October 28, 2021
Toronto tech startups raised over $1.6 billion through 53 deals in Q3 of 2021, representing a 12% increase over the previous quarter and a 431% increase year over year. This is a further sign that Toronto is no longer a second thought for Venture Capital firms (“VCs”). Matt Cohen, the founder of Ripple Ventures, stated that he is now seeing VCs who used to only focus their attention on New York City and the Bay Area, turn their sights on the Toronto market. This is demonstrated by the fact that Toronto startups raised $4.1 billion in 2021, surpassing the total investment raised in 2020 by 281%.
It appears to be a founders market as there are large pools of capital waiting to be deployed by VCs. This has resulted in rounds being raised quickly and at high valuation multiples, with 20x forward revenue not being uncommon. The largest deals being closed in the Toronto region during Q3 were Clearco’s $268 million Series C round, Deep Genomics $226 Series C round, and FreshBooks $163 million Series E financing round. While these were the largest rounds, they only accounted for 40% of all investment in the region, demonstrating that there was strong funding spread across a variety of deals. Toronto’s AI sector was the most active in terms of funding during Q3, while Saas, FinTech and Healthtech also were very active sectors during the quarter.
Of the 53 deals that closed in Toronto during Q3, eight were pre-seed and 17 were seed-stage. Some notable early stage deals during the quarter were pre-seed funding rounds of $5.6 million each for Horizon Blockchain Games and Aviron Interactive. Series B deals have grown from 10% of deal volume three years ago to 20% of the volume today. This evidences the ability and desire of Canadian companies to continue to build their businesses and scale.
By: Erik Axell