Venture winter in Canada: Q1 2026

All dollar ($) figures in Canadian dollars unless otherwise noted.

TORONTO, May 22, 2026 /CNW/ - Canadian venture capital (VC) investment totalled $1.12 billion across 110 financings in Q1 2026, down from $1.44 billion in Q1 2025. According to CPE Analytics, the quarter ranked as the fourth-lowest quarterly result since the firm began publishing these findings in 2017.

Excluding the large US $275 million PIPE (Private Investment in Public Equity) financing completed by Xanadu, total investment would have fallen to $741 million across 109 financings, highlighting the weakness in underlying market activity.

The pullback of U.S. and international investors has created a significant gap in the funding landscape, and that pressure is reflected in the shockingly low VC fundraising numbers.

The findings suggest that Canadian VC-backed companies have remained under sustained funding pressure since 2023, with the rising share of bridge financings serving as one of the clearest indicators of continued stress across the market.

On the VC firm fundraising front, outside of BDC's $300 million allocation, the other 12 funds have managed to raise $62 million in aggregate, averaging about $5 million each. The sharp drop highlights limited institutional and international participation and suggests a much more constrained environment for venture investment overall.

Q1 2026 key observations

Venture capital disbursements in Canada (where capital flowed)

• Early-stage companies captured 33% of total capital deployed, while growth-stage companies, including PIPE financings, accounted for 47%.
• Quebec regained second place among Canadian VC destinations, attracting $231 million, behind Ontario at $627 million and ahead of BC at $136 million.
• Toronto's dominance continued unabated, with the city attracting more VC dollars ($596 million or 53%) than the rest of the country. Montreal was the only other city to attract at least $100 million in VC investment, raising $205 million. Toronto and Montreal combined accounted for 71% of total capital deployed.
• Growth- and late-stage investment continued to converge toward early-stage levels, reflecting a tighter environment for larger rounds.
• Cleantech increased its share of total investment to 21%, up from 14% in 2025, while life sciences eased slightly to 15% from 16%.

Venture capital funding sources and investors in Canada (where capital came from)

• US investors--historically among the most reliable sources of capital for Canadian startups--reduced their share of total funding to 40%, down from 58% in 2025. International investors also pulled back, with their share declining from 12% to 4%.
• Investors from 16 countries or regions participated in financings involving Canadian companies, down sharply from 54 in 2025.
• Except for second-ranked US VC firms, non-traditional capital providers dominated the quarter. US and Canadian mutual and hedge funds--the top- and third-ranked investor groups--together invested $393 million, equal to 35% of total funding. US VC firms, Canadian governments, Canadian institutional VCs, Canadian corporate VCs, and Canadian VCs invested $138 million, $126 million, $121 million, $110 million, and $91 million, respectively.
• Among Canadian investors, Ontario investors led with $408 million, followed by Quebec-based investors at $166 million. Alberta- and BC-based investors contributed $30 million and $18 million, respectively.

Venture capital fundraising in Canada

• Canadian VC firms raised $362 million across 13 funds during the quarter.
• The $300 million allocation by BDC to its StrongNorth Fund represented 83% of total VC fundraising during Q1 2026.

Venture capital exits in Canada

• Canada has not recorded a venture-backed initial public offering (IPO) since 2021.
• Secondary liquidity continues to weaken, with no notable secondary transactions reported during the period.
• SPAC (Special Purpose Acquisition Company) Qualifying Acquisitions (QAs): Xanadu Quantum Technologies completed its business combination and began trading on Nasdaq and the TSX in March, supported by a US $275 million PIPE financing. General Fusion announced in January its plans to go public through a SPAC QA with Spring Valley Acquisition Corp. III, with the transaction targeted to close in mid-2026.

"Q1 2026 venture capital investment and fundraising data paint a morose picture across several dimensions. These include: a precipitous decline in US and other foreign venture capital investment from levels recorded in 2025. US investment declined from 58% last year to 40% in Q1 while other foreign investment tumbled from 12% to 4%. Plus, 54 countries provided venture capital financing in 2025 versus only 16 in Q1. This data suggests that Canada's efforts to boost the overall level of foreign direct investment in the country are not being met with enthusiasm by foreign venture capital providers as nations across the globe deploy incentives to keep leading technologies at home. As well, venture capital fundraising itself paints a picture of an industry in the doldrums with 83% of capital raised going to federal crown corporation BDC while the other 12 funds that succeeded in raising funds only managed to haul in an average of $5 million each. Unless these sums change drastically upwards going forward, the outlook is for severe underfunding of Canada's future technology-heavy firms in the not-too-distant future. To round out the picture, exit activity remains somewhere between very subdued and non-existent. All in all, Canada is in the midst of a venture winter, " Richard Rémillard, President, Rémillard Consulting Group (RCG)

Summary report
The full summary report is available on the financings.ca website: https://www.financings.ca/reports/

Methodology

Included

• Equity and quasi-equity investments made directly into companies.

Excluded

• Secondary transactions or investor/shareholder exit events in which no capital flowed to the company.
• Acquisitions undertaken for expansion purposes (M&As).
• PE transactions
• Financings involving foreign-headquartered or foreign-domiciled companies with Canadian subsidiaries.

Rémillard Consulting Group (RCG)
Rémillard Consulting Group (RCG) is an Ottawa-based bilingual consulting firm that provides private-sector, government, and trade association clients with research-grounded advice on business issues and public policy matters related to the Canadian financial services industry. For more information: [email protected]

CPE Analytics
CPE Analytics is a leading Canadian source of financing intelligence, providing comprehensive, verified, and unbiased insights into private and public financings, initial public offerings (IPOs), M&A activity, and fundraising by professional investment firms.  Its venture capital coverage includes detailed intelligence on the source of funding by country and investor type.  CPE Analytics is the data analytics division of CPE Media & Data Company. More information: https://cpeanalytics.ca, https://financings.ca

CPE Media & Data Company
Founded by some of Canada's most experienced private capital and financing research professionals, CPE Media & Data Company is a leading provider of financing news and intelligence in Canada. More information: https://cpecompany.ca/

SOURCE CPE Media & Data Company

Contacts, Ted Liu, CPE Media & Data Company, 647-782-8818, [email protected]; Richard Rémillard, Rémillard Consulting Group (RCG), 613-715-3055, [email protected]