Canada’s startup funding environment is sending a clear message: mainstream capital is flowing to safe bets, while early innovation—especially from founders outside the usual circles—is getting left behind. For those willing to look deeper, this isn’t a risk. It’s an opportunity.

Here’s what the latest data and policy signals are showing:

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1. Startups at the Earliest Stages Are Starved for Capital

In 2024, Canadian seed-stage investment dropped to $510M across 201 deals, the lowest in years—even as those deals made up over a third of all transactions. Pre-seed activity also slowed, with average deal sizes down 36% from the five-year norm.

Meanwhile, mega-deals (>$50M) dominated, absorbing 62% of all venture dollars. The imbalance between late-stage inflows and early-stage needs signals an ecosystem that’s ripe for recalibration—and reward.

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2. Toronto Is Thriving—But Opportunity Is Canada-Wide

Toronto remains Canada’s venture capital anchor, drawing 57% of all VC raised in Q1 2025, totaling $703M. Ontario overall received two-thirds of the country’s VC disbursements. And for good reason: Toronto is home to many of the nation’s top founders, funds, and exits.

But here’s what’s equally important: many high-potential startups are still flying under the radar in regions like Atlantic Canada, Alberta, and the Prairies. These founders are solving real problems in healthtech, AI, agtech, and clean energy—but they aren’t always in the spotlight. Investors who look outside the usual map may find extraordinary companies hiding in plain sight.

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3. Government Is Carrying the Early Stage—Private Capital Must Step Up

BDC’s recent report was clear: 86% of early-stage VC in Q1 2025 came from public sources, especially BDC itself. The message to Canadian investors? It’s time to stop waiting and start backing local innovation.

The over-reliance on public capital risks long-term fragility. Private capital—especially from pension funds, corporate VC, and high-net-worth investors—needs to re-engage at the earliest stages, not just the safest ones.

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4. Policy Innovation Could Spark Private Momentum

There’s reason for optimism. The federal government is exploring the use of flow-through shares—a tool long used in the mining sector—to incentivize private investment in tech and deep R&D. This could unlock meaningful tax advantages for investors backing early-stage innovation in cleantech, biotech, and AI.

If implemented, it would give private capital a compelling reason to engage earlier and more broadly—spreading risk and reward across a wider slice of Canada’s innovation economy.

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Final Thought

Toronto is at the center of Canada’s tech momentum. But even here, the most exciting companies aren’t always the most obvious. Across the country, talented founders are building in overlooked sectors and underfunded regions.

At GSA Ventures, we’re focused on finding them—and backing them early. If you’re an investor ready to look past the usual signals and get closer to the real builders, let’s talk. the ones others overlook—let’s talk.