Canada’s venture scene showed signs of resilience last year. But with fresh U.S. tariffs in play, can that momentum survive?
Tensions between Canada and the U.S. are heating up fast. A renewed trade war, sparked by aggressive tariffs from the U.S., is stirring concern on both sides of the border. While headlines focus on cross-border exports and political spats, there’s another question quietly emerging — what happens next for Canada’s startup investment landscape?
After a sluggish 2023, Canadian venture funding bounced back in 2024. VC-backed startups in the country raised $6.9 billion, according to Crunchbase — a 17% climb from the $5.9 billion seen in 2023, and well ahead of the pandemic-era low of $3.9 billion in 2020.
That rebound didn’t come from a surge in deal activity. In fact, Canada saw fewer than 700 venture rounds last year, a steep drop from nearly 1,000 in 2023. But big-ticket AI investments helped drive the recovery.
AI Deals Fueled Canada’s Venture Surge
Last year’s funding spike was anchored by some monster rounds in artificial intelligence. In July, Vancouver-based legaltech firm Clio secured a $900 million Series F round at a $3 billion valuation. Its Clio Duo platform uses generative AI to help legal teams work more efficiently, automate discovery logs, and analyze usage patterns.
That same month, Cohere, one of Toronto’s most talked-about AI players, raised $500 million in Series D funding. With a $5.5 billion valuation, Cohere continues to develop customizable large language models for use in enterprise applications.
Then in December, Tenstorrent, also out of Toronto, raised over $693 million in a Series D. The chip startup, led by semiconductor legend Jim Keller, landed a $2 billion pre-money valuation — a signal of just how hot the AI hardware space has become.
Thanks to those mega-deals, Q3 and Q4 of 2024 each topped $2 billion in venture funding — a rarity for Canada’s startup ecosystem.
A Slow Start to 2025
So far, 2025 is telling a different story. Deal activity picked up in Q1, but the total dollars raised dipped noticeably. Canadian startups brought in $1.6 billion across 128 deals — down from $2.4 billion in 118 rounds in Q4 2024.
That figure is still double what Canada saw in Q1 2024, so there’s no need to panic just yet. Standout rounds included StackAdapt’s $235 million growth round in February, backed by Teachers’ Venture Growth, and Tailscale’s $160 million Series C round, which valued the cybersecurity firm at $1.5 billion.
Still, the decline suggests a more cautious market mood as we move into Q2.
Will U.S. Tariffs Disrupt Canada’s Tech Momentum?
What’s unclear is how the latest round of U.S. tariffs — which officially took effect this month — will impact venture investment across Canada. While the most obvious targets are hardware components like chips and electronics, ripple effects could spread far wider.
In volatile markets, software budgets often get trimmed first. If U.S. buyers pull back, Canadian SaaS companies and platform startups may feel the squeeze — especially those with deep customer ties south of the border.
Uncertainty makes investors nervous. Even Canada’s thriving AI sector could face a slowdown if export rules tighten or access to U.S. capital becomes harder to secure.
That said, Canadian venture still has a few tailwinds. Global attention on AI isn’t fading. And with solid infrastructure, strong technical talent, and recent mega-rounds proving global interest, the market has reasons to stay bullish.
As trade tensions evolve, Canada’s venture ecosystem is heading into a pivotal year. Whether 2025 continues the upswing — or falls victim to geopolitical headwinds — will depend on how quickly investors and startups adapt to a new reality.
