A sharp drop in later-stage financing pushed Canadian venture capital investment to its lowest level in nearly a decade last quarter. 

New data from the Canadian Venture Capital and Private Equity Association (CVCA) shows VC investors deployed about $936 million across 104 deals in the first three months of 2026. That’s nearly 77 per cent less capital invested than the previous quarter, and 41 per cent fewer deals. Investment dollars were down 12 per cent and deal count fell 17 per cent compared to the first quarter last year.

The slowdown was especially pronounced at the later and growth stages, where mature startups raise larger funding rounds. Growth-stage financing nearly disappeared completely, with the CVCA tracking just one investment of $1 million in an undisclosed deal last quarter. A typical first quarter sees about $140 million in growth capital, according to CVCA’s five-year average.  

VCs instead invested more in startups at the earlier stages, including those raising pre-seed through Series B funding rounds. Those deals were worth $651 million in total, representing about 70 per cent of all investments in the first quarter. Transactions at the earliest stages—pre-seed and seed—surpassed $185 million across 54 deals. That’s nearly 20 per cent of capital invested in Q1, compared to a first-quarter average of about nine per cent over the last five years.

The average deal size, meanwhile, grew about six per cent to $9 million compared to a year earlier, which largely reflects early-stage companies raising slightly bigger funding rounds, said David Kornacki, CVCA director of data and product. 

Kornacki said that while it’s hard to draw conclusions based on one quarter of data, the shift away from late-stage deals deserves attention. 

He noted that Canadian companies often turn to foreign investors or acquirers when the time comes to raise large funding rounds, diluting domestic ownership as companies scale. A drop in domestic growth capital could amplify that tendency. 

Deal activity was concentrated in a relatively narrow set of industries, the report shows. Information and communication technology—which could include software, AI and companies building other digital services—remained the most active sector, with 53 deals worth about $365 million. Cleantech followed with $208 million across 12 deals, while life sciences companies raised $158 million over 20 transactions. 

There were also no traditional initial public offerings last quarter, though Toronto-based quantum computing firm Xanadu went public through a reverse takeover in March. A pair of Vancouver-based companies, cleantech firm General Fusion and defence-tech startup Juno Industries, are also expected to pursue similar listings later this year. Kornacki said that these public listings may reflect how hard it is for private companies in Canada to raise growth capital. 

The report lands as the federal government decides how to spend $750 million it earmarked in the 2025 budget for startup support. The CVCA has been pressing Ottawa to spend the money on VC funds capable of leading large investment rounds—something it says Canada is severely lacking, and a reason why too many startups rely on foreign capital to grow. Those recommendations are at odds with those of early-stage investment groups who want some or all of the capital to go to younger startups.