Q3 2023 was much slower for fundraising in Canada than in recent years, with startups collecting just $808 million over the summer months compared to the more than $1.1 billion raised during the same period in 2022.
Despite investments being 57 percent off of last year’s Q3 totals (and more than 80 percent below the $5.12 billion that Canadian startups raised in Q2 2021, an all-time record), there have still been winners during an otherwise quiet season for fundraising.
According to the Geo Quarterly Report from Tracxn, a global SaaS-based market intelligence platform, businesses focused on Artificial Intelligence (AI) are continuing to get the most interest (and the lionshare of new, early-stage investments) in today’s market. As Two Small Fish Ventures told TechCrunch, more than a third of their current portfolio companies are focused on AI, while the only Canadian company that raised at least $100 million during Q3 was Toronto-based AI chip startup Tenstorrent.
Enterprise apps, environment tech and fintech lead investments in Q3
While AI-backed products continue to win the day regardless of industry, companies focused on enterprise applications, cleantech and environmental solutions, as well as financial technology are all seeing healthy levels of funding.
Fintech activity even ticked up slightly in Q3 2023, with companies raising $141 million during the quarter compared to $125 million over the same period last year.
That said, with the overall investment landscape sinking across the board, total investments into enterprise applications—still the strongest sector for fundraising—dipped more than 57 percent year-over-year.
Funding has also largely been focused in Canada’s eastern cities during Q3 2023, with startups based in Toronto raising $239 million over the period. Montreal and Ottawa came in second and third, with $215 million and $132 million in investments tracked, respectively, across the quarter.
While this is good news for startups in the East, it’s a different story for the West, which had been enjoying a boom in investments earlier in the summer that didn’t stick around heading into the fall. This includes data from briefed.in published back in July that saw $639.6 million invested into British Columbia startups during Q2, marking a 573 percent jump in investment over Q1 totals.
Fewer deals in general as capital strategies evolve
In general, there were simply far fewer deals in Q3 2023 than had been tracked in recent quarters, with only 71 startups raising money over the period compared to 102 in Q2 2023 and 146 tracked during Q3 2023.
To that end, acquisitions are down, with only 35 tracked by Tracxn over the period compared to 44 in both Q2 2023 and Q3 2023.
That said, slower market activities aren’t unique to Canada, as the report noted that businesses in every country are “facing the effects of funding winter caused by global macroeconomic uncertainties.”
While venture capital remains tight, and market conditions continue to be in flux heading into fall, founders should explore as many non-dilutive funding opportunities as they can to extend their runway and continue driving innovation.
At Boast AI, we partner with thousands of startups—from seed to growth and beyond—across North America to both tap into programs like SR&ED while optimizing their R&D operations from the ground up.
By integrating with the project tracking and financial systems your team already uses to manage their workflows today, Boast AI can actively monitor for SR&ED-worthy activities throughout the year to ensure you always have an accurate picture of how much money you’ll get back from the CRA.
Talk to an expert from Boast AI today to learn more about how we combine cutting edge technology with years of expertise—and a founder’s POV—to optimize your R&D and fund your innovation.