The CB Insights report says the bottom fell out of Canadian FinTech funding in Q2 2022

While Canadian FinTech funding has already reached 58 percent of 2021’s annual total so far this year, Q2 2022 saw a drop in total deals and a dramatic drop in total funding according to CB Insights’ latest State of Fintech report.

The report found that funding flowing into Canadian FinTech companies in Q2 2022 has fallen 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 was reduced by 70 percent.

Canada had the second lowest number of FinTech deals in the quarter, beating out only Australia.

Although funding for Canadian FinTechs is down quarter-on-quarter, there is still a good amount of capital flowing into the sector – although 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 companies that received 13 percent of this pot, while late-stage companies secured 7 percent.

The number of agreements also decreased by 36 per cent quarter on quarter. A total of 28 deals were completed in the second quarter of 2022, down from the 44 deals made in Q1 and a decrease of five percent from Q2 2021.

Calgary-based Neo Financial’s $185 million CAD Series C round in May was named the top equity deal of the quarter. That funding round also made Neo one of Canada’s newest and youngest unicorns, giving the two-year-old FinTech startup a valuation of more than $1 billion.

Following Neo is Toronto startup Delphia, which closed a $75.2 million CAD Series A round in April. Delphia is followed by Vancouver company MeetAmi Innovations’ $29 million in seed funding, as well as Toronto-based Pine’s $27 million CAD investment round.

Other Canadian FinTech firms that have also raised a significant amount of capital in the second quarter include VirgoCX, Altrio, Mash, Moves, Emma and Uplinq.

The amount of M&A exits fell to 7 in Q2 2022, a slight decrease from 10 M&A exits in the previous quarter. Canada saw just one SPAC and one IPO each this quarter, which is in line with the same period last year.

The country’s top FinTech investors for the second quarter of 2022 were Ontario Teachers’ Pension Plan and Portage Ventures, which produced 4 deals. Intact Ventures and N49P followed, along with 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 eighth top investor YTD.

Among the other regions mentioned in the report – the US, Asia, Europe, Africa, as well as Latin America and the Caribbean – Canada had the second lowest number of FinTech deals in the quarter, beating out only Australia.

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Canada also accounts for only a small fraction of the total number of agreements made between all regions and across all agreement stages, after Latin America and the Caribbean.

As with the number of deals, FinTech funding has essentially declined for all regions, including Canada. However, Canada was only one of the two regions where the median deal size did not decrease, with a current average of $4 million. The second region was Europe with an average funding of $5 million.

Although Canada is one of the smaller players in deal stocks, CB Insights’ report found that Canada had one of the largest seed/angel deals of the quarter, MeetAmi Innovation’s $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, as Q2 2022 had the lowest number of new unicorns since the same period in 2020. Most of the other regions gave birth to more new unicorns this quarter, unlike Canada’s only Q2 unicorn, Neo Financial.

Canada’s FinTech sector has entered a cooling period, relative to the amount of funding activity in the country last year. However, even on the international stage, Canada continues to see much lower deals by number and amount invested compared to other regions.

What this means for the country amid the downturn in venture capital deals is uncertain, but it is clear that Canadian FinTech funding is lagging behind its foreign counterparts.