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Canadian VC dollars were up 17% in H1 2026, but the money went to fewer companies. 16 deals of $50M+ took 59% of all capital, and seed funding fell 31%
Everyone is going to focus on that seed number. We believe CVCA underreports early-stage funding because many VCs don't share their data with CVCA, so the real amount going into seed is healthier than the report shows.
The data that's worrying is how few companies are getting funded. Total deal count fell 8.8%, and only 18 later-stage rounds closed, the fewest in any first half CVCA has tracked. At every stage, capital is concentrating in the winner and consensus companies earlier and earlier, and the validation you need to raise the next round keeps getting harder.
The market is broken. 1% of the deals have momentum and are raising, and everyone else is struggling to get the next round done.
Four Forces Pushing Capital Into Fewer Companies
Multi-stage funds have gotten massive
In 2021, the top 10 US venture funds raised 13% of all VC capital; by 2025 that share had jumped to 32.9%. Andreessen Horowitz (A16z) raised $15B in January, more than double its 2024 raise. Lightspeed raised $9B in December. Funds this size have to put hundreds of millions into each winner to make their fund math work. A $1B outcome doesn't get them there anymore. They need $25B+.
As Menlo Ventures partner Matt Murphy put it,
“I’ve been in the business for 25 years… you were kind of saying like, hey, great outcomes are $300M, $500M, $1B… That’s not how the game is being played anymore. You have to be in the big outliers to drive great returns… Those just aren’t gonna move the needle.”
That takes a whole group of startups that could raise three years ago off the table for these funds. Smaller funds feel it too. They rely on multi-stage firms to lead the follow-on, so they end up backing the same kind of company.
AI is moving too fast for conviction
AI is moving too fast, making it hard to know what will be possible in six weeks, let alone 10 years. Last December, the story was that OpenAI and Anthropic would be the only two companies left. By June, open-weight models were the threat.
Now the application layer is winning, and the last few weeks have been all about personal agents like Grok Bot, Instinct, and Meta's Muse. When it's hard to know what will be possible in six weeks, it's much harder for an investor to have conviction about the next 10 years.
The bar for the next round keeps getting harder
Qualitative validation used to be enough for a seed. $1M ARR used to start a Series A conversation. Now we're seeing companies need $3M+ in ARR, growing 5x, to raise an A. With the bar shifting this often, VCs struggle to decide how much to invest, because it's hard to know what a company needs to achieve over the next 18 to 36 months.
Deep tech, sovereign, and defence are new territory
These have become the hot areas, and many funds are still building their thesis. The largest early-stage round in Canada this half was Dominion Dynamics' $139M Series A.
Acquisitions Are Bringing Liquidity Back
There is good news. Acquisitions are happening, and they're returning capital and talent to the market. Some are great, like SpaceX closing its $60B acquisition of Cursor in August. Some are much needed, like everything Bending Spoons is buying, including Airtable and Miro.
What This Means for Your Raise
If you're one of the few startups with momentum, lucky you. You'll have inbound from every direction, and you get to choose your investors.
If you're like most startups, expect your raise to take much longer. You'll need more meetings, and you'll most likely need more capital than you think to get to the next round. You've always had to explain your unique insight and how you'll scale quickly. Now you also have to explain why it will still be true in six months or a year.
On Thursday, we'll keep going with why a lot of the usual fundraising advice no longer applies.
~ Alex
What kind of topics would you like to see in future editions?
Health Toronto: Building What's Next in Healthcare 🩺
We had a packed room last evening at GreenShield’s new downtown office.
From navigating startup urgency and finding your edge in the age of AI to raising capital, proving scalability, and measuring impact, our panelists Luke Vigeant, Lucas Perlman, Suzanne Mason, and Samuel Daviau uncovered the realities of building health tech companies today.
If you were in the room, what’s the one thing that surprised you from what our panelists shared?
What Would You Ask Chris if You Had the Chance?
Chris Alexander, candidate for Mayor of Toronto, is joining us at Together Toronto on Oct 5, with 400+ founders, investors, and builders in the room.
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