Canada’s venture capital market is showing signs of significant slowdown, with investment levels dropping to those last seen during the height of the Covid-19 pandemic. According to a new report from the Canadian Venture Capital and Private Equity Association (CVCA), investors poured $2.9 billion into 254 Canadian VC deals during the first half of 2025 — representing a 26% decline in total capital invested and a 22% decrease in deal volume compared with the same period last year.

The report paints a picture of a cautious investment environment, as both domestic and foreign investors pull back amid global economic uncertainty. The CVCA notes that U.S. investors, traditionally major contributors to Canada’s venture ecosystem, have also scaled back their involvement — with participation down 3% from 2024 and 8% below the record highs of 2021.

Industry experts say the downturn reflects a combination of factors, including global trade tensions, tightening financial conditions, and reduced risk appetite across markets. David Kornacki, director at CVCA, said the slowdown mirrors a broader pullback in venture capital activity worldwide.

“We’re seeing similar trends across the U.S. and Europe,” Kornacki explained. “Uncertain economic conditions and geopolitical challenges have made investors more selective, especially when it comes to early-stage and high-growth ventures.”

Despite the downturn, analysts suggest that the pullback may offer opportunities for resilient startups to secure funding at more sustainable valuations, while investors focus on quality over quantity in a more disciplined market.