Venture Debt - Canada | Statista Market Forecast

Canada is expected to see the Total Capital Raised in the Venture Debt market market reach US$996.70m in 2024.
Traditional Venture Debt is set to dominate the market with a projected market volume of US$942.80m in 2024.
When compared globally, the United States will generate the most Capital Raised, reaching US$22.4bn in 2024.
In Canada, Venture Debt in the Capital Raising market is gaining traction as a popular financing option for innovative startups.

Definition:

The Venture Debt market refers to a form of equity and debt financing combination, which is used to finance early stage and growth stage capital-backed companies. Besides equity funding rounds, business can seek venture debt that minimizes ownership dilution and governance requirements to increase the cash runway to reach the next milestone or even provide a cushion for delays.

Structure:

The market consists of two segments:
- The Traditional Venture Debt market refers to a form of debt financing that is often provided to venture-backed companies to either buy new equipment, meet a deficiency of short-term capital, or support expansion plans.
- The Growth Venture Debt market refers to a form of debt financing that is often structured with warrants or options, which provides a rapid development stage in which businesses can support their long-term oriented growth plans.
The market data comprises of the amount of capital raised, number of deals, and average deal size.

Key players in this market are companies such as Wells Fargo and Hercules Capital.

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Venture Capital
Venture Debt funds are sponsors by governments

The Venture Debt market in Canada has been experiencing significant growth in recent years.

Customer preferences: Canadian entrepreneurs and startups are increasingly turning to venture debt as a financing option. This is due to several reasons. Firstly, venture debt allows companies to raise capital without diluting their ownership stakes, which is particularly attractive to founders who want to maintain control over their businesses. Secondly, venture debt provides a more flexible financing option compared to traditional bank loans, as it is typically structured as a line of credit or term loan with more favorable terms and conditions. Lastly, venture debt is seen as a complementary source of capital to equity financing, enabling companies to extend their runway and fund their growth initiatives.

Trends in the market: One of the key trends in the Canadian Venture Debt market is the increasing number of specialized lenders entering the space. These lenders focus exclusively on providing debt financing to startups and early-stage companies, and they have a deep understanding of the unique needs and challenges faced by these businesses. This specialization allows them to offer tailored financing solutions that meet the specific requirements of their target customers. Another trend in the market is the growing demand for venture debt from companies in sectors such as technology, healthcare, and clean energy. These industries are experiencing rapid growth and require significant capital to fund their expansion plans. Venture debt provides an alternative financing option for these companies, allowing them to access the capital they need to fuel their growth without diluting their ownership stakes.

Local special circumstances: Canada has a vibrant startup ecosystem, with several cities such as Toronto, Vancouver, and Montreal emerging as hotbeds of innovation and entrepreneurship. This has created a favorable environment for the growth of the Venture Debt market. The presence of world-class universities, research institutions, and incubators has fostered the development of a strong pipeline of startups and early-stage companies that are in need of capital to fund their growth initiatives. Furthermore, the Canadian government has implemented various initiatives to support the growth of the startup ecosystem. These include tax incentives, grants, and funding programs that provide financial support to startups and early-stage companies. This favorable regulatory environment has attracted both domestic and foreign investors to the Canadian Venture Debt market, further fueling its growth.

Underlying macroeconomic factors: The growth of the Venture Debt market in Canada is also influenced by macroeconomic factors. The country has a stable and resilient economy, which provides a conducive environment for startups and early-stage companies to thrive. Additionally, low interest rates have made debt financing more attractive, as companies can access capital at relatively lower costs. In conclusion, the Venture Debt market in Canada is experiencing significant growth due to the increasing preference for non-dilutive financing options among entrepreneurs and startups. The market is characterized by the presence of specialized lenders and a growing demand for venture debt from companies in high-growth sectors. The favorable local circumstances, including a vibrant startup ecosystem and government support, further contribute to the market's growth. Overall, the Venture Debt market in Canada is poised for continued expansion in the coming years.

Data coverage:

Data encompasses B2B and B2C enterprises. Figures are based on the amount of capital raised, the average of deal size and the number of deals.

Modeling approach / Market size:

Market sizes are determined through a combined top-down and bottom-up approach, building on a specific rationale for each market segment. As a basis for evaluating markets, we use data from OECD, annual financial reports of key players, industry reports, third-party reports, publicly available databases, and survey results from primary research (e.g., the Statista Global Consumer Survey). In addition, we use relevant key market indicators and data from country-specific associations, such as GDP, CPI, number of small and medium-sized enterprises (SME), new businesses registered (number) . This data helps us estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the relevant market. For example, the S-curve function and exponential trend smoothing are well suited for forecasting digital products and services due to the non-linear growth of technology adoption.

Additional notes:

The market is updated twice a year in case market dynamics change. The impact of the COVID-19 pandemic and the Russia-Ukraine war is considered at a country-specific level.

This report presents a comprehensive analysis and additional information on the Financial market, in a PDF format.

Venture capital is the term used to call the financial resources provided by investors to startup firms and small businesses that show potential for long-term growth. It has become a very important source of capital for entrepreneurs, who often have problems with financing their needs through risk-averse banks. Venture capital investments incorporate a high level of risk as only some of the VC-backed companies develop into successful and highly profitable businesses. In 2020, the leading venture capital backed company worldwide was the Manbang Group, which based in Nanjing, China.