Monday Market Minute | Feb 20, 2023

Canadian VC deal activity falls to three-year lows as the funding winter persists

What Moved

CVCA preliminary data for Q4 2022 confirmed that Canadian venture capital deal volume had declined roughly 40% from the 2021 peak. The trend showed no signs of reversing in early 2023. Late-stage rounds were particularly scarce as crossover investors — hedge funds and growth equity firms that fuelled the 2021 boom — had retreated entirely. Seed and early-stage activity held up better but with smaller round sizes and significantly more founder-friendly term deterioration.

Why It Matters

The VC correction reshaped the Canadian startup landscape. Companies that raised at 2021 valuations faced painful down-round conversations or were forced to pursue secondaries at steep discounts. For private markets allocators, the dislocation created opportunities in VC secondaries and distressed venture debt. The best vintage years in venture historically follow periods of contraction — 2009-era funds outperformed dramatically — and 2023 deployments could follow a similar pattern.

Signal to Watch

Whether major Canadian VCs like OMERS Ventures, BDC Capital, and Real Ventures maintained deployment pace or pulled back to protect existing portfolio company reserves.

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