Monday Market Minute | Sep 26, 2022

Canadian VC deal activity drops to two-year lows as growth capital retreats and runway anxiety rises

What Moved

CVCA data through Q3 2022 showed Canadian venture capital deal activity declining sharply from the 2021 highs. Late-stage rounds were most affected, with several high-profile Canadian tech companies accepting flat or down rounds. The IPO window on the TSX and TSX-V remained effectively closed, eliminating the primary exit path that had supported 2020-2021 valuations. Early-stage activity held up better, as seed and Series A rounds were less dependent on public market comparables, but even here, terms shifted decisively toward investor-friendly protections.

Why It Matters

The VC correction was a necessary repricing after two years of excess, but it created real distress for Canadian tech companies that had raised at peak valuations with high burn rates. For LP investors, the near-term impact was portfolio write-downs and extended hold periods. The longer-term opportunity, however, was compelling: funds deploying at reset valuations with disciplined entry prices would benefit from the same mathematical dynamic that made 2009-2010 vintage VC funds among the best performers in history.

Signal to Watch

Canadian tech layoff announcements — workforce reductions would confirm that companies were shifting from growth-at-all-costs to capital preservation mode.

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