B.C. firms defy national trends as venture capital pours in during pandemic

Photo: Rob Kruyt

What happened: B.C. firms raise $553m during first half of 2020

Why it matters: The latest data shows a sharp increase in venture capital funding on the West Coast at a time it’s contracting in other provinces

While the pandemic appears to be choking the flow of venture capital across Canada during the first half of the year, B.C. is showing signs of immunity to investor uncertainty.

Venture capital investments on the West Coast totalled $553 million from the start of 2020 through to June 30, according to data released Tuesday (September 8) from CPE Media Inc.’s analytics division.

That’s up 31% from the same period in 2019 when the province tallied $422 million in venture capital investments.

While lockdowns may have led to less in-person elbow-rubbing in the spring, 79 deals were struck in B.C. during the first half of 2020 compared with 61 during 2019 H1.

But it’s a different story nationwide with Canadian investment activity falling 11% annually to $2.59 billion when compared with 2019 H1.

One possible explanation for B.C. defying national downward trends is the source of the capital.

Ontario and Quebec — home to the top-performing companies so far this year with raises totalling $1.048 billion and $700 million — are far more reliant on domestic investors.

Domestic investors accounted for 59% of investment sources for Ontario during 2020 H1 and 85% for Quebec.

B.C. companies, meanwhile, received just 28% of investment from domestic sources compared with 51% from the U.S. and the remaining 21% from other foreign sources.

“It's been really challenging for the last six months, and I expect it to continue to be a little bit challenging for another couple of months,” B.C. Tech Association CEO Jill Tipping told BIV, referring to the state of innovation investment in the province.

“So there's no doubt that a huge global economic shock like this causes everybody to just sort of pause and take a different approach to investment. But now we have pent-up demand.”

She said it will be key for tech companies not to undervalue themselves as they hold discussions with investors.

Tipping added companies have also benefitted from the fact that all capital-seeking companies are on a similar playing field as virtual meetings become the norm during the pandemic.

“When I'm talking with Ottawa, I can do so now on a daily basis, whereas I previously had to get on a plane and fly to Ottawa [and] my Ontario colleagues could be there far more often,” she said. 

“Nowadays, the playing field is a little bit equalized.”