Atlantic startups have posted their weakest first quarter fundraising performance since the depths of the pandemic, according to new data from the Canadian Venture Capital and Private Equity Association, though Newfoundland and Labrador is a bright spot.

East Coast companies closed just $35 million of VC deals in the first three months of this year, according to the organization’s Canadian Venture Capital Market Overview, equalling their performance for the same period in 2021. The vast majority of that funding — $30 million — was associated with a quartet of deals in Newfoundland.

The regional total represents a decline from $57 million for the same period the year prior and a tepid recovery from the low of $16 million raised by Atlantic companies in the second quarter of 2023.

The drawdown is not mirrored nationally, with the $1.3 billion total funding raised by startups Canada-wide exactly equalling last year’s first quarter figure. But it does reflect a VC market that remains tight worldwide, with analysts at PitchBook forecasting less than three percent annual growth in assets under management through 2028.

“As we transition into the second quarter of 2024, we see that the Canadian venture capital sector is not only weathering global market fluctuations but is also capitalizing on emerging opportunities, particularly in life sciences and Al,” wrote CVCA Chief Executive Kim Furlong. “This approach is demonstrated in the first quarter's increased deal sizes, as investors are focused on supporting resilient companies with demonstrated financials.

“Early-stage investments remained strong, venture debt financing remained stable, the average deal size surged to C$10 million and the quarter also witnessed strong exit activity already accounting for 50 percent of the total exit value of 2023.”

In addition to the four deals in Newfoundland, Nova Scotia posted three deals worth a combined $3 million, and New Brunswick companies closed three deals worth $2 million.

Across all three Atlantic provinces where startups raised capital in the first quarter, there were only two sectors represented: life sciences and IT.

In its report, the CVCA said the Newfoundland funding totals were led by St. John’s-based Spellbook’s US$20 million, or C$27 million at the time, Series A raise.

The second quarter, however, is shaping up to be stronger. CoLab Software’s US$21 million, or C$28.6 million raise, announced last week, brings the total equity funding raised by East Coast startups since the beginning of April to more than $30 million.