Blakes upRound™: June 2024 | Blake, Cassels & Graydon LLP

In this case

• How the Ontario Securities Commission (OSC) is improving access to capital for early-stage companies
• New rules on foreign investment in the gaming, VR and digital media sectors, workplace rules in Canadian jurisdictions, the 2024 federal budget and other relevant topics
• Artificial intelligence (AI) investment deals are gaining traction; Bank of Canada cuts interest rates

Market insight

OSC introduces initiatives to support capital raising for early-stage companies in Ontario – As part of its mandate to support capital formation and competitive capital markets, the OSC recently introduced certain time-limited initiatives aimed at improving access to capital for early-stage businesses in Ontario. These initiatives include the creation of new dealer registration exemptions for early stage companies and non-profit angel groups and the expansion of the prospectus exemption pilot program for self-certified investors. The OSC implements these initiatives through its TestLab program, which it uses to evaluate capital market innovations and new approaches to regulating capital markets in Ontario. Read more in our news Blakes Bulletin: OSC introduces initiatives to support capital raising for early-stage companies in Ontario.

Legal update

Founders and investors may find the following insights from our colleagues at Blakes helpful and informative:

• Interactive technology – On March 1, 2024, the Government of Canada issued two policies that will impact foreign investment in Canada’s gaming, virtual reality and digital media sectors, indicating that such investments will be subject to increased scrutiny. Read more about these rules in our Blakes Bulletin: This is not a simulation: Canada publishes new rules on foreign investment in interactive digital media.
• Digital Services Tax Act — Canada’s long-awaited decision Digital Services Tax Act was introduced in Parliament on November 30, 2023, as part of Bill C-59. Read ours Blakes Bulletin: The mechanics of Canada’s new digital services tax to learn more about how affected taxpayers should calculate their 3% DST liability as the implementation date approaches.
• Workplace Policies – While updating workplace policies is often on an organization’s to-do list, regularly reviewing such policies often gets pushed aside and occupied with other, more urgent tasks. Depending on the jurisdiction in which your organization operates, regulations require a number of workplace policies. Read more in our Blakes Bulletin: Updating mandatory workplace policies across Canada.
• Federal Budget 2024 – On April 16, 2024, the Government of Canada published its 2024 budget. In our article, we summarized the key aspects that may impact your business Blakes Bulletin: Your guide to the 2024 federal budget.
• Cybersecurity – On May 13, 2024, the Government of Ontario introduced Act 194, the so-called Strengthening Cybersecurity and Building Trust in the Public Sector Act of 2024which, if adopted, would significantly reform the law Freedom of Information and Privacy Protection Act (FIPA). FIPPA governs how the Government of Ontario and designated public sector entities collect, use and disclose personal information, and provides a general right to access government records. To learn more, read ours Blakes Bulletin: New Ontario Bill 194 reforming FIPPA and introducing mandatory reporting of privacy breaches.

Transaction monitor

Data comes from PitchBook.

• IT investments continue to be the most active industry, accounting for almost half of the top 20 YTD deals in 2024 by value, with a particular focus on SaaS and artificial intelligence (AI), the latter of which is a popular topic in the space. Investments in financial services are growing, already exceeding the total amount of transactions at the end of 2023 in terms of value and number.
• Among the largest deals was Ontario-based QuadroCore’s strategic partnership with Sustainable Development Technology Canada, which included $66 million in funding to produce a mass spectrometer that offers high-performance tools with high throughput, cost-effective process and modular design to enable safety, care healthcare, and other industries to accurately quantify the analyte of interest.
• Other major SaaS and AI deals in 2024 include Brim Financial’s $63 million Series C financing led by Export Development Canada, Reactiv’s $59 million financing from Unbound Capital, Thentia Cloud’s $53 million Series B1 financing USD led by Spring Mountain Capital, BDC Capital and First Ascent Ventures, and a $52 million Dcbel grant from the California Energy Commission.

• While 2024 has been a relatively slow year so far, we may see a surge in transaction volume towards the end of the second quarter. The healthcare industry has had a slow start to 2024, but if past trends continue, we should see it quickly become one of the leading industries by the end of the year.
• Hopefully, with the Bank of Canada lowering key interest rates to 4.75% (the bank’s first rate cut since March 2020), companies should start to see an increase in investment activity and a return in the venture capital and growth capital markets.