When Aaron Bast describes the Canadian tech lending space without Silicon Valley Bank (SVB), he canât help but reach for a local metaphor.
Bast, the Waterloo, Ont.-based general partner at Graphite Ventures, a venture capital firm focused on seed-stage startups, recalls the Waterloo Regionâs âfear, shock, and awe” after Research In Motionâs implosion in 2012.
â[People wondered], âIs it gonna cripple the community in Waterloo?â But we were ready the best we could be, and the community got stronger as a result,â he said. âThat could be said about how the Canadian banking community was able to absorb and step up and fill the gap left by SVB.â
One year after the collapse of SVBâwhich saw a bank run inspired by concerns about the bankâs liquidity lead to a swift shutdown by regulators and eventual sale to First Citizens Bank in the U.S.âventure capitalists and lenders BetaKit spoke with said the ecosystem is missing one of a small number of doors to knock on for debt funding.
Venture capitalists and lenders BetaKit spoke with said the ecosystem is missing one of a small number of doors to knock on for debt funding.
But the bankâs four-year run in Canada changed the tech lending landscape significantly, with its presence prodding the Big Five banks to start competing for startupsâ business and giving smaller companies better access to bank pricing for debt. With those banks hoovering up former SVB Canada talent and customers in the past year, and National Bank of Canada acquiring its Canadian portfolio in August, the countryâs major financial institutions are set to be more active tech lenders.
âAll the players now have new DNA and a focus on the potential of tech companies to become strong depositors,â said Matt Roberts, co-founder and general partner of CMD Capital, a seed stage-focused VC firm. âI think youâll see ex-SVB people in senior positions all over the innovation and financial industries for the next generation.â
Tony Barkett, head of technology and innovation banking at RBCx, said the tech lending market is âthe most competitive Iâve ever seenâ since he started working for SVB in 2010. He attributed the competition to a combination of a larger number of lenders and far fewer startups looking to raise capital, with macroeconomic conditions having pushed many to the sidelines.
Unlike traditional debt facilities for more mature companies, venture debtâa type of non-dilutive fundingâis geared to early-stage companies that are often still cash flow negative and donât have assets against which to lend. Structured as a term loan with a principal and interest payments, venture debt facilities are offered to venture-backed companies during equity rounds and providers tend to rely on the due diligence of VCs to assess the growth potential of borrowers. The debt, which is used as working capital to help companies get to their next raise, is paid back ahead of equity holders in the capital stack.
Big Bank battle
CIBC Innovation Bankingâlong a leader in the venture debt space since its acquisition of Wellington Financial in 2018âmaintained its dominant position over the past year. The bank was the top venture debt provider by both deals and dollars in 2023, lending $113 million over 15 deals, according to the Canadian Venture Capital Associationâs (CVCA) 2023 annual report. That included an undisclosed debt facility to Toronto wealth management platform d1g1t, and a $3.5-million CAD debt facility to Edmonton AI-based maintenance solutions provider Nanoprecise Sci. Corp.
Espresso Capital was the second-largest venture debt provider by number of deals, at $21 million over 13 deals, and Investissement Québec was third, with $93 million over seven deals.
Multiple VCs cited more recent entrant RBCx as being active in the past year and committed in the early-stage space. RBCx, which launched its venture debt product in 2021, hired four former SVB Canada employees in November last year and rolled out its early-stage banking platform around the same time.
âRBCx is a solid platform, theyâre more strategic in the deals they do,â said Christian Lassonde, founder and managing partner of Impression Ventures. âTheyâre out there, active, and relevant.â
Bast said his portfolio companies have primarily dealt with CIBC, RBCx, SVB before its collapse, and Comerica, but he didnât see other banks as active in the early-stage space. âMaybe theyâre very, very strong way downstream at the pre-IPO stuff; I just donât see them as much,â he said.
Two sources told BetaKit that after its August 2023 acquisition of SVBâs Canadian loan book National Bank has been unexpectedly quiet. The acquisition included $1 billion CAD in loan commitments to SVBâs Canadian customers, about $325 million of which were outstanding at the time of the deal.
âIâve not seen National Bank be nearly as active as I thought they would be,â said one VC, who asked not to be named to speak freely about the differences between financial institutions. âI thought theyâd buy that platform and try to activate it and maintain the leadership that SVB had. So far I havenât really seen that.â

Roberts said the bank is doing deals and looking to establish itself, but is still working to build relationships outside of QuĂ©bec. âNational Bank was trying to get into this space and in QuĂ©bec they have a large presence, but they did not have, for lack of a better term, an English-language equivalent.â
Michael Denham, vice-chairman of commercial banking and financial markets at National Bank, told BetaKit he was ânot surprisedâ people hadnât heard much from the bank, as its culture is to act rather than talk. âThe VC community is well aware and highly supportive of what weâve done,â he said. The people who need to know know, and they see what weâre doing. The fact that others donât hear a lot of noise frankly doesnât concern me.â
National Bank has hired a number of ex-SVB Canada employees since the acquisition, which Denham said has given the bank a stronger tech investment banking presence outside of QuĂ©bec. He said the bankâs loan book has also given the bank more balance between QuĂ©bec and English Canada clients.
Since August, the bank has been working with the clients it acquired from SVBâs portfolio to shift their banking services over to National, if they werenât already clients, and work with them to improve their cash management position. It also extended âa numberâ of venture debt facilities to existing and new clients, he said. While the bankâs bread and butter was historically lending to later-stage companies, Denham said the acquisition included a number of early-stage startups and the bank has been learning.
âIâm pleased with what weâve done since the acquisition. We attracted employees, got close to a lot of these clients and a lot have moved their banking and deposits to us,â he said.
Denham said the bank is âmore comfortableâ lending to cleantech and SaaS companies, and prefers B2B over B2C.
Pumping the brakes
The past year has seen a quieter lending market, but it has little to do with SVBâs absence.
Venture debt deals slowed last year, representing just 10 percent of all non-dilutive financing in 2023, according to the CVCA report. SR&ED-backed financing represented the other 90 percent. It was a significant drop from 2022, when $664 million was disbursed over 124 deals.
Roberts said thereâs âvery little [classic] venture debt going on in the ecosystem right now,â as the velocity of equity rounds has decreased in the wake of higher interest rates. Last year saw a total of $6.9 billion invested over 660 deals, well down from $10.5 billion across 760 deals in 2022 and $15.7 billion over 847 deals in 2021, according to the CVCA report.
With time between raises stretching out, Denham said venture debt requirements have become âlonger and thinner,â and many startups have worked on their cash management to lower their burn rate. âAs a lender, you have to be comfortable with the extended timeframe, but the amount you’re needing to disperse to cover the cash requirements is a lot less,â he said.

Roberts noted that the banksâ credit risk strategies, given the impact of higher interest rates on consumers and businesses, could be part of why the lending market is slow now. Canadian banks licensed by the Office of the Superintendent of Financial Institutions to take deposits and issue loans must set aside funds to cover loans that could go sour, which is meant to protect depositors if borrowers default.
Itâs something that made them historically careful about traditional venture debt lending (SVBâwhich only had a license to lend and didnât have to hew to those same provisionsâhad more flexibility). As of their 2024 first-quarter results, released late February, the Big Five have set aside a combined $3.9 billion in loan loss provisions.
Barkett said thereâs been âno discussion internally from a credit risk perspective on holding back on venture debt,â however. âWhat we look at is quality deals, really good companies to back, and if you do that over time the portfolio plays out. Weâre trying to do that on the front end, but thereâs been no discussion on not doing new term sheets because of any sort of portfolio risk.â
The “wild wild west”
For those companies that can raise capital, Barkett said they have their pick of lenders and should assess what additional services they can offer startups, rather than just the debt. âIf youâre able to raise capital itâs a great time to be an entrepreneur, there are a number of partners on the debt side looking to help you out,â Barkett said.
Denham, who characterized the market as a flight to quality, was more moderate. Good-quality startups have options, he said, but wouldnât agree that life is rosy. âI think two years ago there was a sense that every VC-backed company would succeed, and as a result, there was lots of venture debt. Now people are a bit more realistic, some companies do have the basis for success and some donât.â
Mark McQueen, former president and executive managing director of CIBC Innovation Banking, agreed. Even with higher interest rates, the cost of debt is still competitive, and the taps havenât turned off.
âI think every good company still has ready access to debt term sheets, whether thatâs from banks or from funds, and thatâs the same as two years ago,â he said, adding that the private debt market was âway largerâ than just three to five years ago, and there were more venture debt funds in North America now than at any other point his 25-year career.
For most of the last three decades, he continued, the cost of equity funding sat at around 35 percent, and the cost of debt between seven and 18 percentâexcept forâthe last few years when equity was extremely inexpensive and companies loaded up.
McQueen said his sense of venture debt pricing is consistent with where it was about a decade ago. âThere were a lot of great companies created 10 years ago that raised debt, and if you can get money at six [percent] itâs better than at 12 [percent], but if the cost of equityâs 35 [percent], then obviously youâre a happy camper.â
Barkett described the debt market as the âwild wild west,â with some lenders looking to gain market share by offering larger debt rounds than early-stage companies could normally access: $5 or $6 million of debt financing for a startup raising a $10-million Series A, when a normally they would have been able to secure a $3-million debt facility.
While that kind of offer can be appealing, it risks those companiesâ ability to raise the next round, as it loads the balance sheet with more debt than they may be able to handle. âThatâs where I think the marketâs gotten a little bit crazy, because the term sheets have gotten very, very aggressive and more debt is not necessarily a good thingâŠespecially when equity rounds are few and far between,â he said.
He also said some lenders are choosing not to include warrants in term sheets. A warrant gives a debt provider the right to buy company stock in the future at an established price.
âI think warrants are an important part of venture debt. When youâre taking warrants as a lender that allows you to be patient and flexible because thereâs upside,â he said. âIf I donât take any warrants thereâs no incentive to help that company.â
Roberts saw the warrant-less deals differently: as lenders questioning whether there was any value in the equity options of a company, given how unclear valuations are currently, and thus looking to just benefit from higher interest rate payments.