Canada’s angel investors reined in deal-making last year, with investment activity at the earliest stages reaching its lowest level in five years.

Canada’s angel groups invested $113.8 million across 490 deals in 2025, a 22 per cent drop in dollars invested compared to the year before, and 20 per cent fewer transactions, according to new data from the National Angel Capital Organization (NACO).

The decline erased signs of recovery in 2024, continuing the downward trend since activity peaked in 2021 with $262 million invested across 635 deals. Average deal size in 2025 fell about 2.5 per cent to $232,000, also marking a five-year low.

NACO attributed the slowdown to worsening macroeconomic conditions, including trade tensions and broader economic uncertainty making investors more cautious about backing young companies. 

The report adds to a growing body of evidence showing startup funding in Canada is weakening at multiple points of a company’s life cycle. Last week, the Canadian Venture Capital and Private Equity Association (CVCA) reported venture investment had fallen to a nine-year low in the first quarter of 2026, with the latest-stage deals nearly drying up completely. 

NACO warned that declining angel investments will lead to even weaker later-stage deal-making as companies struggle to grow due to a persistent lack of capital.

The report arrives as Ottawa weighs how to deploy $750 million earmarked in the 2025 federal budget to support startups. The promised funding has ignited a debate among investor groups over where capital shortages are most acute and what size companies could benefit most from the money. 

The CVCA, Canada’s main VC lobby group, has argued the funding should support larger, later-stage companies raising Series B rounds and beyond, where Canadian firms often rely heavily on foreign investors to scale. NACO, meanwhile, has been pushing for the funding to focus on earlier-stage startups, warning that weaknesses at the pre-seed and seed stages ripple through the rest of the ecosystem and eventually limit the number and quality of growth-stage companies. A third group, the Canadian Startup Capital Association, would like to see up to 20 per cent of the money go to angel through seed-stage companies, with the rest supporting later-stage firms. 

NACO’s annual report also shows angel investing remains concentrated in a handful of geographic regions. Central Canada accounted for about three-quarters of all deals and capital deployed in 2025. Northern Ontario, meanwhile, far outperformed the rest of the country on a per-capita basis, logging about 36 deals per million residents. That’s roughly 64 per cent higher than in Southern Ontario.

The organization attributed that performance to the region’s strong angel investor network and programs, supported in part by federal regional development funding. 

The report also found women now make up 40 per cent of members in angel groups NACO tracks, up from 35 per cent in 2024 and nearly triple the level reported in 2017.