50 million, backing such tech companies as BlueRock, Thalmic Labs, DalCor Pharma and Real Matters, took $1.4 billion, or 37 percent, of the total invested. That’s a record concentration of cash in Canada’s top deals,” wrote Falconer.

Moreover, 38 financings of $20 million-plus raised $2.1 billion, or 56 percent of the total, while 74 financings of $10 million-plus raised $2.6 billion, or 70 percent. These statistics are also unprecedented in Canadian venture capital.

For Stokes and company it’s been a long journey of making small bets. Central to early stage venture capital, many of those bets don’t pan out. A small minority do. Over time, those bets multiplied and Montreal’s venture community seemed the strengthen. Entrepreneurs seemed to mature and even the support community of mentors has grown larger.

Stokes told PE Hub it’s a “continuous process, with investors always ‘stoking the funnel’ to generate fresh opportunities.” He expects more mergers and acquisitions in 2017 as startups continue to mature.

“When companies are ready to scale up, Real Ventures taps its network of VC partners, many of them U.S. funds. Thomson Reuters data show foreign investors deployed more than $1.4 billion in Canada in 2016, the most since 2001,” added Falconer.

iNovia Capital’s Chris Arsenault told Falconer that 2016 was “a turning point but not an arrival” for his companies and the broader ecosystem. Like Stokes, he forsees more exits, just like his own portfolio company Luxury Retreats did via Airbnb (but it’s worth keeping in mind Luxury Retreats was founded more than 10 years ago).

“We’ve entered a new era of growth, never seen before in Canada, both in terms of revenue and financing sizes,” said Arsenault. “With it come new challenges of attracting experienced talent to cope with growth issues still unknown to most emerging entrepreneurs.”

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