AI and tech drive record VC investments, but exits shift and early-stage deals face new headwinds
A handful of megadeals have redefined Canada’s venture capital (VC) landscape in 2025, with just a few transactions accounting for the lion’s share of investment activity and reshaping the market’s risk and opportunity profile, according to the Canadian Venture Capital and Private Equity Association (CVCA).
In the third quarter alone, $1.8 bn was deployed across 123 deals, up from $1.6 bn in Q2, but this capital was concentrated in fewer, larger investments—a trend that signals a more selective and deliberate approach by investors, as reported by the Financial Post.
Megadeals, defined as transactions of $50m or more, pulled in 75 percent of all capital deployed in Q3 and 60 percent of the total VC investment year to date, despite representing only 5 percent of total deal volume, according to CVCA data.
Notably, Toronto-based artificial intelligence (AI) startup Cohere Inc. secured the largest VC deal of the year, raising $689m from global tech leaders and Canadian investors, with an additional $100m later in the quarter.
Other significant financings included Blue J Legal Inc. ($167m), Moonvalley AI ($121m), and UniExpress Inc. ($95m), as highlighted by the Financial Post.
Despite the uptick in capital, overall VC activity has slowed compared to previous years, with $4.9 bn invested across 386 deals so far in 2025, down from $8.6 bn in 2024 and $7.1 bn in 2023, as per the CVCA.
The average deal size in Q3 climbed to $14.7m, a 20 percent increase from the previous quarter, reflecting a market that is “selective but confident,” according to CVCA’s David Kornacki, who described the environment as “a healthy, stable” market returning to pre-pandemic norms, as reported by Betakit.
Sector-wise, the internet, communications, and technology (ICT) sector rebounded in Q3, with investment activity nearly doubling to $1.2 bn across 54 deals.
However, ICT investment remains below previous years’ levels.
Life sciences and agribusiness have emerged as areas of strength, with investment levels approaching or surpassing year-end 2024 totals, as noted by the CVCA.
Seed- and growth-stage investments have shown resilience.
Seed-stage investments totalled $579m year to date, just 12 percent below 2024’s full-year figure, while growth-stage deal volume jumped 71 percent year over year in Q3, with $995m invested so far in 2025, according to the Financial Post.
However, early-stage investment remains subdued, attributed in part to tighter fundraising conditions and a decline in startup formation, as observed by Betakit.
Exits via secondary transactions have become a dominant liquidity pathway, accounting for 74 percent of all disclosed exit proceeds in 2025 and reaching $919m across six deals in Q3, up 20 percent from 2024, as reported by the Financial Post.
Initial public offerings (IPOs) remain absent, with no IPOs recorded so far in 2025.
On the private equity (PE) front, investors have poured $56.5 bn into Canadian companies so far this year, nearly double the previous full-year record, driven by a wave of privatization deals and megadeals, according to The Logic.
Transactions under $25m still account for the bulk of deal volume, underscoring the critical role of private capital in supporting small and medium-sized businesses.
