Venture capitalists backing Canadian companies logged negative double-digit returns last year, as startup valuations continued to decline from their pandemic highs, according to the Business Development Bank of Canada’s latest annual venture capital report. 

Internal rate of return (IRR)—a measure of a company’s annual growth rate and a gauge of future performance—for VC-backed companies hit -11.2 per cent in 2023, compared to five and 10-year returns of 11.5 per cent and 11.7 per cent, respectively. Another challenging year could drag long-term gains into the single digits as well, said BDC, a federal Crown corporation and Canada’s largest venture capital investor. 

The drop in IRR is just one statistic in a complex picture BDC paints of Canada’s venture capital landscape. Here are the big numbers: 

$6.9B: The amount of venture capital invested in Canadian companies in 2023. That’s down 34 per cent from a year earlier. Still, BDC notes that the deal value is 64 per cent above the five-year average of $4.2 billion leading up to the COVID-19 pandemic, topping the 15 per cent increase seen in global venture capital. VC as a share of GDP has also dropped dramatically since 2021—from 0.79 per cent to 0.36, but is still slightly higher than pre-pandemic levels. 

$10.4B: The dry powder—or capital available to deploy to companies—that Canadian investors have accumulated. Canadian startups can expect about 55 per cent of that capital, BDC estimates, based on past activity, plus about two per cent of the $421 billion in U.S. dry powder. “Record dry powder in the U.S. may trickle back to Canadian companies,” the report reads, “potentially alleviating concerns regarding capital availability in the Canadian market over the coming years.”

12 months: The average amount of time companies have before they run out of cash, based on BDC’s portfolio. Runway is down from 2020’s 16-month peak. Later-stage companies, however, have maintained longer runways of about 18 months or more, BDC found. That’s despite these firms having more trouble raising money than their earlier-stage peers, which could be attributed to relatively more aggressive cost-cutting measures at later-stage firms.

$432.8M: The amount of venture debt startups raised in 2023, after spiking to $721.9 million a year earlier. Last year’s venture debt was still higher than pre-pandemic and even 2021 levels, with 2022 being an outlier for this type of financing, as companies sought non-dilutive capital to stretch their cash. Silicon Valley Bank’s crash in early 2023, coupled with interest rate hikes, curbed the venture debt hype, BDC noted. 

31%: The portion of down rounds—or share of VC deals in which startups raised money at depressed valuations—relative to previous financing rounds. Down rounds surged from just seven per cent in 2022, as many companies relied on bridge financing. The 2023 down rounds, however, indicate that investors are done with quiet inside rounds and that “companies will have to go back to market in order to raise a priced round and comply with investors’ lower valuations.”