Amid Record-Breaking Year, Warning Signs For Atlantic Canada Startup Community
HALIFAX — There were more startups than ever before in Atlantic Canada last year. Together, the startup community broke records for job creation, smashed records for funding, and maintained solid revenue growth.
Overall, 2019 was a stellar year for the region’s startup sector. But there was also one troubling trend unfolding beneath the good news.
The trends, both good and bad, are laid out in Entrevestor’s Atlantic Canadian Startup Community Data Report for 2019.
The annual report digs into the numbers behind the region’s startup economy, providing estimates for how many jobs it supports, how much funding was raised, as well as other key indicators.
The report identified 697 startups active in Atlantic Canada in 2019, which was a 27 percent jump from the previous year.
Peter Moreira, who wrote the report, said in a presentation on September 24 that growth is being spurred by the network of organizations in Atlantic Canada dedicated to fostering entrepreneurs.
“There are a lot of groups doing really, really great work [in Atlantic Canada],” he said.
Of the nearly 700 startups active in the region, 164 are categorized as “new companies,” which Moreira says is 43 percent more than any other year.
Moreira said one of the “huge success stories” for the community last year was jobs. In 2019, startups provided 6,500 jobs in Atlantic Canada, up from 5,500 in 2018.
“Basically, we added about 1,000 jobs last year,” he said.
“This is a really good news story. These are good jobs, they are highly technical jobs… and they are overwhelmingly employing young people, which the region desperately needs,” he said.
And then there’s the funding.
Atlantic Canada recorded the biggest growth capital funding round in Canadian history last year when Verafin raised $515 million in equity and debt.
The $651.3-million raised in Atlantic Canada was triple that of any other year. Obviously impressive numbers, but Moreira said it’s not all good news.
He pointed out that about 80 percent of those millions went to three companies.
“It’s great the funding is going into the big companies because they’re making moves that really bring impact to what the startup community is all about and the economic gains of the big companies far outweigh the economic gains of the little ones,” Moreira said.
However, strip out those few big deals and there was a funding decline last year, which is especially concerning considering the startup community was bigger than ever.
Moreira says the biggest worry is angel funding.
In 2018, the region raised $29.4 million in angel funding, but that number dropped by 26 percent last year.
When Moreira and his team looked at the band of financing from $20,000 to $500,000, which can be considered “pre-seed financing,” they found troubling trends.
In 2018 there were 64 deals at that level, accounting for 12 percent of the startup community. In 2019 there were only 56 of those deals, accounting for just 8 percent of the startups.
“So, we’re getting a small proportion of the startup community raising pre-seed rounds, and that’s got to be concerning,” Moreira said.
He said non-dilutive funding, through organizations like ACOA and IRAP are helping fight this trend but can be uneven.
Other notable trends uncovered in the report were the growth of the life sciences sector in Atlantic Canada, with four times more funding in 2019 than 2018; more new startups being created in rural parts of the region; and a growth in the number of startups lead by women (“it’s an improvement, it could be better,” Moreira said).
More information from the Atlantic Canadian Startup Community Data Report for 2019 is available here.