US venture capitalists pump $13 billion into Canadian IT
American investors are sending big money north to fund Canadian information technology (IT) startups, which raised a record $13.6 billion in venture capital (VC) last year.
That’s according to a Monday, April 18 report from The Wall Street Journal, which said many venture capitalists are drawn to bustling tech hubs in cities like Vancouver and Toronto. Companies such as Google, Microsoft, Uber, and Intel have opened or expanded operations in these cities in recent years.
This has led to a growing pool of tech workers, who have become increasingly scarce in the United States as engineers, coders and software developers leave tech hubs like Silicon Valley to take advantage of remote work opportunities, reduced cost and more open immigration rules.
Meanwhile, investors told the WSJ that the presence of Big Tech companies has fueled university research labs and advanced training programs, which are known to collaborate with backers such as Microsoft and Google.
According to the report, the average deal size among tech startups in Canada rose to $15.5 million in 2021 from $6.8 million in 2020. Meanwhile, funding rounds of $25 million or more accounted for three-quarters of all capital invested in 2021, up from 51% two years ago, according to PitchBook data.
In February, Canadian financial services provider Koho raised $210 million as it strives to provide an alternative to payday loans. Additionally, in November of last year, last-mile delivery company Bolt Logistics raised $92 million.
Read more: Canadian fintech Koho gets $210m for payday loan alternative
But even after a decade of rapid growth in its tech market, “Canadian startups have historically struggled to raise capital and been relatively underfunded compared to their peers south of our border,” Scott MacDonald, co-founder and managing partner of Toronto. investment firm McRock Capital, told the WSJ.
He said that over the past three years venture capitalists, especially those in US companies, have taken notice of the booming world of startups in Canada. Since 2020, more than 50% of all VC deals in the Toronto area have involved at least one U.S. investor