This article is part of our special report on venture capital and family offices.
The Canadian venture capital environment in 2025 appeared, in a word, dismal. While 571 venture capital deals attracted $8 billion in investment, the amount of capital deployed declined by six per cent and deal count fell by 12 per cent from 2024, according to statistics from the Canadian Venture Capital and Private Equity Association (CVCA).
A report from RBCx, Capital Under Pressure, largely concurred with that picture. It saw fundraising levels in 2025—when Canadian VC firms raised a meagre $2 billion, well below the long-term average of $3.1 billion—at their weakest since 2016.
Globally, family offices have also appeared to be shying away from VC. The PwC Global Family Office Deals Study 2025 reports that, between July 2023 and June 2025, family offices reduced their share of total venture capital investment from 31 per cent to 26 per cent, while other investors took up the slack.
In Canada, governments have long tried to stimulate VC activity as a means to enhance competitiveness and innovation. Most recently, Prime Minister Mark Carney’s federal Liberals have offered some policy incentives, including $750 million to address “early-stage funding gaps.” That’s on top of the $1 billion Venture and Growth Capital Catalyst Initiative (shorthand: Growth VCCI) starting in 2026-27, in which the government will invest alongside the private sector.
Critics, however, question whether boosting funding for VC deals really addresses the heart of the problem, which they say is simply this: Venture capital investments in Canada provide inadequate returns.
A report from the Business Development Bank of Canada, Canada’s Venture Capital Landscape, found that as of 2024, Canadian VC’s net 10-year internal rate of return stood at a somewhat lacklustre 10 per cent. That compares unfavourably to a more robust 14.6 per cent IRR in the U.S.
Government policies take time to demonstrate progress
What does 2026 hold for the VC landscape? David Kornacki, director, data & product at CVCA, says the market continues to reflect a more selective environment following the 2021-2022 peak.
“Deal counts remain lower, with capital increasingly concentrated in fewer, larger deals, across all stages,” he adds. “We’re also seeing a meaningful rise in secondary transactions, both in number and value, offering liquidity for early investors.”
As to federal programs providing more funding, Kornacki says it’s too early to draw conclusions on the degree to which they might influence the overall Canadian VC landscape.
“Venture capital operates on long fund-raising and deployment cycles, and any policy signals from the new government, however positive, take time to translate into fund formations, LP [limited partner] commitments and deal flow,” he explains. “If there is a meaningful shift, we would expect to see early evidence in fund closings and new manager activity in the second half of 2026 at the earliest, and more clearly into 2027.”
In the meantime, however, Kornacki says that there is a clear opportunity for family offices to play a meaningful role in backing venture funds.
“Canadian venture funds are actively seeking anchor and follow-on LP commitments, and valuations have reset from their 2021 peaks, with several strong managers currently in market,” he says. “For family offices with a long-term investment horizon, this represents a more compelling entry point than in prior years.”
Liquidity crunch is straining VC markets
Johanna Gerrie, a partner in KPMG’s M&A tax practice, says that although the VC market in Canada remains constrained, there’s still available capital in the system and capital deployment appears to be selective rather than frozen.
“The real pressure point is liquidity,” she says. “The CVCA reports that, in 2025, Canada had only 29 VC-backed exits and no IPOs, and venture debt was actually at record highs. That means companies are using debt and the secondary market to buy time, because their traditional exit routes are bogged down.”
The impact of that stoppage ripples throughout the VC ecosystem. “You’ve got limited partners waiting longer for distributions as general partners hold on to their assets longer, while founders have to spend more time financing than scaling up their business,” Gerrie explains. “So, capital’s harder to mobilize all the way from startup to scale to liquidity.”
But government policy might create a more conducive environment. Gerrie cites the cancellation of the capital gains inclusion rate hike in 2025 as marking an important shift. The Growth VCCI and $750 million commitment for early growth funding also matter, because Canada’s weakness has long been domestic scale capital and not simply seed formation, she adds. Likewise, policies aimed at boosting the demand side are also providing more certainty for innovators. Those include “Buy Canadian” rules and increased Canadian intellectual property and R&D content in larger federal procurements.
“For venture cap companies, especially in the tech space—AI, cyber, industrial tech, dual use, and some manufacturing—it matters because one of the hardest things in Canada is winning a meaningful domestic customer,” Gerrie says. “Good VC policy is not just about creating more funds. It’s also about helping companies commercialize and scale at home. It’s too early to say how these policies will be executed, but the direction of travel is promising.”
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Family offices also have a role to play in the VC space as complementary—not replacement—capital, she says. Gerrie sees family offices as patient capital, flexible in their mandates, with a willingness to back certain asset classes or operators they know well.
“That matters to family- or founder-led businesses,” she says. “Family offices can also cater more to bespoke situations where private equity and venture capital might not be as keen to structure. The catch is that many family offices are also prioritizing liquidity and de-risking, not unlike VC, but with a direct investment preference and a skew more to growth-stage than seed funding. However, Canadian family offices can genuinely help in the capital cycle, especially where they’re bringing sector knowledge, operating experience or a willingness to be patient. [But] they’re not a substitute for a strong domestic institutional investor, or for healthy exit markets.”
All factors considered, Gerrie sees 2027 as representing a more normalized market for VC activity.
A shift to industrial pragmatism
Matt Roberts, managing director, VC coverage at RBCx, sees the shift in federal government policy as a broader signal that the Canadian venture landscape is undergoing a shift to industrial pragmatism.
“The administration’s Growth VCCI and Defence Industrial Strategy [DIS] demonstrate that linking venture outcomes to national economic security is a priority,” he says. “Government funding still represents 36 per cent of fundraising, and the DIS changes the focus from broad-based innovation to dual-use technologies that serve both commercial and defence needs.”
He also sees family offices as uniquely positioned to capitalize on the gaps left by institutional retrenchment and government delays.
“Institutional LPs have largely stepped back from new GPs, with emerging managers raising a record-low $249 million in 2025,” he says. “Family offices can secure outsized influence and favourable terms by anchoring these specialized, early-stage funds, particularly those with a dual-use or defence focus.”
Like Gerrie, he sees liquidity as a major barrier to VC capital deployment, although opportunities may await in the coming year.
“LPs and GPs are in a holding pattern awaiting federal capital deployment, creating a temporary liquidity bottleneck,” Roberts says. “In the meantime, we’re seeing a ‘winner-take-most’ dynamic where the top 25 per cent of funds capture the vast majority of available commitments, similar to the dynamic seen throughout 2025. With entry prices at seed and Series A rounds reset to 2018 levels, managers who break the current holding pattern will deploy into one of the most attractive, high-conviction environments we’ve seen in a decade.”
Encourage better entrepreneurs, not more start-ups
For Sean Wise, professor of entrepreneurship at Toronto Metropolitan University, recent federal policies represent progress, but he believes they’re aimed at the wrong layer of the VC landscape.
“From 2023 to 2025, pre-seed, seed and early-stage activity declined, with fewer deals and less seed capital,” he says. “That’s the real risk in the system: running out of start-ups worth funding at the later stages. However, policymakers continue to prioritize the mobilization of substantial capital reserves. Yes, improve early-stage incentives, but also go upstream. Capital isn’t the bottleneck anymore—quality founders are. We should be teaching entrepreneurship earlier so we produce better founders, not just more start-ups.”
Wise also sees a specific role for family offices to deploy VC funding. “Like angel investors, family offices can more easily pivot their investment targets, whereas VCs cannot,” he says. “The moving upstream of VC deals away from pre-seed, seed, and early-stage creates a real gap at the earliest stage. That is precisely where family offices can step in, with patient, flexible capital.”
Peter Kenter is a Toronto-based writer with a deep and abiding interest in how everything in the world works and how it got that way. He’s written about the economy, investing, financial services, cryptocurrency, pharmaceuticals, mining, energy, cannabis, agriculture, consumer electronics, education, sponsorship marketing, and entertainment. He’s the author of TV North: Everything You Wanted to Know About Canadian Television.
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