While B.C.'s venture capital sector in the first quarter of 2025 mirrored activity from seven years ago, the true fallout of economic uncertainties could still be pending.
“We’re definitely seeing a more selective process with investments…now we’re seeing fewer deals with larger sizes,” said David Kornacki.
The director of data and product at the Canadian Venture Capital and Private Equity Association said he expects to see less investment activity this year compared to previous years given the current economic climate.
In Q1 2025, there were 14 venture capital deals with a total investment of $80 million across B.C., showed a CVCA Q1 2025 Canadian venture capital market report. The average deal size for this time period was around $5.71 million.
There were 27 deals with an investment of $210 million in Q1 2024, representing a decline of 48 per cent in deals and 61.9 per cent in investment on a year-to-year basis, according to CVCA data shared with BIV. The average deal size for that quarter was around $7.78 million.
Activity levels for Q1 2025 were similar to Q1 2018, which had 13 deals with an investment of $70 million, showed the CVCA data.
The levels of this year’s first quarter are certainly lower than those between 2019 and 2024, Kornacki said. However, the real impact from economic uncertainty will probably begin to be reflected by the first half of this year and into Q3, he said.
“I don’t think it’s any surprise that everyone is being more cautious with where they’re putting their dollars,” said Kornacki, adding this selective mindset could impact ventures looking for funding.
Investors also have to make sure their portfolio companies are receiving investment during these turbulent times, but it’s really a waiting game at the moment, he said.
WUTIF Capital (VCC) Inc. CEO Mike Volker echoed CVCA’s results, and said there has been a decrease in deal valuations and numbers — those that are available and those getting done.
According to him, investors are being more cautious, and mixed with the tariffs, this is having an impact on ventures looking for capital. Additionally, he said investors look for companies with the potential to grow rapidly, which usually comes from selling into the U.S. This is also affecting the attitude of investors amid U.S. tariffs, said Volker.
“If there are fewer investors, it does impact us to a certain degree,” he said. “We co-invest with others…deals may be slower in getting done, just because there aren't as many investors at the table.”
The symptoms of the current venture capital market in B.C. began to appear after the pandemic, and the ecosystem has not been moving at the same velocity as other markets, said Yaletown Partners Inc. partner Eric Bukovinsky.
At the moment, he said that within Yaletown’s portfolio, the firm is comfortable with venture progress and valuations. However, for new deals outside of their portfolio, the firm is creating pressure on venture valuations that might be elevated, given the state of the market, he said.
The venture ecosystem works like a pyramid, said Bukovinsky, the pyramid must be strong at the bottom with early stage activity that ultimately climbs to liquidity, which then comes down and supports other ventures in a cycle.
One of the reasons for a slowdown in the market after the pandemic was a breakdown in early stage venture activity, after advanced ventures that would eventually support the bottom of the ecosystem with liquidity were delayed, he said.
Additionally, there was also a lot of investment from American companies in Canadian ventures during COVID, which has rescinded since then, but Canadian investors are yet to fill that gap to keep the system working, said Bukovinsky.
“There really isn't enough local capital supply to support the scale of that ecosystem,” he said, adding that early stage cohorts over the next few years are probably going to be pretty small.
There were 116 deals made with a total investment of $1.26 billion across Canada in Q1 2025, showed the CVCA report. Compared to Q1 2024, which had 146 deals with an investment of $1.31 billion, this is a decrease of 20.5 per cent in deals and 3.8 per cent in investment on a year-to-year basis.
Ontario led Q1 2025 with 46 deals and a total investment of $694 million, followed by Quebec with 30 deals and $301 million invested. B.C. ranked third in deal counts across the country with 14, followed by Alberta with 12. However, in investment, Alberta ranked third with $140 million. B.C. took the fourth spot with $80 million, said the report.
For the remainder of the year, Kornacki expects to see similar investment activity to 2020 because of the hesitancy among investors. That year in B.C., there were a total of 75 deals at a value of $771 million, the lowest year in deals and valuations since then.
There could be delays in closing funding rounds, as well as reduced deal rates and numbers, he said.
“It's definitely going to be tough for the next while, tougher than it is already,” said Kornacki. “We can get some really good companies out of it, but it's just a matter of weathering the storm.”
