TORONTO — Despite the “Buy Canadian” movement elsewhere, Canadian startups are still turning to American investors to raise the money needed to build and grow their ideas.

According to PitchBook, U.S. investors participated in 80 per cent of Canadian venture capital investments in the first quarter of 2025—that’s 86 deals worth US$800 million. U.S. investors led at least 24 of those transactions, representing about half of all deal value.

The figure is in line with the average U.S. participation in Canadian VC deals in 2024, which was up from the two years prior when American investors backed about 68 per cent and 75 per cent of Canadian deals in 2023 and 2022, respectively. 

While Canadian startups have long raised money from their American neighbours, Michael Buhr, CEO of C100—an organization that connects Canadian entrepreneurs with funding and mentorship in Silicon Valley—said the fraught relationship between the two countries should make Canadian firms reconsider their reliance on U.S. capital. 

“It’s just better for the Canadian ecosystem overall to have to have Canadian investors,” said Buhr, adding that it helps grow the domestic startup and investment sector faster. 

Leaning heavily on American funding, meanwhile, means those benefits go to the U.S. Because U.S. investors often lead large rounds in Canadian startups, foreign backers end up taking a greater share of a company’s equity and having more influence over its growth. When a startup in that situation eventually exits, through a sale or initial public offering, for example, American investors reap the greatest returns—money that’s more likely to be reinvested south of the border. 

Buhr said it doesn’t have to be that way. “You don’t need a U.S. investor on your cap table,” he argued. Ten years ago, when Canadian startups didn’t have as many sources of capital at home, fundraising in Silicon Valley made perfect sense, he says. But Canada’s venture capital industry has matured to a point, Buhr said, where investors can and should be leading more rounds in their local startups. 

Patrick Lor, managing partner at Panache Ventures, said he hasn’t seen founders turn away U.S. capital for geopolitical reasons. However, he’s heard concerns about the U.S. restricting their ability to cross the border, making it harder for them to access their American investor networks or employees, if they have workers down south. “They’re saying, ‘I want to make sure I at least have some touch points in Canada,’” he said. 

Lor, who’s based in Calgary, added that entrepreneurs directly impacted by tariffs may also prefer mentorship from a Canadian investor rather than a U.S. one as the Trump administration wagers a trade war against its closest ally. A U.S. backer may advise a Canadian firm to simply relocate to the States to avoid tariffs, he says, while a Canadian investor would more likely understand that isn’t always the easiest or most desired option. 

Still, American VCs continue to muscle out Canadians in many of the deals Panache has considered recently, said Lor. “U.S. investors are still driving higher valuations,” he said. “On investments that we think are the highest quality ones, they’re going in and dominating these rounds.”

Buhr said he sees this a lot: American VCs tend to offer startups more compelling investment terms, assigning them a higher valuation or investing more money over a longer period, for example. He said Canadian investors may take for granted that local startups want them on their cap table and offer less competitive terms. “The reverse logic is what really needs to happen,” he added. “You should beat the U.S. term sheet.” 

Senia Rapisarda, managing director of investment firm HarbourVest’s Canadian business, said she hasn’t seen the “Buy Canadian” movement hit the VC space yet. “There is some talk starting on that point,” she said, especially among family offices and limited partners—the investors that back venture capital funds. But, she added, the scarcity of capital in the market makes it hard for Canadian entrepreneurs to exclusively raise money locally.

Chris Neumann, a Vancouver-based startup investor who spends a lot of time in the U.S., said he’s hearing more talk from angel investors about backing more Canadian companies, but hasn’t seen that translate into investment activity yet. He argued Canadian firms are drawn to U.S. VCs not just for their deep pockets, but also their brand recognition and experience. He doubts founders will give that up because of the trade war or tensions between Canada and the U.S.

Lor agrees that U.S. investors will remain prominent in Canadian deals. “The reality is, there’s so much capital stateside that you have to look at U.S. money,” he said. “You would not be a responsible founder if you didn’t explore all your capital options in this country, the U.S. and beyond.” 

For its part, though, Panache is prepared to make bolder plays to compete with U.S. firms, says Lor. “The best VC firms out there are going to have to adapt their playbook to the environment,” he says. “You’re going to see us being a little more aggressive, throwing a little more money into the market … and a lot more lead term sheets.”