Christinne Muschi, Reuters Canadian Venture Capital Review First Half 2018 Table of Contents Canada’s VC Market in H1 2018 3 $ Invested and # Companies Financed 5 Top VC Deals 7 Top VC Investors 8 North American Rankings 10 Investor Type & Nationality 14 Canada by Sector & Stage 16 Canadian Dealmaking Abroad 19 VC Funds Raised 20 Public and M&A Exits 21 Venture Capital Returns 22 Explanatory Notes & Contacts 23 Canadian Venture Capital Market Activity in H1 2018 Canadian VC Market Trends Canada’s venture capital market remained robust during the second quarter of 2018 with $1.12 billion invested into 151 rounds of financing. In dollar terms, this was 18% lower than last quarter, however it was still the second strongest quarter since Q2 of 2001. It also marked the sixth time in the past seven quarters that Canadian companies received over $1 billion in investment. Deal volumes in the first half of the year were up 9% over last year and the 151 rounds of financing in the quarter represented the highest level in over two years. Heading the Top Deals list for the first six months of the year was the $280 million February round into Montréal-based Enerkem, a company that turns solid waste into biofuels and renewable chemical products. The round, which was Canada’s largest cleantech deal ever, included a whole host of Canadian investors such as Cycle Capital, Fondaction, Investissement Québec, and Fonds de Solidarité FTQ. Other top deals for the first half included cloud-based medical care platform PointClickCare’s $187 million investment by Dragoneer Investment Group, and AI-powered search technologies company Coveo Solutions, which secured a $100 million investment by Evergreen Coast Capital in April. Canadian investors and US investors were neck and neck in terms of dollars invested into Canadian companies during the first half, each investing $887 million, or 46% of disclosed values during the period. The share of Canada-based investors has been steadily declining each year since 2014, when they were responsible for 57% of all financing amounts. The remainder was accounted for by overseas investors, mostly from China, Hong Kong, the United Kingdom, and Singapore. Canada VC Fundraising Trends The second quarter was far and away the best quarter for Canadian VC fundraising in recent history. Eleven Canadian funds raised a total of $1.6 billion over the course of the three month period, representing a 227% increase over Q2 2017. Leading the way was the $580 million close of Georgian Partners Growth Fund IV, which will be used to expand the firm’s presence across the entirety of North America. Other substantial closings during the quarter include the $257 million closing of Brookfield Ventures, Brookfield Asset Management’s first venture fund which will primarily focus on real-estate technology investments, as well as the $233 million closing of White Star Capital’s oversubscribed Fund II. Canadian Venture Capital Market Activity in H1 2018 Canadian VC Trends by Region Ontario-based companies received $1.2 billion, or half of all disclosed investment dollars during the first half. The represented a 93% increase from the same period last year and landed Ontario in fifth place in North American rankings, behind Washington and ahead of Texas. Québec- based companies raised $809 million during the same period, an increase of 10% over the prior year. This earned Quebec an eighth place ranking overall, behind Maryland and ahead of Florida. British Columbia also made the top twenty with $354 million, earning it the 17th spot, between Ohio and Utah, although this was a 43% decrease from the investment level in the region during H1 2017. Toronto-based companies were the reason behind Ontario’s surge, as they raised $1 billion during the half, which is more than double the amount over the same period last year and 84% of the financings in the province this year. This earned the city a 9th place finish in the North American rankings, ahead of Orange County and behind Seattle. Montreal ranked 12th with $629 million invested in 77 deals, ahead of Philadelphia but behind Denver. Canadian VC Trends by Sector Canadian IT companies continued to be the main driving force behind VC investment, raising $879 million in the second quarter, representing a 79% share of overall VC in the period and a 43% increase year-over-year. The life sciences sector on the other hand saw its sixth straight quarter of declines with only $95 million invested, a 67% drop year-over-year. Cleantech companies raised $462 million during the first half, up 271% year-over-year, largely led by the $280 million Enerkem investment and ecobee’s two rounds worth a combined $118 million. Canadian Fund Performance Although investment activity continues to reach new heights, the performance of Canadian venture capital and growth equity funds had not quite attained the same levels. Published data provided by Cambridge Associates shows Canadian venture capital & growth equity funds with vintage years of 2000 or greater returned a since inception IRR of only 2.4% as of the end of Q1 2018, lagging far behind both US counterparts and public market equivalents. The improvement of Canadian VC fund returns from 2012 through 2015 has not maintained momentum, and returns since have continued to decline. Historical Venture Capital Investment in Canadian Companies: Deal Values Canadian companies raised $2.5 billion in H1 2018, the strongest first half since 2000 and a 17.9% increase over last year. $6.0 $6.4 $5.0 $4.0 $4.2 $4.1 $3.7 $3.0 $2.7 $2.8 $2.5 $2.0 $2.3 $2.4 $2.1 $1.9 $1.8 $1.9 VC Deal Values ($ Billions) ($ Values Deal VC $1.6 $1.6 $1.4 $1.6 $1.0 $1.2 $1.0 $0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 Historical Venture Capital Investment in Canadian Companies: Deal Volumes Deal volumes reversed their decline in Q2 2018 with a total of 151 rounds, a 29.1% increase over the second quarter of 2017 and resulting in a 9.3% increase over the entire first half. 1,400 1,332 1,200 1,000 973 800 856 774 600 674 678 # of Deals of # 571 596 578 513 510 499 490 476 400 442 447 409 388 200 282 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 Top Canadian Venture Capital Deals, First Half 2018 Portfolio Company Investors Deal Value Rank Company Name Location Sector Investing Firms (Disclosed) ($ millions) Blackrock, Braemar Energy Ventures, Cycle Capital, Fondaction, Fonds de Solidarité FTQ, Investissement Québec, National Bank, 1 Enerkem $280.0 Montreal, QC Biofuels & Renewables Rho Capital Partners, Sinobioway, Waste Management, Westly Group 2 PointClickCare Technologies $187.3 Mississauga, ON Healthcare Software Dragoneer Investment Group 3 Coveo Solutions $100.0 Québec, QC Enterprise Search Evergreen Coast Capital Georgian Partners, Greylock Partners, Insight Venture Partners, 4 Ritual Technologies $85.6 Toronto, ON Dining App Mistral Venture Partners Energy Impact Partners, Amazon Alexa Fund, Export Development 5 ecobee $78.8 Toronto, ON Smart Thermostats Canada, GXP Investments, Northleaf Capital Partners, Ontario Capital Growth Corp, Relay Ventures, Tech Capital , Thomvest JPMorgan Chase, OMERS Ventures, BDC Venture Capital, Relay 6 TouchBistro $67.8 Toronto, ON Mobile POS Solutions Ventures, Napier Park Global Capital, Recruit Holdings 7 Wealthsimple $64.8 Toronto, ON Robo-Advisor Power Financial 8 Tilray Canada $63.5 Nanaimo, BC Cannabis Not Disclosed Multiplatform Tencent Holdings, BDC Venture Capital, Kickstart Ventures, 9 Wattpad $63.0 Toronto, ON Entertainment Peterson Group, The Raine Group 10 Breather Products $60.0 Montréal, QC Workspace Rental Caisse de dépôt et placement du Québec, Temasek Holdings Top VC Investors in Canadian Companies, Partnerships & Governments Canadian Private Independent Partnerships First Half 2018 Estimated Investments Rank Firm Name # Deals Location ($ millions) 1 Real Ventures 30 $22.0 Montreal, QC 2 iNovia Capital 17 $23.2 Montreal, QC 3 Cycle Capital – Ecofuel 14 $36.9 Montreal, QC 4 Yaletown Venture Partners 7 $33.5 Vancouver, BC 5 Vanedge Capital 7 $6.9 Vancouver, BC 6 Relay Ventures 6 $32.6 Toronto, ON 7 Golden Ventures 5 $9.5 Toronto, ON 8 AmorChem 5 $5.9 Montreal, QC 9 Anges Québec Capital 5 $3.4 Montreal, QC 10 iGan Partners 4 $7.5 Toronto, ON Canadian Government Funds First Half 2018 Estimated Investments Rank Firm Name # Deals Location ($ millions) 1 BDC Venture Capital 50 $79.5 Montreal, QC 2 MaRS Investment Accelerator Fund 9 $3.3 Toronto, ON 3 Export Development Canada 6 $17.7 Ottawa, ON 4 Sustainable Development Technology Canada 5 $23.8 Ottawa, ON 5 Innovacorp 3 $3.5 Halifax, NS Top VC Investors in Canadian Companies, Foreign & Other Non-Canadian Investors First Half 2018 Estimated Investments Rank Firm Name # Deals Location ($ millions) 1 White Star Capital 4 $13.0 London, UK 2 Rho Capital Partners 3 $31.8 New York, NY 3 500 Startups 3 $4.8 San Francisco, CA 4 Accomplice 3 $3.3 Cambridge, MA 5 Amazon 2 $35.2 Seattle, WA 6 Kayne Anderson Capital Advisors 2 $25.3 Los Angeles, CA 7 Openview Venture Partners 2 $18.0 Boston, MA 8 Intel Capital 2 $7.5 Santa Clara, CA 9 Newbury Ventures 2 $3.8 Redwood City, CA 10 Betaworks Studio 2 $2.4 New York, NY Canadian Retail, Institutional & Other Investors First Half 2018 Estimated Investments Rank Firm Name # Deals Location ($ millions) 1 Desjardins Venture Capital 43 $35.5 Lévis, QC 2 New Brunswick Innovation Foundation 10 $3.4 Fredericton, NB 3 Westcap 6 $5.7 Saskatoon, SK