Canadian venture capital (VC) market activity continued to fall in the first half of 2025 amid ongoing trade and geopolitical uncertainty, according to a new report.
The Canadian Venture Capital & Private Equity Association (CVCA) recorded $2.9 billion CAD in total VC funding across 254 deals in Canada during the first six months of 2025. This is a 26-percent decrease in investment and a 22-percent reduction in deal count compared to the same period last year, marking the lowest first half total since the onset of the COVID-19 pandemic in 2020.
CVCA director of data and product David Kornacki acknowledged that Canadian VC activity was particularly low in H1 2025. “There’s no way around that,” he told BetaKit.
“It’s a period of uncertainty.”
David Kornacki,
CVCA
Kornacki noted that uncertain macroeconomic conditions have created a challenging exit market and made it tougher for Canadian tech startups and the VC firms who support them to secure funding. As capital and liquidity have become scarce, VCs have grown more cautious. “We saw it during [COVID-19] as well,” he said.
The CVCA found that these conditions contributed to a decline in pre-seed and seed activity, along with a drop in mega-deals worth $50 million or more, despite investors focusing on fewer, larger investments. There have been only eight mega-deals so far this year, the lowest H1 total since 2017. U.S. investor participation in Canadian VC also declined by three percent compared to 2024.
Kornacki said he was not surprised by these results. “It’s a period of uncertainty.”
Following a particularly weak Q1, the CVCA reports that while there was “a modest rebound” for Canadian VC during Q2 on a quarterly basis, total investment ($1.65 billion) and deals (131) still fell by 36 and 28 percent year-over-year, respectively.
These findings contrast slightly with the U.S., according to PitchBook data shared by CVCA. Unlike Canada, total VC investment and deals in the U.S. during Q2 both decreased on a quarterly basis by over 20 percent. Still, the U.S. saw 40 percent more VC dollars invested across 20 percent fewer deals compared to the same period last year.
Amid a weak exit market marked by fewer exits and no initial public offerings, investment firms have increasingly turned to secondaries as a means of generating liquidity. The two largest VC deals of H1 2025, Jane Software and StackAdapt, were secondaries.
While H1 2025 indicated some concerning signs for Canada’s VC market, Kornacki is not yet ready to sound the alarm.
“I think it’s maybe a yellow flag,” Kornacki said. “I wouldn’t say it’s a red flag yet, but it’s something that we have to definitely keep an eye on.”
After over six years as CEO, Kim Furlong left the CVCA in July, and Kornacki stated that the search for her replacement is ongoing. As Furlong told BetaKit in May, this is a “nervous time” for Canadian VC. She noted that global economic uncertainty has slowed down VC investment decisions, mergers and acquisitions, and fundraising—conditions that remained through Q2.
As BetaKit has reported, performance anxiety and access to capital have been top concerns for Canadian VCs after a slow start to the year that left the industry in need of a “wake-up call” about the necessity for increased homegrown VC activity.
Despite the gloom, there were also positives in H1 2025, including in life sciences, venture debt, and one of the Prairie provinces.
Most industries tracked by the CVCA, including information and communications technology, cleantech, and agribusiness, experienced activity declines. However, life sciences showed resilience, securing above-average investment levels. There was $894 million deployed across 58 deals, putting this year on track to surpass 2024.
Venture debt financings also rose to $628 million across 36 deals, a 188-percent increase in funds and nearly a 90-percent increase in deal count from last year’s period. This represents the highest mid-year total since the CVCA began tracking venture debt.
Kornacki attributed this to companies seeking non-dilutive funding amidst a tough market for equity fundraising, while also noting more frequent disclosure of such deals has been a factor.
Geographically, Manitoba stood out. The province has already exceeded its 2024 VC funding totals (when only $2 million was invested across four deals), securing $125 million in total investment in 2025 thus far, thanks primarily to Conquest Planning and Taiv.
It was a tale of two asset classes in H1, as despite a difficult stretch for domestic VC, Kornacki noted that Canada’s private equity market performed