Techopia

Ottawa’s VC haul grows nearly fourfold to $400 million in 2021, research firm says

April 6, 2022

Ottawa-based startups raised just shy of $400 million in fresh venture capital in 2021 – almost four times as much as the year before, according to a new study.

Local firms landed a total of $396 million in early stage funding across 17 deals last year, the 2021 Canadian Venture Capital Report compiled by CPE Analytics says. That’s up from the $111 million that companies in the National Capital Region brought in from 25 deals in 2020, according to the Toronto-based research firm.

Ottawa ranked seventh among Canadian cities in total VC funding last year, a jump of four spots from its 11th-place position in 2020.

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Among the city’s biggest venture capital winners in 2021 were data protection software firm Rewind, which landed more than $80 million in a series-B round last September, and automated marketing campaign generator Knak, which raised $32 million in November.

CPE tracks equity and debt financing from a range of sources, including angel investors, venture capital firms, private equity firms and law firms. While its report offers a compelling snapshot of the region’s VC scene, it doesn’t tell the whole story of how investment capital is helping grow Ottawa’s tech ecosystem.

Take, for example, biotech firm Turnstone Biologics, which was founded in Ottawa and still has a significant R&D presence in the capital. Even though the company received $80 million in new funding last July, that money was not included in the city’s total because Turnstone is now headquartered in the United States.

Similarly, Ottawa-born online health-care platform Fullscript’s $300-million raise last fall from U.S. firms HGGC and Snapdragon Capital Partners is not part of CPE’s tally. Fullscript, which merged with Arizona-based Natural Partners in 2018, is officially considered a subsidiary of its U.S. parent, which is headquartered in Scottsdale.

In addition, CPE does not factor funding it deems to be “growth equity” – that is, investments from private equity firms that are taking significant ownership stakes in mature companies such as Fullscript that have moved beyond the startup stage – into its calculations.

The National Capital Region was not alone in experiencing a funding resurgence after a difficult 2020 that saw the pandemic wreak havoc with the global economy, CPE’s report shows.

The top three cities on the 2020 list – Toronto, Vancouver and Montreal – once again led the way last year. But their combined funding haul of $9.92 billion in 2021 dwarfed the $2.71 billion in fresh equity raised by firms in the three cities the previous year.

Biotech big winner

Companies specializing in information and communications technology ($8.73 billion) and biotech ($1.98 billion) attracted nearly 80 per cent of all Canadian VC funding last year.

More than half of the $13.6 billion injected into Canadian ventures last year – about $7.6 billion – came from firms based in the U.S., with VCs headquartered in other foreign countries pitching in an additional $2.17 billion.

Ottawa-based consultant Richard Rémillard, a business and public-policy adviser whose clients include a number of VC firms, said leaning so heavily on funding from south of the border is a mixed blessing for young Canadian companies.

“On the one hand, the dominance of venture capital investment volumes from the U.S. is testament to the attractiveness of the Canadian innovation market, but at the same time betrays an over-reliance on the U.S., which could place Canada in a vulnerable position should American funds pull back,” he said in a statement.

Rémillard also cited investment in the cleantech sector as “cause for celebration and concern.”

Emerging firms catering to the nascent green-energy industry brought in just over $1 billion in fresh equity in 2021. While acknowledging that’s a “considerable amount of capital,” Rémillard noted the sector accounted for just 7.4 per cent of all VC investments last year – an amount he said is “unlikely to materially assist Canada in meeting its ambitious earth and climate-friendly goals and commitments.”

Meanwhile, a major Ottawa-based law firm once again cracked the list of top Canadian firms catering to VC deals. According to the report, LaBarge Weinstein LLP was involved in 17 financing transactions last year, the fourth-highest total of any firm in the country.