Q2 2022 saw a dramatic 70 percent drop in FinTech funding YoY.
While Canadian FinTech funding has already reached 58 percent of 2021’s annual total so far this year, Q2 2022 saw a dip in total deals and a dramatic dropoff in total funding according to CB Insights’ latest State of Fintech report.
The report found that funding poured into Canadian FinTech companies in Q2 2022 has plummeted by 75 percent quarter-over-quarter, from $1.2 billion to $300 million. Compared to the same period last year, which raised $1 billion, funding for this second quarter decreased by 70 percent.
Canada had the second lowest number of FinTech deals in the quarter, beating only Australia.
Though funding for Canadian FinTechs is down quarter-over-quarter, there is still a good amount of capital flowing into the sector—though it remains to be seen how the rest of the year will play out given the current turbulent economic and market conditions.
Early-stage companies saw 71 percent of the deals made in the first half of the year, followed by mid-stage businesses receiving 13 percent of that pot, with late-stage firms securing 7 percent.
The amount of deals also decreased by 36 percent quarter-over-quarter. In total, there were 28 deals completed in the second quarter of 2022, down from the 44 deals made in Q1 and a five percent drop from Q2 2021.
Calgary-based Neo Financial’s $185 million CAD Series C round in May was crowned the top equity deal in the quarter. That funding round also made Neo one of Canada’s latest and youngest unicorns, providing the two-year old FinTech startup with a more than a $1 billion valuation.
Second to Neo is Toronto startup Delphia, which closed a $75.2 million CAD in Series A round in April. Delphia is followed by Vancouver company MeetAmi Innovations’ $29 million seed financing, as well as Toronto-based Pine’s $27 million CAD investment round.
Other Canadian FinTech firms that have also raised a sizable amount of capital in the second quarter include VirgoCX, Altrio, Mash, Moves, Emma, and Uplinq.
The amount of mergers and acquisition exits dropped to 7 in Q2 2022, a slight decrease from 10 M&A exits in the previous quarter. Canada only saw one SPAC and one IPOs each in this quarter, which is in line with the same period last year.
The country’s top FinTech investors for Q2 2022 were the Ontario Teachers’ Pension Plan and Portage Ventures, which tied with 4 deals. Intact Ventures and N49P followed, joined by Georgian Partners, Loyal VC, Luge Capital, Whitecap Venture Partners, and Xpand Capital.
On a global scale, CB Insights also ranked the Ontario Teachers’ Pension Plan as the 8th top investor YTD.
Among the other regions named in the report—United States, Asia, Europe, Africa, as well as Latin America and Caribbean—Canada had the second lowest number of FinTech deals in the quarter, beating only Australia.
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Canada also only makes up a small portion of the total amount of deals made among all regions and across all of the deal stages, following Latin America and Caribbean.
As with the amount of deals, FinTech funding has essentially dropped for all regions, including Canada. However, Canada was only one of the two regions where the median deal size did not go down, with a current average of $4 million. The other region was Europe with an average financing of $5 million.
Although Canada is one of the smaller players in deal shares, CB Insights’ report found that Canada had one of the largest seed/angel deals in the quarter, namely MeetAmi Innovations’ $29 million round. In addition, the country saw one of the largest Series A and Series C rounds—which were Delphia and Neo Financial’s funding rounds, respectively.
Unicorn births across the globe have slowed down, as Q2 2022 saw the lowest number of new unicorns since the same period in 2020. Most of the other regions gave birth to several new unicorns this quarter, in contrast to Canada’s only Q2 unicorn, Neo Financial.
Canada’s FinTech sector has entered a cooling down period, relative to the amount of funding activity in the country last year. Even on the international stage however, Canada continues to see much lower deals by number and amount invested compared to other regions.
What this means for the country amid the slowdown of venture capital deals is uncertain, but it is clear that Canadian FinTech funding lags behind its foreign counterparts.