Venture capitalists tap brakes on B.C. as funding drops to pre-pandemic levels

Inflation, rate-hikes putting pressure on investors

Market volatility, inflation and interest rate pressures taking toll, says report | Chung Chow, BIV

Venture capitalists have had no problems shying away from B.C so far this year.

West Coast firms have raised $1.047 billion in venture capital (VC) through the first three quarters of 2022 – the lowest amount in five years, according to data released Thursday by CPE Analytics.

“The dramatic decline in VC investing activity in 2022 has left no sector or stage unscathed,” Richard Rémillard, president of Rémillard Consulting Group, said in CPE Analytics’ report. “While commentary nine months ago tended to predict that 2022 would be the ‘Year of the Tiger,’ it is clear that 2022 has turned out to be the ‘Year of the Monster Bear.’”

The global economic landscape has shifted dramatically over the last year after a rapid bounce back from 2020’s pandemic-induced paralysis.

Last year, West Coast firms managed to draw $3.945 billion through the first three quarters of 2021 after raising $1.31 billion during the same period in 2020, according to CPE Analytics. 

Inflation is now hitting record levels and central banks across the globe are hiking rates, making cheap capital less ubiquitous than it was in 2021 and 2020.

“[General partners] are taking a cautious approach, deploying dollars more slowly and rethinking strategy,” Kim Furlong, CEO of the Canadian Venture Capital and Private Equity Association, said in an August report about the state of VC in Canada.

“The fundraising environment has shifted slightly. While institutional investors are staying the course, family offices, high-net-worth individuals, who have seen their public portfolio value decrease, are treading lightly.”

She said those same trends are occurring globally as market volatility, inflation and interest rate pressures take their toll on investments.