How good was Vancouver’s VC funding in the first half of 2023?

Spoiler: it’s likely better than you’re expecting, given this year’s lackluster Q1.

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It’s official: all the deals across Canada in the first half of the year have been tallied, and the data is in. And according to the Canadian Venture Capital and Private Equity Association (CVCA), there’s plenty to celebrate.

In its hotly anticipated report on H1 2023, the organization highlighted that across the country, $4 billion has been invested across 335 deals so far. That represents a 45 percent increase compared to the same time last year — signs that funders are moving away from their post-COVID wait-and-see pattern and deploying real capital once more.

The average deal size is up, too. Over $16.6 million was invested this quarter, with pre-seed, seed, and early-stage funding all showing solid growth. That suggests that confidence has returned across all stages of companies’ life cycles — not just the bigger, sure-bets that took home much of the money in 2022.

In Canada as a whole, the tech sector took the lion’s share of the cash this quarter, especially in the AI sector, which led the pack with $1.8 billion invested in 84 deals. (No surprises there, given the buzz around the technology after generative AI took off at the end of last year.) Life sciences also scored a big percentage of the money, as did cleantech — both representing the anxiety around global events in the wake of the pandemic and another record-breaking year of heat, forest fires, and extreme weather.

In B.C., the story is similar. The province accounted for a 19 percent share ($741 million invested over 58 deals) of all VC investment this half of the year, reclaiming its position in third place after a slow Q1.

On a city level, that helped Vancouver rank as the third-most active Canadian hotspot for the number of deals (46) and amount invested ($545 million). Just ahead in second is Montreal with 53 deals and $564 million, with Toronto topping the rankings at 99 deals totalling $1.2 billion. Much of Vancouver’s ranking was buoyed by LayerZero Labs — a blockchain company and one of the city’s unicorns — which was the recipient of the largest disclosed deal in the province, raising $120 million in a Series B financing round from a consortium of U.S. and global investors.

The report also unveiled an interesting trend in this half of 2023. There’s been a surge of companies using non-dilutive sources, which has set new records for the number of deals made across the country (though those deal values have seen a dip, most likely due to the rising interest rates and changing market conditions.) B.C. saw the second-highest use of non-dilutive funding by a considerable margin, accounting for 36 of the total 99 deals. By contrast, Ontario companies represented 50 of the remaining deals, suggesting B.C. companies are punching above their weight when accessing capital like IRAP or SR&ED financing.

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