Venture capitalists say the latest results are “not the end of the world” but expect a further slowdown.
A new report found that pre-seed and seed-stage investment activity in Canada continued to decline in the first half (1H) of 2025 as investors committed fewer dollars to fewer deals.
“We used to climb this huge mountain with the wind at our backs, but now it doesn’t.”
According to the Canadian Venture Capital and Private Equity Association (CVCA), $297.2 million in venture capital (VC) has flowed into Canadian tech startups across 133 pre-seed and seed deals. This represents a 16 percent decline in total investment and a 28 percent decline in the number of deals at these stages compared to the same period in 2024, according to the CVCA. Report for the first half of 2025.
CVCA said seed-stage investment and deal volumes peaked between 2021 and 2023, but then declined in 2024 and faced a “further contraction” in 2025. mirrors the fate of the entire Canadian venture capital market during this time.
While the CVCA says 2025 is still on track to exceed Canada's pre-pandemic average for pre-seed and seed activity, RBCx managing director of venture capital coverage Matt Roberts argues that the trend line is what matters most, noting that the situation was improving before the pandemic.
“We used to climb this huge mountain with the wind at our back, but now it doesn’t,” Roberts told BetaKit.
Total seed investment was down 12 percent year-on-year, and the number of deals was down 25 percent, according to the CVCA. Total pre-seed investments and deals fell by 34 percent and 28 percent, respectively.
“We need to invest more in pre-seed and seed-stage deals,” Startup TNT co-founder Zach Storms told BetaKit, citing falling deal volumes as a cause for concern.
While the latest CVCA data is “not the end of the world,” Roberts said he expects the “slowdown” in Canadian pre-seed and seed-stage venture capital to continue “for the foreseeable future.”
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“What worries me is that, looking at the market over the next three years, it looks like there will be less venture capital. [fund] “There is less limited partner (LP) money in the market today than there was in 2019, and in 2019 we were trending upward and now we are trending down.”
Inovia Capital CEO Chris Arsenault said in Post on LinkedIn that Canada needs more new managers who typically invest at the pre-seed and seed stages, but found fundraising more challenging as market conditions deteriorated and limited companies concentrated on more established firms.
For some Canadian venture funds, the slow decline could be a positive, Roberts said, as less competition among investors could lead to lower startup valuations. But he noted it could also encourage more Canadian founders to raise funds south of the border in search of higher prices.
“It was much easier to raise funds in the US—higher valuations and faster execution,” Sakina Rufid, the Canadian founder of a hidden income startup, told BetaKit. “Susa Ventures committed to doing my rounds just two hours after our initial call, passing on dozens of referrals in that time.”
Conversation with BetaKit Last month, CVCA chief data and product officer David Kornacki said that while the first half of 2025 showed some troubling signs for the Canadian venture capital market, including the lowest first-half total since 2020, he is not ready to sound the alarm at this stage.
Roberts said he now believes Canada's seed and seed venture market is “where we would have been if the madness hadn't happened” during the pandemic.
Storms stressed that returning to pre-pandemic levels of pre-seed and seed-stage venture capital in Canada will be a challenge for the ecosystem given the number of new companies that have emerged since then.
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Unsurprisingly, CVCA found that artificial intelligence (AI) accounted for the largest share of total pre-seed and seed investment, with $28 million across 12 deals in the first half of 2025, representing nearly 10 percent of all dollars invested in those stages. It was followed by building technology, software as a service (SaaS), digital health, financial technology and clean technology, respectively.
Roberts noted that there is currently “some stupidity and creeping valuation” in artificial intelligence, adding that companies are now finding it harder to raise money in other areas.
The CVCA also found some positives: average deal size has increased, life sciences and agribusiness have seen an uptick, and there is a “more balanced pre-seed environment” that includes startups outside of Ontario, Quebec and Alberta. U.S. investor participation in Canadian seed rounds has also fallen, continuing a trend that began last year.
“While deal activity in several provinces and sectors continues to exceed pre-pandemic averages, gradual declines in dollar investment and changes in foreign participation signal a more cautious and selective financing climate,” the CVCA report said.
Concerns about possible missing data
Some venture capitalists have questioned what role lack of reporting played in CVCA's numbers, but the data PitchBook shared with BetaKit tells a slightly different story. PitchBook tracked total investment of C$470 million across 143 angel, pre-seed and seed funding in Canada in the first half of 2025.
This represents a four percent increase in dollars invested and a 26 percent year-over-year decrease in deal volume compared to PitchBook numbers for the same period in 2024. It also means there are 10 more deals and $172.8 million more in total investment than CVCA captured.
Storms acknowledged that reporting these investment data can be administratively challenging. “Even our own organization sometimes misses a quarter,” he said. But he and Roberts argued that some of those complaining should improve their own reporting to paint a clearer picture of the entire ecosystem.
“It’s good if your own brand is included in the CVCA data, but it’s also good if a Canadian brand has accurate data,” Storms said. “As far as I can tell, the CVCA produces the most comprehensive, high-quality report of what's happening in Canada, so I think we should all get involved.”
With files from Aaron Anandji.
Artistic image courtesy of Creative Commons
