The Business Development Bank of Canada (BDC) is allocating nearly $1 billion in new money to two growth-stage venture capital funds to help back Canadian companies facing the threat of a trade war and general economic uncertainty.

The federal Crown corporation announced $500 million for its Growth Venture Fund and $450 million in its Growth Equity Partners Fund Tuesday. 

The funding is meant to support middle-market and scaling tech companies that are struggling to raise money and grow their businesses faced with tariff threats and potential labour shortages.

Venture capital investing has been sluggish since 2022, when rising interest rates and high inflation throttled markets and the tech sector in particular. Many investors have waited years for deal-making conditions to improve, forcing Canadian tech companies to conserve cash by laying off workers and stalling growth plans. 

BDC Capital, the Crown corporation’s VC arm and Canada’s biggest venture investor, reported a $220-million loss in the value of its portfolio in fiscal 2024, which ended March 31, leaving it with $2.9 billion in assets.

Geneviève Bouthillier, BDC Capital executive vice-president, said later-stage companies have been hit particularly hard. The bank’s latest report on the VC market found that, in 2023, late-stage companies raised half the money they did in 2022.

“The private sector is retracting from late-stage companies,” Bouthillier said. “That’s why BDC needs to play its role as a steady hand.” 

The bank warned that Canadian companies may need to rely on foreign investors if domestic funding remains scarce. “This is one of the reasons we’re doing this,” said Bouthillier. “We want Canadian funding to Canadian companies to keep our great businesses in Canada.”

Many investors expect a trade war with the U.S.—or merely the threat of one—to stymie Canada’s already-strained VC market by weakening the economy and creating more business uncertainty. 

To date, the Growth Venture Fund has invested $390 million in 30 companies since 2016, said BDC spokesperson Flavie Côté. The fund backs late-stage Canadian companies in any sector with at least $10 million in annual revenue. 

The Growth Equity Fund has invested $440 million in 36 companies since 2015, across three private-equity-style funds. It writes cheques ranging from $3 million to $45 million in profitable, middle-market companies, and can take up to 49 per cent ownership in a company it backs.

BDC Capital has 12 fund programs that invest in companies across different sectors and stages of their development. Bouthillier said the bank’s decision to recapitalize these two growth funds was based on current economic conditions. “It comes from a market need,” she said. “Listening to our entrepreneurs, this is where we wanted to intervene at this time.”