Stealth funding deals proliferated in Atlantic Canada in 2023, while angel investment reached its lowest ebb in at least eight years.

Those are among the findings of Entrevestor’s 2023 Atlantic Canada Startup Data Report, with the unannounced stealth rounds emerging as a widespread phenomenon in the region for the first time. Of the 34 funding rounds worth over $1 million last year, 10 were never publicly revealed. We learned of them when founders completed our confidential surveys.

The decline in angel deals, in contrast, represents the continuation of a pattern that innovation economy observers have been warning about since at least the end of the last decade. In 2023, East Coast companies raised just $18.6 million of angel funding, down from $26.3 million the year prior.

Both trends are emblematic of a year of hard-to-define market conditions. A large portion of the founders interviewed by Entrevestor reported difficulty raising capital, but the final totals have proven fairly robust. Atlantic companies raised $265.8 million of equity funding, which was their worst performance in three years, but also their fourth strongest on record. One deal, Halifax-based CarbonCure’s US$80 million or C$105.7 million raise, accounted for more than 40 percent. But the number of companies posting six-figure raises or better grew by eight compared to the previous year’s total.

Nova Scotia led the region with $172.4 million raised, followed by Newfoundland and Labrador at $75.7 million. New Brunswick companies raised $13.7 million and P.E.I. startups saw $4 million.

For very young companies, though, headwinds are stronger. Our research, backed by survey responses from 112 startups, suggests many young, Atlantic Canadian companies are simply not able to access the capital they need in order to scale.

It has now been more than five years since the First Angel Network closed its doors, and even longer since the pan-regional funding group was a force in raising capital for young companies. Longtime angel organizer Gerry Pond has also stepped back from his work with East Valley Ventures in New Brunswick, though others are continuing the group’s work.

Similar conclusions are inescapable even allowing for the existence of funding sources like the New Brunswick Innovation Foundation, which is not an angel group, but tends to back rounds of about the same size. Even so, we heard from just nine companies that raised between $500,000 and $1 million in 2023, compared to about 20 similar raises the year prior.

Funding from public markets, meanwhile, had a terribly weak year. Of the half-dozen publicly traded innovation-driven companies that were operating in Atlantic Canada last January, two failed during the year and only two others, St. John's-based Kraken Robotics and Halifax's Sona Nanotech, managed to post a return for their shareholders.

In fact, if an investor had placed $10,000 in an equally-weighted basket of the seven East Coast startup stocks at the beginning of 2023, they would have ended the year with just $6,617, losing just over a third of their money. (Other than Kraken and Sona, the other four companies in our frazzled investor's portfolio would have been video game technology specialist Swarmio Media, advanced materials-maker Meta Materials and drug-discovery companies Appili Therapeutics and IMV.)

Now in its 10th year, our Startup Data Report delves into such metrics as the number of new companies founded, employment figures, revenues and funding. We plan to launch our full 2023 report June 20 in a presentation at the Wu Conference Centre at the University of New Brunswick in Fredericton. You can learn more here.