Startups in Atlantic Canada attracted a record $166.6 million in private capital in 2018, while increasing their revenues strongly and adding about 1,000 employees, according to a new report from Entrevestor, a publication that provides news and data on East Coast startups.
On Monday, Entrevestor released the Atlantic Canadian Startup Data Report 2018. It is Entrevestor’s sixth annual report on high-growth, innovative companies in the region, and the first that has been released to the public, thanks to a partnership with the Atlantic Canada Opportunities Agency (ACOA) and Halifax-based innovation hub Volta.
In previous years, the report had to be purchased.
“There are a lot of startup founders who are real enthusiasts about the development of the ecosystem and they’re extremely interested in the metrics of it all,” said Peter Moreira, Entrevestor Principal and author of the report. “After a while, we were talking to ACOA, we were talking to Volta and a few others about putting something in place where I don’t have to sell the report individually to people, it would just be out there for everybody.”
In New Brunswick, the report found the province’s startup community had its most successful year since 2011, when Radian6 and Q1 Labs announced they were exiting with a reported value of more than $1 billion. The report found that in 2018, $84.7 million funds were raised by startups in the province. Startups employed 1,479.5 people, which was up by 21 per cent from the year prior. New Brunswick startups also saw a revenue growth of 154 per cent in 2019.
Leading this strong funding year was the closing of Sonrai Security’s US$18.5 million funding round, led by Boston-area VC firms Polaris Partners and TenEleven Ventures. Founded by Q1 Labs veterans Sandy Bird and Brendan Hannigan in Fredericton, Sonrai offers technology that protects enterprise clients’ data on the cloud and makes it easier to manage. Its first public statement was its funding announcement, the largest pure venture capital round ever in Atlantic Canada.
“I think what was significant about Sonrai is it ticked so many boxes for New Brunswick. It was return entrepreneurs, so guys who have already had a massive exit coming back to get ‘the band back together’ if you will,” said Moreira. “That’s easy to overlook but it’s really important to get entrepreneurs, once they have success, coming back in and starting new businesses because they’ve been there and they know what they’re doing.”
Another reason the funding round was significant is that it brought in investors from outside the region as well.
“It was bringing outside investors into Fredericton, which was big. It was an IT deal that New Brunswick is strong in,” said Moreira.
In other notable funding rounds, relationship software company Introhive had raised $15.2 million in equity and debt, and agtech company Resson booked a $14 million round, led by the world’s leading tractor maker, Mahindra & Mahindra of India.
The Sonrai, Introhive and Resson deals accounted for $65 million in funding. Other companies like Eigen Innovations, Chinova Bioworks, and Smart Skin Technologies came in with seven-figure funding rounds that added to the amount. In the end, Entrevestor calculated that New Brunswick companies raised $84.6 million in funding – more than in the previous five years combined.
There were also a few notable exits in New Brunswick in 2018. Saint John-based EhEye, which developed video recognition software for public security, was purchased by Patriot One Technologies of Toronto for more than $3.2 million in stock in November.
Meanwhile, Fredericton-based Envenio, whose technology assists in the understanding of fluid dynamics, quietly exited, being taken over by San Francisco electronic cigarette company Juul. The buyer, which has 800 employees and US$1.1 billion of annual revenue, planned to maintain and grow the Fredericton R&D team.
The previous year had been a weak one for funding by New Brunswick startups – they raised only $9.9 million in equity funding in 2017, barely half the level of Newfoundland and Labrador. Though the province made a comeback in 2018, whether the momentum will follow through the rest of 2019 is yet to be known.
“There have been a few nice deals. Chinova Bioworks had one and SomaDetect has raised, but we’re not seeing the same scale of deals that we saw in Resson, Introhive and Sonrai last year,” says Moreira. “But the funny thing about funding is it accelerates toward the end of the calendar year, so who knows what the next three months will bring.”