Canadian companies closed fewer venture capital deals in the first three months of 2025 than any quarter since the start of 2020, as global trade uncertainty spooks investors, a new report from the Canadian Venture Capital & Private Equity Association (CVCA) reveals. 

Startup funding dries up: Investors allocated $1.26 billion across 116 deals in the first quarter. That’s roughly the same amount of capital as Q1 in both 2024 and 2023, which tends to be the slowest investment period in a year. But this year, that money was spread over far fewer deals, especially early-stage ones. 

CVCA chief executive Kim Furlong said that could spell trouble down the road. “The persistent slowdown in pre-seed and seed-stage investments, now at levels not seen since 2020, is a signal we cannot ignore,” Furlong explained in the report. “These early investments are the pipeline for future growth. A weakening at the foundation threatens the innovation economy we’ve worked hard to build.”

Companies raise more debt: Startups and scaleups raised $283 million in venture debt across 14 deals last quarter. That’s the most debt raised since CVCA began tracking it, and 229 per cent higher than the first-quarter average over the past five years. The trend towards debt financing is a response to the tighter equity market, the report explains. It helps companies stretch their cash without diluting their ownership or having to reprice their valuation, which, for many startups, has declined since the last time they fundraised a few years ago. 

Private equity holds steady: Private equity investments hit nearly $18.2 billion across 141 deals in the first quarter, a separate CVCA report reveals. Excluding one megadeal—a $14 billion recapitalization transaction in Montreal-based GardaWorld—investment activity remained generally on par with quarterly averages since 2020. 

Most deals were less than $25 million, which is typical for Canada, where private equity targets small and medium-sized companies. There was, however, a slight increase in deals in the $25-million to $100-million range. That could be an early indicator of a growing appetite for larger, later-stage deals, the report explains. 

Exit closed: No companies went public through an initial public offering in the first quarter—that goes for venture and private equity-backed firms. Mergers and acquisitions also plummeted. There were just seven M&A exits worth a combined $149 million in the venture capital space, compared to 14 a year earlier that totalled $3.3 billion. 

Private equity exits beyond IPOs declined, with just 13 total exits worth $130 million, including M&A and secondary buyouts. In the same period last year, there were 15 exits totalling $2.8 billion. “The exit activity points to delayed closings and increased caution from U.S.-based acquirers,” Furlong said, pointing to uncertainty around tariffs and trade.