Canadian venture capital deals

have tumbled to levels not seen since the COVID-19 pandemic, according to a new report by the

Canadian Venture Capital and Private Equity Association

(CVCA).

Investors poured $2.9 billion into 254 Canadian VC deals in the first six months of 2025, marking a 26 per cent decline in dollars invested and a 22 per cent fall in deal count compared to the same period last year, the report released on Wednesday said. It was the lowest first-half total since 2020. A sharp pullback in early-stage funding was a key factor in the decline.

The information and communications technology (ICT) sector, which includes e-commerce, telecommunications, software and hardware startups, attracted the most VC investment in the first half of 2025, raising $1.39 billion across 115 deals.

The life sciences industry was in second place, raising $894 million across 58 deals, followed by cleantech, which received $191 million from 54 deals in the same period.

VC deployment slowed down across all sectors in the first half compared to the same period last year, with funding for the ICT and cleantech sectors reaching only 30 per cent and 17 per cent, respectively, of their total levels a year ago.

Investors in the United States have long been key players in Canada’s venture capital and startup ecosystem. In the first six months of 2025, however, their participation in Canadian VC deals dropped by three per cent compared to last year and by eight per cent compared to the all-time high reached in 2021.

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Global trade tensions

and similar market slowdowns in the U.S.” fueled the slump, said David Kornacki, director of data and product at the CVCA.

Nevertheless, U.S. investors continued to dominate Canada’s largest deals, participating in half of all mega-deals — those valued at $50 million and above. The most active foreign VCs in Canada in 2025 so far have been American, including the likes of Y Combinator LLC, Tidemark Management Co. LP and TCMI Inc., better known as Technology Crossover Ventures.

Investor exit activity remained subdued in the first half of 2025. There were zero initial public offerings, marking two years since the last IPO of a VC-backed portfolio company in Canada.

“Ongoing market uncertainty and valuation challenges continue to delay public market entries,” said the CVCA report.

Mergers and acquisitions

accounted for 74 per cent of exit activity, or $171 million across 14 exits, in the first half of 2025, but that’s way below the numbers in the past two years. M&A transactions hit $4.38 billion across 35 deals in 2024 and $8.03 billion across 36 deals in 2023.

Low interest rates

and valuation challenges stoked a growing pivot toward venture debt — loans provided by bank and non-bank lenders tailored for early-stage startups — as a “strong alternative source of capital,” the CVCA said.

In the first half, $628 million was invested across 36 venture debt deals, a 288 per cent surge from the same period a year ago. On a quarterly basis, the total amount invested declined to $267 million in the second quarter from $361 million in the first quarter.

Canadian private equity investments skyrocketed in the first half, with $30.8 billion invested across 322 deals, surpassing 2024’s full-year total of $27.5 billion and marking a 258 per cent jump in total dollars invested compared to the first half last year.

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Mid-market activity continued to dominate, with 86 per cent of deals in the first half of the year valued at less than $25 million. Five mega-deals, including three that were valued above $2.5 billion, drove overall investment to record highs.

• Email: ylau@postmedia.com