Venture capital investment in Canadian startups fell sharply in the first half of 2026, extending a slowdown that is reshaping who funds the country’s young companies and where that money comes from.
Canadian VC investment totalled $2.481 billion across 248 financings in H1 2026, a 12% drop from $3.215 billion in H1 2025 and a 19% decline in deal count from 306 financings a year earlier, according to the H1 2026 Canadian Venture Capital Report from CPE Analytics.
The pullback was concentrated at the later stages of the market. Early-stage companies raised $1.616 billion, or 57% of total capital deployed — up from 45% in 2025 — while growth- and later-stage companies attracted just $327 million, a 12% share that was down sharply from 37% the year before. Ontario remained the dominant destination for VC dollars, drawing $1.609 billion, or 57% of the national total, with Toronto-based companies alone raising $1.41 billion. British Columbia edged out Quebec for second place among provinces, at $508 million versus $491 million. By sector, information and communications technology companies took in $1.566 billion (55% of funding), followed by cleantech at $365 million (13%) and life sciences at $273 million (10%, down from 16% in 2025). Aerospace and defence companies saw funding jump to $159 million from just $7 million a year earlier.
The report’s most striking finding concerns where the capital is coming from. U.S. investors’ share of Canadian VC funding climbed to 56% in the second quarter of 2026, up from 40% in the first quarter and nearing the 2025 high of 58%. U.S. private VC funds were the single largest investor category in H1 2026, deploying $808 million, followed by U.S. mutual and hedge funds at $404 million. By contrast, participation from non-U.S. international investors sank to its lowest level since 2020: just 25 countries or regions had investors take part in Canadian financings in H1 2026, down from 55 in all of 2025.
“U.S. investors have increased their share of the market in Q2, 2026 to 56 per cent, marginally below the 2025 high,” said Richard Rémillard, President of Rémillard Consulting Group. “Historically, U.S. investors have been amongst the most reliable contributors to the Canadian venture scene. As recent events on the trade negotiations front have shown, this reliability cannot be taken for granted going forward, and attracting alternative sources of international capital to fuel Canadian companies appears increasingly imperative.” He added that non-U.S. international investors accounted for a “mere five per cent of the market in Q2, 2026,” calling Canada’s record on that front “abysmal.”
Fundraising by Canadian VC firms themselves also weakened. Twenty-nine funds raised a combined $917 million in H1 2026, and if that pace continues through year-end, 2026 would rank as the second-lowest year for Canadian VC fundraising on record — trailing only 2023’s $1.717 billion. The activity that did occur was highly concentrated: excluding BDC Capital’s $450 million in allocations, Lumira Ventures and Version One Ventures together accounted for 66% of private VC fundraising in the period.
Exits remained scarce. Canada has not recorded a venture-backed initial public offering since 2021, and the report noted no notable secondary transactions in H1 2026. The lone bright spot was GSK plc’s US$950 million acquisition of 35Pharma, a company primarily backed by U.S. venture investors.
Not every corner of the market is retreating. Galen Weston Jr.’s private investment arm, Wittington Ventures, launched a new $180 million venture capital fund in September, its third, focused on Series A and B rounds in commerce, healthcare, consumer, climate and food. The firm — the private capital arm of Mr. Weston’s family holding company, which controls Loblaw Companies Ltd. through George Weston Ltd. — has now committed $820 million across five funds since its 2019 launch, including $400 million specifically earmarked for venture capital. “The numbers matter not because getting bigger was the objective, but because they show what the platform is now capable of doing,” said Jim Orlando, managing partner of Wittington Ventures.
The broader capital picture for Canada is mixed. Research published by the CPP Investments Insights Institute found 94% of global institutional investors surveyed plan to hold or grow their Canadian exposure over the next three years — the strongest retention figure among eight developed markets studied, ahead of Japan (82%) and the United States (77%). Yet the same research flagged a persistent “investibility gap,” with investors citing a lack of institutional-scale deal flow and revenue certainty as barriers to converting confidence into committed capital. Naomi Powell, Director of the Insights Institute, said “capital ultimately moves to opportunities with sufficient scale, profitable structures and a credible path to execution.”
That tension echoes across Canada’s broader foreign investment figures. Foreign direct investment into Canada reached nearly $100 billion in 2025, its highest level since 2007, but more than two-thirds of the $44.7 billion in FDI recorded in the first half of 2026 came from the United States — much of it through mergers and acquisitions rather than new business creation, according to Bank of Montreal chief economist Doug Porter. For Canada’s venture sector, that same reliance on American capital, paired with a near-total absence of non-U.S. international investors and a stalled IPO market, points to a financing ecosystem still searching for depth beyond its southern border.
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