Canadian VC pre-seed and seed activity continued to slump in H1 2025

A new report has found that pre-seed and seed-stage investment activity in Canada continued to decline in the first half (H1) of 2025 as investors deployed fewer dollars across fewer deals.

“We were climbing this great big mountain before, and had the wind at our back, and now we don’t.”

According to Canadian Venture Capital & Private Equity Association (CVCA) data, $297.2 million in venture capital (VC) funding was deployed into Canadian technology startups across 133 pre-seed and seed deals. That marks a 16 percent decrease in total dollars invested and a 28 percent drop in deals at these stages compared to the same period in 2024, according to the CVCA’s H1 2025 report.

The CVCA asserted that seed-stage investment amounts and deal volumes reached a “high point” between 2021 and 2023, only to decline in 2024 and face “further reductions” in 2025. This largely mirrors the fate of the overall Canadian VC market during this time.

While the CVCA says 2025 is still on pace to exceed Canada’s pre-pandemic average for pre-seed and seed activity, RBCx managing director of VC coverage Matt Roberts argued that the trend line is what matters most, noting that things were improving pre-pandemic.

“We were climbing this great big mountain before, and had the wind at our back, and now we don’t,” Roberts told BetaKit in an interview.

According to the CVCA, total seed investment declined 12 percent year-over-year, while the deal count dropped by 25 percent. The total pre-seed investment and deal levels respectively fell by 34 percent and 28 percent.

“We need to invest more in pre-seed and seed-stage deals,” Startup TNT co-founder Zack Storms argued to BetaKit in an interview, citing drops in deal volumes as a cause for concern.

While the latest CVCA data is “not the end of the world,” according to Roberts, he anticipates that the Canadian VC “slowdown” at pre-seed and seed will continue “for the foreseeable future.”

“My concern is that, looking out into the market over the next three years, there seems to be less venture capital [fund] creation going on—I’m a direct example of it, but there’s also others,” Roberts said. “There’s less limited partner (LP) money in the market today than there was back in 2019, and in 2019 we were trending upwards, and now we’re trending downwards.”

Inovia Capital CEO Chris Arsenault argued in a LinkedIn post that Canada needs more emerging managers, which typically invest at the pre-seed and seed stages but have found fundraising more challenging as market conditions have deteriorated and LPs have concentrated on more established firms.

For some Canadian VC funds, Roberts said “a slow decline” could be a good thing, as less competition among investors may lead to lower startup valuations. But he noted this could also drive more Canadian founders to fundraise south of the border in search of higher prices.

“It was far easier to raise in the US—higher valuations and faster execution,” Sakina Roufid, the Canadian founder behind a stealth revenue operations startup, told BetaKit. “Susa Ventures committed to lead my round just two hours after our first call, having back-channeled dozens of references in that time.”

Speaking with BetaKit last month, CVCA director of data and product David Kornacki said that while the first half of 2025 showed some worrying signs for Canada’s VC market—including the lowest first half total since 2020—he is not ready to raise the alarm at this point.

Roberts said he now believes that the Canadian VC market for pre-seed and seed is “where we would have been had there been no craziness” during the pandemic.

Storms highlighted that a return to pre-pandemic numbers for pre-seed and seed-stage VC in Canada would be a problem for the ecosystem, given the number of new companies that have emerged since then.

Unsurprisingly, the CVCA found that artificial intelligence (AI) hogged the largest share of overall pre-seed and seed investment, with $28 million across 12 deals in H1 2025, representing nearly 10 percent of all dollars invested at these stages. It was followed by construction tech, software-as-a-service (SaaS), digital health, FinTech, and cleantech, respectively.

Roberts noted that there is “some silliness and valuation creep” in the AI space at the moment, adding that it is harder for companies to raise money in other areas right now.

The CVCA also found some bright spots: average deal sizes increased, life sciences and agribusiness saw rebounds, and there was “a more balanced pre-seed environment” that included startups beyond Ontario, Quebec, and Alberta. US investor participation in Canadian seed rounds also declined, continuing a trend that began last year.

“While deal activity in several provinces and sectors continues to exceed pre-pandemic averages, the gradual decline in dollars invested and shifts in foreign participation signal a more cautious and selective funding climate,” the CVCA report stated.

Concerns over possible missing data

Some VCs have questioned what role a lack of reporting has played in the CVCA’s numbers, and data that PitchBook shared with BetaKit tells a slightly different story. PitchBook tracked $470 million CAD in total investment across 143 total angel, pre-seed, and seed financings in Canada during the first half of 2025.

This represents a four percent increase in dollars invested and a 26 percent drop in deal count year-over-year compared to PitchBook’s figures from the same period in 2024. It also marks 10 more deals and $172.8 million more in total investment than the CVCA captured.

Storms acknowledged that submitting this investment data can be a pain “administratively.” “Even our own organization, sometimes we miss a quarter,” he said. But he and Roberts argued that some of the people complaining ought to improve their own reporting in order to paint a clearer picture for the entire ecosystem.

“It’s good for your own brand to be listed in the CVCA data, and it’s also just good for the Canadian brand to have accurate data,” Storms said. “As far as I can tell, CVCA is putting together the most comprehensive and high-quality report of what’s happening in Canada, so I do think it’s on all of us to participate.”

With files from Aaron Anandji.

Feature image courtesy Creative Commons