Canada’s largest VC firm saw a net revenue drop in fiscal 2026, but ultimately grew its net income as the value of its VC investments rose by more than $400 million CAD.
On Wednesday, the Business Development Bank of Canada (BDC) released its annual report for the year ended March 31, 2026. Amid income of more than $1 billion for the Crown corporation overall, net income for VC activity was $217.8 million. While BDC recorded net revenue losses of $70.9 million and foreign exchange losses of nearly $50 million for the year, this was offset by a $401.5-million increase in unrealized appreciation of investments (paper gains in portfolio companies’ value before they’re sold). The fair value of BDC’s VC portfolio hit $3.68 billion, compared to $3.2 billion in 2022.
Over the year, BDC says it made 848 portfolio investments into Canadian companies and investment firms—30 percent more than the year before.
The overall net income gain marks a turnaround from last year’s net loss of nearly $58 million. The $400-million hike in portfolio value was driven by its direct equity investments, particularly “valuation step-ups” in segments like AI and quantum computing, the report said. Toronto quantum portfolio company Xanadu went public in a special purpose acquisition company deal at the end of March, valuing the startup at a projected market capitalization of $3.6 billion USD.
In its annual report, the Crown corporation attributed the net revenue drop to higher write-offs (when a portfolio company is no longer worth anything), compared to net realized gains of $7.1 million the year before.
BDC Capital is Canada’s largest and most active VC investor, with a portfolio totalling roughly $30 million in debt investments, $1.74 billion in direct equity investments, and $1.68 billion in investments in other funds.
Over the year, BDC says it made 848 portfolio investments into Canadian companies and investment firms—30 percent more than the year before. It invested $282.1 million directly into 70 companies, and $261.7 million into 18 funds, which then invest in companies, a rough split of direct versus indirect activity.
In June, CEO Isabelle Hudon told BetaKit that BDC Capital set the goal of shifting its split to 60 percent direct and 40 percent indirect, and that this year it had an opportunity to rapidly increase its indirect funding. In its report, BDC said the split reflected investment in the lower mid-market private equity and healthcare sectors, and “a strategic focus to better support emerging venture capital fund managers.” At the same time, BDC Capital spun up two new funds to directly invest in Canadian startups: the defence-focused BDC StrongNorth Fund and a new life sciences fund worth $150 million.
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This comes as the calendar year of 2025 was the worst year for total dollars raised for VC funds since 2016. It also saw the fewest funds closed in Canada since 2018, according to an RBCx report.
The federal government has leaned on BDC to deliver the financing to complement some of its strategic priorities, including defence and AI adoption. BDC announced a $6-billion defence platform this year, as well as the $500-million loan program to help small businesses adopt AI.
The Crown corporation, which has an extensive lending business for entrepreneurs of small and medium-sized businesses, brought in more than $1 billion in net income and deployed $11.6 billion in financing solutions, notching an adjusted return on equity of 9.7 percent overall.
Feature image courtesy BDC.