Monday Market Minute | Apr 4, 2022

Canadian venture capital deal activity cools as late-stage valuations face a post-ZIRP reckoning

What Moved

CVCA data for Q1 2022 showed a marked deceleration in Canadian venture capital deal activity, particularly at the late stage. The IPO window had effectively closed — the TSX Venture Exchange saw a dramatic drop in new listings — and growth-stage companies that had raised at peak 2021 multiples were being forced to extend runways rather than pursue markups. Several Canadian unicorns quietly shelved IPO plans as public market comparables corrected.

Why It Matters

The end of zero-interest-rate policy hit VC hardest at the growth and late stages, where valuations had been most disconnected from fundamentals. For LP investors in Canadian VC funds, the correction meant that 2021 vintage marks were likely to be written down. However, early-stage funds deploying into 2022's reset valuations could benefit from more rational pricing. The key question was whether Canadian VC managers had the discipline to mark portfolios to market.

Signal to Watch

Down-round financing activity among Canadian tech companies — a surge in flat or down rounds would confirm the valuation reset was real, not just a pause.

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