The East Coast startup community experienced record numbers of company launches and failures last year while most of the best continued to grow strongly, says Entrevestor’s 2023 Atlantic Canada Startup Data report, which we’re launching today.

Our 10th startup data report, which we’ll launch in an event at University of New Brunswick at noon, is a good-news-bad-news document that shows stagnation in some metrics and a respectable funding level of $265.8 million.

First, the good news: we have a solid core of companies that are performing remarkably well. The number of Elite companies in our databank increased to 55, and they are growing strongly in international markets. They include cleantech company CarbonCure Technologies, which raised US$80 million, and AI software maker Spellbook, which raised $41 million. They also include Site 20/20, which makes automated traffic lights for construction sites. It placed higher than any Atlantic Canadian company ever in the prestigious Deloitte Fast50 list of the fastest growing companies in Canada.

We’ve also increased our stable of Scaling companies by 21 percent to 35, and these companies’ revenues collectively doubled in 2023.

Make no mistake: the best startups are killing it.

The bad news is there was prevailing stagnation in the startup community, which until recently was defined by its astonishing growth. The number of companies in our databank rose about 1 percent to 816.  We cleaned up the databank this year more than usual, and found 117 failures, the most ever. (We also removed some companies because they were service companies or left the region.) Unfortunately, they included IMV, once the star of the biotech sector.

Counterbalancing this, we found 177 new companies, also a record. The highlights of this wave of new companies were strength in IT, especially AI companies, and a lot of returning entrepreneurs.

The challenge facing these new companies will be raising capital in the coming years. We were disturbed to find only $18.6 million in angel funding in 2023, the lowest level in several years. We are hearing that 2024 could be another difficult year for early-stage funding, which may lead to more failures.

Overall, it was a pretty good year for funding, with a total equity funding of $265.8 million. The funding was led by stellar VC deals announced by CarbonCure and Spellbook, and featured more stealth funding than we’d ever witnessed before. In the previous three years, the funding numbers were inflated by large stock market deals, but those vanished in 2023 as IMV, Appili Therapeutics and Meta Materials all ran into trouble.

Most companies increased their revenues without raising their complement of employees. Overall, the number of employees fell 3 percent to 9100 people. Revenues, meanwhile, increased 42 percent, the exact same level as 2022. The strongest revenue was found in our Scaling group (35 companies with $1M+ in revenue, 10+ employees and/or $2M+ in funding). Their weighted average revenue growth was 96 percent.

Another troubling metric was the region recorded just one exit – Halifax-based Bluenode. In fact, more Atlantic Canadian startups were buyers not sellers in 2023. Passiv, Sona Nanotech and Mysa all bought other companies or their assets.

In the DEI file, three in 10 companies are now led by immigrants following another strong year of growth. While there was no overall growth in the number of female-led companies, we did note the number of women being hired for C-level positions.

In our ecosystem section, we’ve counted 67 organizations that support startups in the region. We’ve assumed these groups primarily support companies under the age of five years, and there are 475 of these in our data bank. That means there are about seven startups for each support organization in our ecosystem, which suggests some rationalization is needed.