B.C. startups face venture capital squeeze as funding plummets

Photo: Chung Chow, BIV

Metro Vancouver was home to 24 financings in Q1, raising $513 million, according to CPE Analytics

Not even a sanctioned Russian oligarch could stop venture capital raises from plunging in B.C. during the first quarter, according to new data from CPE Analytics.

West Coast firms raised $547 million in the first three months of 2022 – down an astounding 86 per cent compared with the $3.94 billion raised during the same period a year earlier.

Data from CPE Analytics’ latest Canadian Venture Capital report, released Tuesday, also revealed Russian entities invested $14 million into Canadian firms in Q1.

Among those was Severstal, which contributed to a $79 million funding round that Burnaby-based Ekona Power Inc. closed earlier this year – prior to Russia’s invasion of Ukraine.

Severstal is controlled by Russian oligarch Alexey Mordashov, who the European Union sanctioned after his country’s attack on its neighbour.

“We believe the sanctions against Alexey Mordashov are completely unjustified and illegitimate, and we will use all available means under international law to protect our interests,” a spokesperson for Mordashov told Bloomberg earlier this month after the oligarch filed a challenge at the EU General Court.

Baker Hughes Co. (NYSE:BKR) led the Ekona Power funding round after the American oil field services company took a 20 per cent stake in the B.C. cleantech firm last year.

Ekona Power specializes in producing hydrogen at a low cost while minimizing CO2 emissions in the process.

Meanwhile, the CPE Analytics report found Ontario to be the leader among provinces when it comes to raising venture capital.

It drew $1.34 billion in the first quarter – down 78 per cent from the $6 billion raised the same period a year earlier.

Quebec raised $989 million – down 62 per cent from the $2.6 billion raised one year ago – followed by B.C. at No. 3.

The global economic landscape has shifted dramatically over the last year after a rapid bounce back from 2020’s pandemic-induced paralysis.

Inflation is now hitting record levels and central banks across the globe are hiking rates, making cheap capital less ubiquitous than it was in the early parts of 2021.

Most venture capital coming into B.C. emanated from U.S. sources (64 per cent) rather than domestic (27 per cent).

Metro Vancouver was home to 24 financings in Q1, raising $513 million.