TORONTO — The federal government is preparing to inject more money into Canada’s venture capital market than ever before, but investors say the success of its latest startup funding program will depend on whether private capital—particularly from the pension funds—can match the government’s pledge. 

In its 2025 budget, Ottawa committed $1 billion to the Venture and Growth Capital Catalyst Initiative (Growth VCCI), the successor to its flagship venture funding program. The government also earmarked $750 million for a separate pool meant to help startups scale after their early funding rounds. Together, the programs represent a major expansion of federal support for startups and scaleups at a moment when fundraising has become more difficult and exits remain scarce. 

For investors, though, the scale of the government’s commitment is both welcome and daunting. 

“This will require deeper pockets,” said Senia Rapisarda, managing partner of HarbourVest, who oversees the Boston-based firm’s Canadian business. “We will need a lot of support.” 

The government’s latest VC commitment dwarfs its predecessor, the Venture Capitalist Catalyst Initiative, or VCCI. The program started as the Venture Capital Action Plan in 2013 with $390 million from the Conservative government. The Liberals continued the program under the VCCI moniker, contributing $371 million in 2017, and increased the pool to $450 million for the 2021 iteration. 

Typically, Ottawa distributes most of the money through VC fund managers that the government selects through an application process. The government has picked the same four funds—HarbourVest Canada, Teralys Capital, Kensington Capital Partners and Northleaf Capital Partners—since 2013. Those funds then have to raise capital from private investors, historically two to three dollars for every public dollar they receive. For Growth VCCI, Ottawa has proposed the funds raise three dollars for each dollar the government contributes.

The structure has worked for more than a decade, stretching public dollars further and helping build the funding network to grow Canadian startups. It hasn’t always been easy for the VCCI funds to raise enough private capital to match the government’s contribution, with several investors in the last iteration taking longer than expected to close their funds.

Since then, it’s only become more difficult to raise new venture funds. A recent report from RBCx, the tech and innovation banking arm of RBC, shows that Canadian venture funds raised about $2.1 billion in 2025, a 39-per-cent drop from the year before. “Private capital seems to be taking a step back for a variety of reasons,” said Patrick Lor, managing partner at Panache Ventures, pointing to higher interest rates and the lack of company exits, leaving less cash cycling through the VC market. “That’s what’s going to make it tough,” Lor said of raising the Growth VCCI funds. 

Canadian VC investors have long been pushing the country’s biggest pension funds to write more cheques to VC funds, without much response. Rapisarda said that while smaller, union pensions often contribute to funds like HarbourVest’s, they don’t have the financial heft of the Maple 8. Instead, much of the private capital backing earlier VCCI funds came from family offices, high-net-worth individuals and smaller institutional investors—sources that typically write smaller cheques that take longer to sign. 

Ottawa has been explicit about wanting the pensions to buy into Growth VCCI. The 2025 budget framed the new program as a way to “leverage more private capital by incentivizing pension funds and other institutional investor participation,” signalling that Canada’s largest pools of capital are expected to play a bigger role in financing the next generation of venture funds in the country.  

The government is still in the process of designing the program and hasn’t said how it plans to incentivize the pensions and larger institutional investors to participate this time around. None of the pension funds that make up the Maple 8 would say whether they plan to invest in the program, with some of them citing active consultations on the program. 

Some investors, however, say the environment may be shifting in Ottawa’s favour. Matt Cohen, managing partner at Ripple Ventures, a Toronto-based VC firm, said he is seeing more openness from pension funds and other large institutional investors than in previous cycles, driven in part by political pressure to invest domestically and a growing number of Canadian companies seeking capital.

“I’m feeling more optimistic around the conversations we’re having,” said Cohen, adding that institutional investors are “willing to listen more than ever” about venture opportunities and how they might participate.

Investors say a stronger buy-in from Canadian institutions is becoming more important as more startups in the country reach later stages of growth. Cohen said building a deeper pool of domestic capital could help keep Canadian companies in Canada as they scale, rather than relying on foreign investors for follow-on funding. 

Peter van der Velden, managing general partner at Toronto-based life sciences investment firm Lumira Ventures, said venture investors and the companies they back need clarity soon on what to expect from the government’s VC strategy. With the 2021 VCCI program, there was a three-year lag between announcing the money and the participating investors raising their funds. Van der Velden said the market can’t wait that long this time, warning that prolonging the program’s launch risks slowing deal making at a time when investors are already struggling to fundraise. “We’ve had very little fund formation, he said. “The capital is needed today.”