A new report examining years of Canadian startup ecosystem data shows a funding slowdown at the earliest stages has contributed to sluggish growth and lost value for Canada’s tech sector.
“We have rails everywhere but we don’t have a high-speed railway system.”
Claudio Rojas, NACO
The National Angel Capital Association (NACO) and tech organization Startup Genome released a joint report on Monday tracking startup funding deals in Canada since 2006. The report estimates that Canadian startups are missing out on $141 million CAD annually at the pre-seed and seed stage, and $181 million at the Series A level compared to similar startups in comparable US cities.
The report’s authors say this funding gap early in the pipeline is contributing to Canada’s slower tech growth compared to its global peers. Meanwhile, domestic investors are calling for policy levers to better support startup creation and deal flow.
NACO and Startup Genome analyzed roughly 65,000 funding rounds across seven Canadian ecosystems, and compared them to other leading North American tech cities, including New York City, Boston, and Los Angeles. The report did not compare Canada to Silicon Valley, because it’s in a league of its own, the authors said.
Canada saw 12 to 15 percent fewer startups get seed funding, relative to its number of startups created, than in US “Tier 1” ecosystems. The report argues that these gaps translate to fewer exits, leading to lost ecosystem value. According to the report, Canada’s top-tier ecosystems (Toronto-Waterloo, Montréal, and Vancouver) lost $66 billion CAD in ecosystem value between 2019 and 2024—measured as its market share of global startup funding and exits.
RELATED: Capital concentrates as Canadian VC market narrows: report
Canada is also seeing sluggish growth compared to its global peers, the report said. Its startup ecosystems grew at approximately 2.2 percent annually from 2019 to 2024, while the UK’s grew 13 percent and France’s grew 17 percent.
What could explain the slow growth is an off-kilter ratio between seed and Series A funding rounds, according to Startup Genome founder and CEO JF Gauthier, who’s originally from Jonquière, Que. but now lives in San Francisco.
Gauthier said that in Canada, only 34 percent of total early-stage (meaning seed to series A) funding goes to seed rounds, while that percentage should be closer to 40 percent (it’s 39 percent in top US ecosystems). “Our startups cannot grow slowly at seed and then suddenly grow super fast at Series A,” Gauthier said.
The report spelled out that larger seed rounds lead to faster-growing startups and a higher proportion of companies reaching Series A and Series B rounds. But in Canada, seed rounds are 37 to 40 percent smaller than in Tier-1 US cities.
NACO calls for early-stage “railway system”
The report demonstrated an early-stage funding decline that has plagued the Canadian ecosystem in recent years. A report from the Canadian Venture Capital and Private Equity Association (CVCA) showed that in Q4 2025, pre-seed and seed deal flow both declined year over year. It’s also a challenging time for VCs raising money: according to an RBCx report, 2025 saw the fewest funds closed and the fewest dollars raised in Canada since 2016.
The federal government pledged $750 million toward early-stage VC funding in Budget 2025, but a clear plan for how this will be deployed has yet to be released. If distributed properly, this could make a dent in Canada’s seed-stage gaps, Gauthier argued.
Part of supporting the early-stage pipeline is having strong accelerator programs, he said. This means that they should have funds attached to them and the ability to write cheques, similar to a Y Combinator model.
“If you have weak accelerators, they don’t have much impact,” Gauthier told BetaKit. “To be strong, an accelerator needs to be able to write cheques.”
At a NACO-hosted online roundtable for Canadian tech on Thursday, NACO CEO Claudio Rojas called for national infrastructure to better connect early-stage support mechanisms, like angel networks and venture studios. “We have rails everywhere but we don’t have a high-speed railway system,” Rojas said.
NACO has asked the federal government for such infrastructure. In pre-budget consultations, the group recommended a $450-million early-stage matching funds program complementary to the Venture Capital Catalyst Initiative (VCCI). It also sought a $200-million investment establishing a national infrastructure to activate private capital using existing organizations like angel networks and early-stage funds.
RELATED: Tech investor associations urge unified capital strategy ahead of budget
Janet Bannister, founder and managing partner at Staircase Ventures, argued Canada must improve early-stage fundraising to boost its economic productivity.
“Our economy is heavily weighted toward natural resources, and not strongly enough towards technology,” Bannister said at the roundtable. “We need to fix that.”
Bannister added that the most motivated founders just move to Silicon Valley in search of capital. Toronto firm Leaders Fund found that just over 30 percent of Canadian-led “high-potential” startups (companies that have raised more than $1 million USD) created in 2024 were headquartered in Canada, while almost half were located in the US.
“I can’t tell you how many awesome founders say I’m moving because it’s easier to raise capital there,” Bannister said.
Feature image courtesy Claudio Rojas via LinkedIn.