Capital concentrates as Canadian VC market narrows: report

Canadian venture capital (VC) invested $8 billion across 571 deals in 2025 as capital continued to be funnelled toward fewer companies, according to the Canadian Venture Capital Association’s (CVCA) annual market overview report. 

“Concentration is not inherently negative, but it does raise questions about breadth.”

David Kornacki, CVCA

The CVCA said there was a 12-percent decline in deal flows last year, but deployed capital was only six percent below 2024 levels. That drove the average deal size up six percent year-over-year, to just over $14 million, and meant more money went toward fewer (and larger) players, leaving less for smaller companies, an ongoing trend since 2023. This isn’t a Canadian phenomenon, however, as the report indicated that the US venture market experienced a similar pattern. 

The concentration of capital follows a recent RBCx report, which found 2025 to be the worst year for Canadian VC fundraising since 2016, with the fewest funds closed since 2018. 

“Concentration is not inherently negative, but it does raise questions about breadth,” CVCA director of data and product David Kornacki told BetaKit in an email on Wednesday. “A small number of large deals can sustain annual investment totals, yet long-term ecosystem health depends on a steady pipeline of companies progressing from early stages to scale.”

On top of this, Canadian exits continued to decline year-over-year, with only 29 in 2025 that all came through mergers and acquisitions (M&A). In comparison, 2024 saw 40 companies exit. The chilly IPO market has prompted some companies to hold large secondary rounds so investors can cash out their holdings. 

The phenomenon is now so common that the CVCA has decided to report secondary transactions separately from venture activity, which Kornacki said provides a “clearer view of market dynamics.” 

RELATED: “A perfect storm”: 2025 was the worst year for Canadian VC fundraising since 2016

According to the report, 2025 saw a total of $1.3 billion in additional capital raised via secondary transactions, the majority of which comes from Jane Software’s $500-million secondary round and StackAdapt’s $337-million secondary round. When including both primary and secondary activity, total VC investment for the year increases to $9.3 billion. 

Another trend in 2025 was the dominance of raises of over $50 million, also known as “megadeals.” Megadeals buoyed Canadian VCs’ 2024 numbers, accounting for 62 percent of all dollars invested. Although the total dollars committed to megadeals dropped by four percent, just 26 deals raked in $5.3 billion, making up 66 percent of total investments in 2025. 

Activity increased late in the year 

Overall, venture activity did pick up in the latter half of 2025, which is when 20 of the so-called megadeals closed. The year ended with record high venture debt (loans for venture-backed companies) of $1.4 billion in 2025, $679 million of which came in the fourth quarter, also setting a quarterly record. Q4 also saw the average deal size rise to just over $23 million, lifted by Waabi’s record-setting $1-billion Series C round.

Kornacki said that the increased activity late in the year is “constructive but not definitive,” noting that the activity was concentrated in a small number of large financings. 

“The broader signal remains mixed, with fewer overall deals and continued reliance on international capital in larger rounds, so sustained recovery will depend on stronger progression across the full financing pipeline,” Kornacki said. 

While data released during the first half of 2025 had Canadian VCs clamouring for a “wake-up call,” and others declaring Canada’s domestic VC market to be “dying,” Kornacki said the full year ended up on a stronger footing than those early reports suggested. He explained that capital deployment picking up in the second half of the year, particularly in larger financings, points to “continued investor engagement,” even in a selective market.

“Overall activity shows the ecosystem remains active, resilient, and positioned for more stable growth heading into 2026,” Kornacki said. 

In 2025, later-stage rounds (Series C and beyond) saw a 25 percent increase in dollars invested. However, most other stages experienced less capital and deal flow. Pre-seed rounds saw a five percent year-over-year reduction in dealflow, while average deal size ($880,000) was 15 percent lower compared with the five-year average. One stage up, seed round stats also declined year-over-year, with two percent fewer dollars invested across four percent fewer deals. The stagnation continued into the early-stage category, with Series A and Series B deals reaching only two-thirds of the level set in 2024. 

This isn’t as dramatic a decline as 2024, when seed transactions dropped by 47 percent from 2023. BDC Capital, the venture arm of the crown corporation Business Development Bank of Canada, was the most active seed-stage investor in 2025, participating in 20 of 215 recorded rounds. 

Ontario remained the leading province in both capital invested and deal activity, securing $4.6 billion across 247 deals, while British Columbia ranked second with $1.4 billion across 70 deals, and Quebec recorded $1 billion across 122 deals. Alberta notably recorded three more deals than British Columbia, but only secured $465 million in capital. 

Budding tech markets like Manitoba and Nova Scotia have a reason to celebrate, despite the generally lukewarm report, as they posted record annual investment levels, nabbing $127 million and $162 million, respectively. Newfoundland also recorded the highest average deal size ($27.2 million) among provinces, thanks to CoLab Software’s $101-million CAD Series C round. 

Feature image courtesy Unsplash. Photo by Donovan Dean Photography.