Q1 | Torys QuarterlyWinter 2022

Emerging trends in Canada’s innovation economy

Canadian tech thrived in 2021. We saw record valuations, increased interest from U.S. investors and a healthy number of companies going public. The average valuation for venture-backed companies climbed by 215% from 20201. This immense capital supply added fuel to a maturing ecosystem and a market with a broad, robust sector focus.

The question now being asked is: can the Canadian innovation economy sustain this explosive growth? In this article, we highlight what we expect to see in 2022.

Continued growth of later-stage investments

Historically, most Canadian venture capital deals have been with early-stage companies. In recent years, there has been a notable increase in later-stage funding. Growth and later-stage deals accounted for 63% of total venture capital dollars in Q3 2021, a substantial increase from previous years2. While it is common to see more deal numbers at the early stage, as the industry continues to develop, we expect to see a growing percentage of later-stage deals and a continuation of the rise in absolute dollar numbers being invested in growth and late-stage companies.

A “watch-and-see” approach to tech IPOs

Later-stage tech companies are generally faced with the decision to stay private and continue to grow, to sell, or to go public. In 2021, many chose to go public.

We may see a cautious start to tech IPOs in 2022, with the final verdict—and the impact of inflation and the expected increase in rates—to be determined as the year unfolds.

However, of the tech IPOs issued in 2021, a majority have traded below their listing price, giving rise to speculation as to why3. Is the market cooling off in the face of increasing inflation and an expected increase in interest rates? Is the market simply undervaluing great companies? Or did some tech companies go public too early? Whatever the reason, in 2022, we expect that investors and founders will be closely watching the performance of those tech companies that went public in 2021. This may ultimately lead to a cautious start to tech IPOs in 2022, with the final verdict—and the impact of inflation and the expected increase in rates—to be determined as the year unfolds.

Continued market interest in crypto currency and blockchain

A substantial number of dollars went in to crypto in 2021, with venture capitalists, pension funds and large asset managers all investing in digital currencies. There was also innovation in crypto assets, products and services (e.g., the rise of non-fungible tokens (NFTs) and creation and growth of companies lending against crypto assets), further giving legitimacy to it as an asset class. This explosion in the market was accompanied by heightened attention from Canadian regulators, placing Canada at the forefront of crypto regulation4. In 2022 we expect blockchain companies and crypto businesses to continue to gain attention from established investors and asset managers. These investments by Canadian pension funds and large asset managers will likely be at a measured pace as central governments continue to regulate the crypto currency space and establish policies designed to protect unsophisticated investors and the overall financial system from volatile swings in the price of crypto currencies.

We will see more blockchain applications gain momentum throughout the year.

Regardless of how the crypto sector performs, the underlying blockchain framework upon which it operates will continue to be a standalone technology that tech builders and funders alike will lean into. We will see more blockchain applications, particularly in the financial and data security sectors, gain momentum throughout the year.

Evolution of open banking

The conversation around open banking in Canada, and the rules that will govern it, continued in 2021 with the release of the Advisory Committee on Open Banking’s report5. The report recommends the approach the federal government can take in rolling out an open banking system and provides a January 2023 target date for the initial system to be built. While it remains to be seen whether the January 2023 target date is met, we expect to see a lot of progress in this area over the coming year, powered by a need to iron out details of the proposed system and the markets growing demand for open banking services. This steady push by consumers, and the introduction of platforms by companies who no longer want to wait for the governments guidance, will create a market-led approach that moves policy makers forward.


As 2022 progresses, many different levers will impact the Canadian innovation economy. However, due to an attractive and maturing ecosystem, continued commitment by major players across several emerging markets, and the introduction of regulations that provide more market confidence, we believe it will be another great year of activity and growth for Canadian tech and innovation in Canadian business more broadly.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

For permission to republish this or any other publication, contact Janelle Weed.

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