Canadian venture capital (VC) market activity continued to decline in the first half of 2025 amid ongoing trade and geopolitical uncertainty, according to a new report.
The Canadian Venture Capital & Private Equity Association (CVCA) tracked $2.9 billion CAD in total VC funding deployed across 254 deals in Canada during the first six months of 2025. That represents a 26-percent drop in dollars invested and a 22-percent decline in deal count compared to the same period last year. Notably, it also marks the lowest first half (H1) total since the onset of the COVID-19 pandemic in 2020.
CVCA director of data and product David Kornacki acknowledged that Canadian VC activity was particularly low in H1 2025. “There’s no way around that,” he told BetaKit in an interview.
“It’s a period of uncertainty.”
David Kornacki,
CVCA
Kornacki noted that uncertain macroeconomic conditions have created a challenging exit market and made it tougher for Canadian tech startups and the VC firms who back them to raise money. As capital and liquidity has become harder to come by, those VCs have become more cautious. “We saw it during [COVID-19] as well,” he said.
The CVCA found that these conditions have contributed to not just a continued decline in pre-seed and seed activity, but also a drop in mega-deals worth $50 million or more—despite investors concentrating on fewer, bigger investments. There have been only eight mega-deals so far this year, the lowest H1 count since 2017. United States (US) investor participation in Canadian VC also declined by three percent compared to 2024.
Kornacki said he was not surprised by these results. “It’s a period of uncertainty.”
After a particularly weak Q1, the CVCA reports that while there was “a modest rebound” for Canadian VC during Q2 on a quarterly basis, total investment ($1.65 billion) and deals (131) still dropped by 36 and 28 percent year-over-year, respectively.
These results contrast a bit with the US, according to PitchBook data shared by CVCA. Unlike Canada, total VC investment and deals in the US during Q2 both declined on a quarterly basis by more than 20 percent. But despite this drop, the US saw 40 percent more VC dollars invested across 20 percent fewer deals compared to the same period last year.
Amid a weak exit market that featured a dip in exits and no initial public offerings, investment firms have increasingly turned to secondaries as a means of generating liquidity. The two largest VC deals of H1 2025, Jane Software and StackAdapt, were secondaries.
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While H1 2025 showed some worrying signs for Canada’s VC market, Kornacki is quite not ready to raise the alarm at this point.
“I think it’s maybe a yellow flag,” Kornacki said. “I wouldn’t say it’s a red flag yet, but it’s something that we have to definitely keep an eye on.”
After more than six years at the helm, CEO Kim Furlong departed the CVCA in July, and Kornacki said the search for her replacement remains ongoing. As Furlong told BetaKit in May, this is a “nervous time” for Canadian VC. She noted that global economic uncertainty has slowed down VC investment decisions, mergers and acquisitions, and fundraising—conditions that have held true through Q2.
As BetaKit has reported, performance anxiety and access to capital have been top of mind for Canadian VCs following a weak start to the year that has left the industry in need of “a wake-up call” about the need for greater homegrown VC activity.
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Despite the doom and gloom, there were also some bright spots in H1 2025, including for life sciences, venture debt, and one of the Prairie provinces in particular.
Most industries the CVCA tracks, including information and communications technology, cleantech, and agribusiness, saw activity decline. But life sciences showed resilience, however, securing above-average levels of investment. There was $894 million deployed across 58 deals, putting this year on pace to surpass 2024.
Venture debt financings also spiked to $628 million across 36 deals, a 188-percent jump in terms of dollars invested and a nearly 90-percent increase in deal count relative to the same period last year. This is the highest mid-year total since CVCA began tracking venture debt.
Kornacki attributed this to companies turning to non-dilutive funding amid a difficult market for equity fundraising, while also noting more frequent disclosure of such deals has played a role.
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Geographically, Manitoba stood out. The province has already blown past its 2024 VC funding totals (when a mere $2 million was invested across four deals), garnering $125 million worth of total investment in 2025 thus far thanks primarily to Conquest Planning and Taiv.
It was a tale of two asset classes in H1, as despite a bleak stretch for domestic VC, Kornacki noted that Canada’s private equity market went “gangbusters” during this time, with nearly $31 billion invested across 322 deals for a record-breaking H1 2025 that already exceeds last year’s total.
Kornacki hypothesized that private equity’s longer holding periods and potential declines in company valuations might have driven some of this activity.
For his part, Kornacki expects 2025 overall to be flat or slightly down year-over-year as the trade war that played a key role in H1 shows no signs of abating.
Feature image courtesy Unsplash. Photo by Алекс Арцибашев.