Canada’s Funding Gaps | 1 |
EXECUTIVE SUMMARY | 3 |
1. INTRODUCTION | 6 |
1.1.About this report | 6 |
1.2.About Startup Genome | 6 |
1.3.About National Angel Capital Organization (NACO) | 6 |
1.4.About the Canadian startup ecosystem and funding landscape | 7 |
1.3.1 Recent Performance has been worse than peers | 7 |
1.3.2 Seed Funding | 9 |
2. METHOD | 11 |
2.1.Overview of our approach | 11 |
2.2.Canadian Ecosystems | 13 |
2.3.Comparator Ecosystems | 13 |
2.4.Obtaining Funding Data & Estimating Gaps | 14 |
3. FINDINGS | 16 |
3.1.Canada has lower funding Success Rates | 16 |
Figure 1: Comparison of Attrition Rates | 16 |
Figure 2: Comparison of Attrition Rates (time series) | 17 |
3.2.Canada has a smaller proportion of Seed-funded Startups | 18 |
Figure 3: Comparison of Proportion of Seed-Funded Startups(Canada Tier 1 and US Tier 2 shown as percentage of US Tier 1, 3 year moving average) | 18 |
Figure 4: Seed Funding Rate versus Exit Rate | 19 |
3.3.Canada has lower ratio of Seed to Series A funding than peers | 19 |
Fig 5. Seed to Series A Funding Amount Ratio for Various Ecosystems (3-year moving Average) | 20 |
Figure 6: Comparison of Seed to Series A Ratios (3y moving average) | 21 |
Fig 7. Seed to Series A Funding Amount Ratio for Canadian Ecosystems (3-year moving Average) | 22 |
3.4.The Seed Gap appeared from 2017 | 22 |
Fig 8. Total Funding Amount in Canada1 ($M) (3Q Moving Avg) (Log Scale) | 23 |
3.5.Seed round sizes are smaller in Canada | 23 |
Figure 11: Size of 75th Percentile Seed Rounds | 24 |
Figure 12: Size of 90th Percentile Rounds | 25 |
| 25 |
Figure 13: Large (≥ $1M) Seed Rounds as Percentage of all Seed rounds | 25 |
Figure 14: Success Rates to Series B for Seed-Funded Startups, based on Seed Round Size | 26 |
3.6.Average Series A rounds are also smaller in Canada | 27 |
Figure 15: Median Series A Round Sizes ($M USD) | 27 |
Figure 16: Series A Round Sizes, 75th Percentile ($M USD) | 28 |
Figure 17: Series A Round Sizes, 90th Percentile ($M USD) | 28 |
3.7.Fundraising is also slower in Canada | 28 |
Fig. 18: Median time between Formation and Seed (for firms that raise) | 29 |
Fig 20: Median time between Seed and Series A (for firms that raised both) | 30 |
3.8.AI is critical but exhibits even larger gaps | 30 |
Fig 23: Time to First Raise for ‘AI Native’ startups versus all startups (Global) | 31 |
| 31 |
3.8.1.Seed Round Size for AI | 31 |
Fig 24: Average (median) Seed Round Size (M USD) for ‘AI Native’ startups | 32 |
Fig 25: Distribution of Seed Rounds by Size (comparing AI vs other Tech) | 33 |
Fig 26: Difference in Distribution of Seed Round Sizes (AI Native minus Other Tech) | 34 |
3.8.2.Seed Round Timing for AI | 34 |
Fig 27: Average (median) Time from Formation to Seed for ‘AI Native’ startups | 34 |
3.9.Life Sciences show a similar gap in seed funding size | 35 |
Fig 28: Average (median) Seed Round Size for Life Sciences startups | 35 |
Fig 29: Average (median) Series A Round Size for Life Sciences startups | 36 |
4. ANALYSIS OF GAP | 37 |
4.1.Summary of findings | 37 |
4.2.Estimates of Series A funding gap | 37 |
4.2.1.Increasing Series A size | 37 |
4.3.Estimates of Seed-funding gap | 38 |
5. CONCLUSIONS AND RECOMMENDATIONS | 41 |
5.1.The role of funding policy | 41 |
5.2.Recommended priorities | 42 |
5.3.Adapting to the AI transformation | 43 |
5.4.Recommended interventions | 44 |
6. APPENDICES | 48 |
6.1.Estimates of Startup Output | 48 |
6.2.Total funding across stages | 49 |
6.2.1.Total seed funding | 49 |
6.2.2.Total Series A funding | 49 |
6.2.3.Total Series B+ funding | 50 |
6.3.Median size of rounds | 50 |
6.3.1.Median seed rounds | 50 |
6.3.2.Median Series A rounds | 51 |
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