Market Trends of North America Venture Capital Industry
This section covers the major market trends shaping the North America Venture Capital Market according to our research experts:
Canada VC Growing Market
Canada closed out 2021 with its second-highest level of venture capital investment ever. USD 3.8 billion was invested in Canada in 2021, a 22 per cent decline from the record-smashing USD 4.9 billion in 2020, but strikingly 15 per cent above USD 3.3 billion in 2019.
Business-to-business (B2B) solutions were suddenly in high demand to meet the needs of companies looking for ways to better connect their remote workforces and improve or provide online sales or digital service capabilities.
Fintechs, especially in payments and lending services, gained even more traction when consumers and businesses wanted to avoid handling cash and shifted to e-commerce. The sudden shift to remote teaching and online learning also sparked interest in Edtech firms. Funds poured into this previously underappreciated asset class. Financial services companies are striving to digitize their operations and implement new technologies to better collect and collate data on their customers, identify and monitor for fraud and money laundering, and make their operations more efficient.
Among the top exits in 2021, several other mid-cap Canadian companies in the biotech and pharmaceutical sectors went public in 2021, all on the Nasdaq. The trend points to Canadian companies bypassing the Canadian market and listing directly in US exchanges and highlights the need for participation from large banks and investment firms to finance and support growing Canadian deals.
US Fintech Boost
U.S. fintech funding in 2021 outpaced 2020 in both amount raised and volume of transactions, despite the COVID-19 pandemic. Though the virus wreaked economic havoc in 2020, interest rates remained relatively low, consumers embraced digital channels and the routes for venture capital firms to exit their investments, be it public offerings or M&A, remained open. Each of these factors likely contributed to the USD 17.8 billion that investors poured into private U.S. fintech companies in 2021, via 681 transactions, up from USD 14.8 billion and 539 transactions in 2020. Investors likely sensed that the pandemic could end up benefiting fintech companies, as consumers suddenly needed to do financial transactions online.
By fintech sector, investment and capital markets companies garnered the most funding in 2021, with Robinhood contributing about 27% of the total. Insurtech companies and payments companies were also popular targets for VCs, with each sector raising upwards of USD 4 billion. The United States FinTech market is growing at an incredible pace. Digitally aware and active consumers are becoming more and more open to adopting FinTech into their daily lives.
