Canadian SaaS funding in 2021 rebounds from 2020 low, fueled by influx of US investors


Fueled by pandemic-induced digital transformation efforts and growing support from U.S. investors, funding for Canadian software as a service (SaaS) companies in 2021 has totaled C $ 9.16 billion to date. .

This is revealed by L-SPARK’s latest State of SaaS report, which is released today as part of SAAS NORTH, Canada’s premier annual SaaS conference to be held November 17-18.

According to L-SPARK Managing Director Leo Lax, amid a wave of initial public offerings (IPOs), newly created unicorns and major investors entering the country, last year showed that “the Canada has arrived ”from a SaaS perspective.

L-SPARK CEO Leo Lax said last year has shown that “Canada has arrived” from a SaaS perspective.

“We are no longer the branch … we see ourselves as [SaaS] sustainable, global businesses that continue to grow, ”Lax said in an interview.

Lax attributes much of this increase in investment activity to the shift to digital transformation spurred by COVID-19. This transition, Lax said, has benefited many SaaS companies that have fueled this change, which have grown and raised significant capital as well.

L-SPARK, who co-founded SAAS NORTH, is an Ottawa-based SaaS-focused startup accelerator. The hub’s most recent State of SaaS report covers activity that has taken place since January 1, 2021, pulling its data from Pitchbook and media reports.

In 2020, during the pandemic, only $ 1.17 billion of total capital was invested in Canadian SaaS startups, up from $ 5.13 billion the year before.

Last year COVID-19 “put the brakes on the world,” Lax said. This uncertainty has led to a sharp decline in total SaaS investments in Canada, with investors focusing their spending on their existing portfolio companies, “consolidating their businesses to continue to survive,” he added.

This year, however, total SaaS investment has exploded to $ 9.16 billion, almost doubling the country’s total before the 2019 pandemic. “You are entering 2021, and … we have vaccines, things are happening. , the world is emerging and, by the way, everything we do is now powered by SaaS, ”Lax said.

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He added that these conditions “opened the doors” for SaaS companies to reach the market and obtain the capital they needed to accelerate their growth.

“Because last year everyone was somewhat conservative, there was actually pent-up demand to fund that growth, and it was justifiable,” Lax said.

In 2021, that investment was funneled more into growth phase funding deals at the Series B and C stage, compared to last year, where it was more focused on Series A rounds. SaaS startups like Clio and Applyboard benefited from this shift in focus towards investments at a later stage.

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As a result, deal size and average deal size have also skyrocketed from over $ 14 million out of 127 investments in 2020 to over $ 54 million this year out of 262 deals, the number of rounds of funding of over $ 50 million having more than doubled from eight. to 16.

This growth has been fueled in part by a significant increase in the number of investors, which has grown from 181 last year to 505 this year. Although the number of Canadian investors has grown from 70 to 92 since 2020, that increase has been overtaken by the growing number of American investors this year, which has grown from 158 to 237.

“I think right now we are seeing that many Canadian companies known for their innovative technologies are also able to generate significant revenue growth,” Lax said.

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Lax also pointed out that the number of high-profile IPOs and exits has also increased the visibility and branded the Canadian SaaS ecosystem. In 2021, Canadian SaaS companies like Verafin, Galvanize and Element AI were acquired, while companies like Magnet Forensics, Q4 Inc and D2L debuted on the Toronto Stock Exchange (TSX).

The CEO added that L-SPARK has felt some of this growth. “We’re kind of riding the wave, if you will, of everything that’s going on in the Canadian economy, and we also see it in our own wallets and our own alumni,” Lax said.

Going forward, Lax has identified a few SaaS verticals, including medical technology software, software that serves the connected world and the Internet of Things (IoT), and FinTech software as poised for continued growth in 2022.

Feature image from CSA Transportation via Flickr


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