Risk Capital Isn’t What It Used to Be: The Harsh Reality for Canadian Tech Startups in 2025
By Timothy Swanson
IS The Financing Window Closed?
If you’re a Canadian startup founder, you've likely heard it before: “There’s money out there. You just have to find it.”
Let’s be honest. That’s not entirely untrue… but it’s not very helpful either.
Since late 2022, the funding window for early-stage tech companies has narrowed dramatically. For some, it slammed shut altogether. Yes, term sheets are still being issued, rounds are still being raised, and headlines are still being written. But when you strip out the noise, like the $500M secondary round for Jane Software in Q1 2025, you realize just how distorted the average metrics really are.
The average VC deal size in Canada this year is reported at $11.4M, but when a single mega-transaction accounts for more than 17% of all venture dollars invested nationwide, that “average” becomes largely irrelevant.
If you’re not building a generative AI unicorn or offering a liquidity event for early investors, you’re facing a funding environment that is tough, confusing, and unusually opaque.
Fundraising “Track Record”? That Was a Different Game
In a recent CEO search, a board member emphasized they were looking for a candidate with a “proven ability to raise capital.” Fair enough. But here’s the rub:
A lot of those so-called “track records” were built during the easy-money era of 2020–2021, when a napkin sketch and a charismatic smile could unlock a $5M seed round.
That world is gone.
A strong fundraising history is no longer a reliable proxy for future performance. In fact, it might be misleading. The real differentiators today are adaptability, grit, network cultivation, and a nose-to-the-grindstone mentality. Show me someone who raised a $2M seed in 2023 and still has runway in 2025, and I’ll show you someone who understands capital efficiency and customer obsession.
The New Numbers: What the Data Tells Us
Let’s cut through the confusion and look at the actual data from CVCA’s H1 2025 reports on venture capital and private equity.
Venture Capital (H1 2025):
$2.9B deployed across 254 deals
8 deals over $50M (called “mega-deals”) accounted for 50% of all dollars
The true average deal size for non-mega VC? Closer to $2M–$5M
Life Sciences saw a 51% increase YoY in VC dollars invested—up to $894M
ICT, while still dominant, saw deal count drop 28% and investment fall 34% YoY
Private Equity (H1 2025):
$30.9B invested—but $26.9B of that came from just 5 mega-deals
Deals under $25M made up 85% of total deal count
Minority investment average deal size dropped to $11.55M, the lowest on record
PE capital is flowing more toward buyouts and add-ons—not risk-heavy innovation
The capital is there, but most of it isn’t chasing risk. It's chasing stability, maturity, and consolidation.
Cycles Used to Be Predictable. Not Anymore.
Traditionally, we could rely on capital markets cycling through phases. But today, unpredictability is the only thing we can reliably forecast.
This moment in time will likely earn its own chapter in future Econ 101 textbooks: "How Not to Crash a Recovery: A Case Study in Capital Retraction." And hopefully, right after that chapter, another one: "How to Course-Correct in 90 Days."
We’re in a strange macroeconomic environment. Interest rates remain elevated. IPO windows remain closed. LPs remain cautious. Even public tech multiples remain far below their 2021 highs. The S&P 500 may be at record levels, but the rally is narrow at the core. Just ten stocks, largely AI‑heavy tech giants, make up 40% of the index’s value. The rest of the market isn't keeping pace, which speaks to how opaque and fragile the current macro backdrop really is for tech financing.
Where Capital Might Flow Next
If you’re not in AI, you might be wondering: where else is capital going?
Sectors Showing Resilience:
Life Sciences – Averaging $15.42M per deal, up 51% YoY. Investors like cost savings, predictability, and healthcare efficiency.
Cleantech – Still small, but steady at $191M across 24 deals. Canada’s policy incentives help.
eHealth & AgriTech – Modest but practical. If you help the healthcare system or food chain save money, there’s some appetite here.
Mining - it’s not necessarily tech, but it is a tangible asset-heavy sector. If you are raising money in Canada, gold is a highly sought-after commodity at present.
Sectors Cooling Off:
ICT – Still the most active by count, but appetite is waning. Investors are cautious on pre-revenue SaaS and platform plays.
Pre-Seed/Seed – Lowest dollar volumes and lowest average deal sizes in years. VC is tilting toward later-stage companies with revenue, traction, or both.
What Founders Should Focus On
You’re not powerless. But you do need a new playbook.
Tactical Playbook for 2025
Break-even is sexy: Get as close to cashflow-neutral as possible.
Alternative capital: Explore venture debt, customer revenue, grants, and government R&D programs.
Milestone-based strategy: Raise what you need, not what you want. Earn the next cheque.
Mindset Shift
Forget the vanity metrics. Focus on sustainability, focus, and mission clarity.
The next raise won’t happen in a pitch deck. It’ll happen in your monthly KPI email to an investor who’s been watching for a year.
The Window Will Open Again So Be Ready
We may be in the most founder-hostile capital market since 2009, but this too shall pass. In fact, the startups that survive this cycle will be the ones acquiring others in the next one.
Build now. Raise later. And when the window opens again, make sure your fundamentals are sharp enough to cut through the crowd.
I would love to hear your thoughts, so send me an email.
Further Reading
CVCA H1 2025 Canadian Venture Capital Market Overview
Canadian Venture Capital and Private Equity Association, 2025.
See: Pages 6–9, 14–21, 24–27.CVCA H1 2025 Canadian Private Equity Market Overview
Canadian Venture Capital and Private Equity Association, 2025.
See: Pages 6–13, 16–19.PitchBook Q2 2025 Global Venture Report
PitchBook Data, Inc., 2025.
Note: US VC deal volume declined from $92.9B (Q1) to $69.9B (Q2).BetaKit – “Startups Pivot to Revenue as VC Tightens in 2025”
BetaKit Editorial, July 2025.
Commentary on how Canadian founders are adapting business models in response to market realities.TechCrunch – “What to Expect from Tech Valuations in 2025”
TechCrunch Markets Team, August 2025.
Breakdown of how Series A valuations are adjusting across sectors and geographies