BDC VC report issues collective wakeup call: investing in our own businesses now is a 'must have'

Yahoo

3 days ago

MONTREAL, May 27, 2025 (GLOBE NEWSWIRE) -- The latest edition of the Business Development Bank of Canada's (BDC) 2025 Venture Capital Landscape report paints a rather mixed portrait of the ecosystem, but a deeper dive shows the chill effect of a global trade war with the US, and its impact as we move into 2025. BDC's report makes the case for Canadian investors to rise to the moment by investing more in great Canadian companies to leverage their incredible economic value.
'Of all the insights from the report, Canada's high dependency on foreign capital, while not news, is particularly alarming in today's landscape. It's a collective wakeup call to the industry and major Canadian corporations: fostering Canada's culture of innovation, here and now, is a must have going forward,' says Geneviève Bouthillier, EVP, BDC Capital. 'Canadian investors are highly dominant in seed and early stages, but it is foreign investors, particularly from the U.S., who claim a greater portion of investments in later and growth equity stages. Canada's high growth firms are already relocating or being acquired. Looking ahead, and if we don't fund our companies here with Canadian capital today, we risk losing our champions.'
Overall, optimism in the Canadian venture capital (VC) ecosystem improved slightly in 2024 as interest rates and inflation came down and the economy expanded modestly. VC investment activity in Canada saw a notable increase in 2024 (+10%), breaking a two-year decline, with $7.9 billion invested.
The VC Landscape report is a deep examination of the VC asset class in the country; it leverages BDC's extensive data set to offer a comprehensive, data-based view of the industry's dynamics. Key highlights include:
Canada's VC performance deteriorated last year with a 10-year net internal rate of return (IRR) at 10%, thus deepening the gap with the U.S. The U.S. IRR performance still fares well while Canada lags behind.
Seed, early and later stages saw a decline both in terms of dollars invested and deal volumes.
Ontario, British Columbia, and Quebec accounted for 86% of the total VC activity by value last year, up from 77% in 2019.
Fundraising activity has slowed, with a median time to fundraise remaining at four years for the second consecutive year.
Artificial Intelligence (AI) captured 30% of all VC investments, indicating its pivotal role in driving innovation and value creation. More than half of all investments in Canada (57%) went towards the information and communication technology (ICT) sector last year. Life sciences and the energy and clean technology (ECT) sectors came second and third in terms of investments.
Exit activity continues to be constrained, except for a few big-ticket deals, while the initial public offerings (IPO) drought continued. Only 7% of Canadian unicorns exited in 2024. This created a tough market, with significant capital locked in, while awaiting more favorable conditions to realize returns.
Uptick in valuations: There is an increase in up rounds and a notable decline in down rounds. This means that more start-ups are raising new funding at higher valuations, suggesting positive momentum in valuations.
Established managers continue to expand, resulting in contraction of the emerging managers' share.
Despite liquidity constraints, the available capital in the ecosystem is adequate (at $11.5B) to support the VC landscape in the near term.
On the brighter side, VC investment is still way above pre-pandemic averages, witnessing faster growth than global VC and average deal sizes are expanding, suggesting that investors are focusing on fewer but more established companies. The VC share of GDP saw an uptick in 2024, moving Canada up two spots and now ranking 6th among a sample of OECD nations. Driven by lower GDP growth and higher total VC investments, this ranking underscores VC's vital role in creating wealth, powering innovation and job creation.
As the most active VC investor by number of transactions, BDC's investment arm is committed to supporting innovative Canadian companies in their formative phase by backing them with a full range of capital solutions and advice to accelerate their scaling journey. By collaborating closely with the ecosystem, BDC Capital is advancing Canada's competitiveness, prosperity and autonomy.
For more information and to access the full report, please visit BDC's website.
(Note: This report is based on the Canadian Venture Capital & Private Equity Association (CVCA)'s year-end 2024 Canadian Venture Capital Market Overview. On May 14th, the CVCA has subsequently published revised data for 2024, increasing the total dollars invested to $8.5 billion for the year. The overall conclusions remain consistent.)
About BDC: 80 years as Canada's bank for entrepreneurs
BDC is a partner of choice for all entrepreneurs looking to access the financing and advice they need to build their businesses and tackle the big challenges of our time. Our investment arm, BDC Capital, offers a wide range of risk capital solutions to help grow the most innovative firms. BDC's development role means we are in a state of perpetual evolution – wherever entrepreneurs go and whatever the Canadian economy needs – we will be there to help them defy the odds. 80 years later, that commitment remains very much alive. BDC's financing services in 2025 alone will add an estimated $25 billion in GDP to Canada's economy over the next five years. We are one of Canada's Top 100 Employers and Canada's Best Diversity Employers, and the first financial institution in Canada to receive the B Corp certification in 2013. For more information on our products and services and to consult free tools, templates and articles, visit bdc.ca or join BDC on social media.
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