AI Investments Cooler And Slicker Than Maple Syrup

Artificial Intelligence (AI) attracted $162M in investments across 12 deals in the first half of 2017, the highest amount of funding in Canada in the past five years, according to a MoneyTree Report from PwC Canada and CB Insights.  Despite the record high in AI deals, investments in venture-backed companies based in Canada slowed down in the first half of 2017. Funding decreased to $885M in the first half of 2017 from $1.027B (14%) from the same period in 2016. The number of deals also decreased to 127 deals from 170 (25%) from the same period last year. 

 

Quarterly activity in Q2 2017 saw $400M deployed across 58 deals. This is a decline from Q2 2016 which saw $600M deployed across 58 deals. Sector-wise, Internet deal count was up 19% from Q1 2017; Healthcare and Mobile accounted for much of the quarterly decline in Canada as a whole. In terms of thematic areas, a $102M mega-round pushed annual funding to Canadian AI companies to a high of $162M across 12 deals through H1 2017, while deal activity is also on pace to surpass last year's high.

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Deals and dollars invested were both down in the leading hub of Toronto, with $107M deployed across 24 deals. Vancouver saw 3 more deals completed than Q1'17, but 29% less capital invested. Meanwhile, Montreal saw deal count drop but total funding spike 145% to $189M, buoyed by several larger financings. Highlights include:

  • Seed-stage deal share has bounced back after falling below 40% for two consecutive quarters, as Q2 2017 saw seed share rising to 45%. Expansion-stage deal share also hit an eight-quarter high, accounting for 19% of Q2 2017 deals.
  • Despite the slowing Canadian funding environment overall, 26% of all deals to Canadian companies featured at least one corporate or corporate venture capital investor in Q2 2017, climbing for the second consecutive quarter and setting a fresh eight-quarter high.
  • Internet deal share reached an eight-quarter high of 53% amid soft Healthcare and Mobile & Telecom activity. Healthcare deal share in particular dipped to an eight-quarter low, representing just 7% of the Q2 2017 total and down from the 20% high of Q1 2017.
  • Digital Health annual funding has also already reached an annual high of $106M, although deal pace is on track to fall short of last year's figure.
  • On a trailing-twelve-month basis, investors based in Canada represented at least 50% of all active investors in Canadian companies across seed, early, and expansion stages, with later-stage deals being the lone exception. US investor participation rate was 33% or greater across stages, with an especially active presence in larger later-stage deals, where US-based firms accounted for 58% of all investors.  

For further information, checkout the report.

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