Canada-U.S. relations are strained right now — to put it mildly.
U.S. President Donald Trump’s trade war has impacted both nations’ economies and rankled what long has been a close relationship between the neighboring countries.
While many wait to see the aftermath of the new tariffs — which went into effect this month — in the public market, there are also questions about what it could mean for venture investment in Canada-based startups.
While Canada only made up about 2% of the global venture market last year, 2024 did represent a comeback of sorts after a down 2023.
Last year, VC-backed startups in Canada raised $6.9 billion, per Crunchbase data.That was a 17% jump from the $5.9 billion raised in 2023 — the lowest mark since the country’s startups raised only $3.9 billion in 2020.
Big money
The jump in dollars actually coincided with a fairly significant drop in deal flow. Last year saw fewer than 700 deals, compared to 2023 which saw almost 1,000 funding rounds.
However, the dollar number was helped out by some pretty massive rounds — all having to do with artificial intelligence, not surprisingly — including:
In July, Vancouver-based legal tools platform Clio locked up a $900 million Series F at a $3 billion valuation. The company’s Clio Duo generative AI solution helps lawyers complete routine tasks and leverage use analytics to run more efficiently. The AI platform includes audit log functionality for court discovery.
In December, Tenstorrent, the Toronto-based chip startup led by vaunted semiconductor engineer Jim Keller, raised more than $693 million in a Series D funding that gave it a $2 billion pre-money valuation.
Also in July, Toronto-based Cohere raised a $500 million Series D at a $5.5 billion valuation. Cohere builds large language models that allow AI to learn from new data, and can be customized and put into applications for features such as interactive chat or to generate text.
Quarter breakdown
Those rounds helped both Q3 and Q4 2024 break the $2 billion barrier. However, so far this year it has been a different story, as deal flow seems to be picking up while dollar totals trend down.
In Q1, Canada-based startups raised $1.6 billion in 128 deals, compared to $2.4 billion in 118 rounds in Q4 last year, per Crunchbase data. The Q1 dollar total is the lowest since Q2 2024, which saw only $1.3 billion raised.
The Q1 dollar total, however, was about twice that of the same quarter last year and included big deals such as Toronto-based programmatic advertising platform StackAdapt raising a $235 million growth round led by Teachers’ Venture Growth in February, and cybersecurity firm Tailscale raising a $160 million Series C this month that values the company at $1.5 billion.
What’s next?
Of course, Q1 was completed by the time the new U.S. tariffs on Canadian goods went into effect, so it’s hard to tell what result they will have in the venture world.
While many point to chips and devices and other such hardware components being affected by trade issues, it is important to remember even software will see effects. Uncertain markets and volatility cause companies to rein in spending — with software being the first to go.
After a strong 2024, Canada’s growing venture market bears watching as markets continue to be in flux.
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Illustration: Dom Guzman
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