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.
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.
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