US VC Firms Pump $13B Into Canadian IT

American investors are sending a lot of money north to finance Canadian information-technology (IT) startups, which raised a record $13.6 billion in venture capital (VC) last year.

That’s according to a Monday (April 18) report by The Wall Street Journal, which said many VC firms are being enticed by bustling tech hubs in cities such as Vancouver and Toronto. Companies such as Google, Microsoft, Uber and Intel have either opened or expanded operations in those cities in recent years.

That has led to a growing pool of tech workers, who have become increasingly scarce in the U.S. at the same time that engineers, coders and software developers are departing tech hubs like Silicon Valley to take advantage of remote-work opportunities, a reduced cost of living and more open immigration regulations.

Meanwhile, investors told the WSJ the presence of Big Tech companies has fueled university research labs and advanced training programs, which have been known to collaborate with corporate backers such as Microsoft and Google.

According to the report, the average deal size among tech startups in Canada rose to $15.5 million in 2021, compared to $6.8 million in 2020. Meanwhile, funding rounds of $25 million or higher accounted for three-quarters of all capital invested in 2021, compared to 51% two years ago, per data from PitchBook.

February saw the Canadian financial services provider Koho raise $210 million as it works to provide an alternative to payday loans. Additionally, in November of last year, last-mile delivery company Bolt Logistics raised $92 million.

Read more: Canadian FinTech Koho Nets $210M for Alternative to Payday Loans

But even after a decade of rapid growth in its tech market, “Canadian startups have historically struggled to raise capital and have been comparatively underfunded compared to their peers south of our border,” Scott MacDonald, co-founder and managing partner at Toronto-based investing firm McRock Capital, told the WSJ.

He said that the last three years have seen VC investors — particularly those from firms in the U.S. — take notice of Canada’s burgeoning startup world. Since 2020, more than 50% of all Toronto-area VC deals have involved at least one investor from the U.S.