Consider taking a moment today to check in on any venture capitalists in your life, because (in Canada, at least) there’s a good chance they just went through a rough year.
What happened: Canadian VCs raised just $2.1 billion last year, according to a new RBCx report, the worst showing since 2016 and well below the average of $3.1 billion.
Emerging managers — defined in the report as those that have raised three or fewer funds — are struggling the most to find fresh capital, raising only $249 million last year. That amounted to just 12% of all venture capital raised.
Why it matters: Less capital means fewer cheques for Canadian startups, not exactly what the country needs at a time when the economy could use a stiff dose of innovation to offset the effects of the U.S. trade fight.
Why it’s happening: The downturn is likely the result of a few factors, including a hangover from the pandemic-era tech boom when interest rates were near-zero and cash was flowing freely.
The flight of capital away from emerging managers to established ones also suggests investors are looking for safer, more conservative bets and entrusting their money with managers they know and trust — about what you’d expect in a more uncertain economic environment.
What’s next: Today’s startups are tomorrow’s world-beating companies; today’s emerging managers are the investors who will, five or 10 years from now, fund the next generation of promising startups. If that pipeline dries up, Canada will be feeling the effects for years to come.—TS