Canadian entrepreneurs are still accessing capital when starting up a technology-related firm. But the pool of money is now much smaller than in the past, according to new research from RBCx.

The RBCx report showed that in Q1, 40 per cent fewer founders were able to secure funding compared to the same period last year.

“We’ve been seeing a not-unsurprising decline of VCs (venture capital) raising money," Matt Roberts, managing director, VC coverage with RBCx said to TechNX in an interview.

"There was a moment where venture capital hit an all-time high in 2021, 2022 and so you would expect coming off that period a decline, and perhaps a rationalization of the amount of money that’s being deployed into that market.”

“But what has been surprising is just how dramatic the fall-off has been in Canada in the intervening five years.”

Digging into VC data

The firm’s recent Capital Under Pressure report painted a dismal picture for early-stage founders. It showed that emerging managers (smaller funders who typically are involved early in start-ups) have invested $2.8 billion this year, 36 per cent less than anticipated.

“We’ve got quite a number of VCs as clients, and then we also are a major investor in VCs, so we do have the ability to see what they are investing in. It provides us a level of data about what’s going on in our market at any one time, and we use that data to inform decisions,” Roberts said.

RBCx is RBC’s technology funding arm and it tracked fundraising activity of more than 700 pre-seed and seed-stage companies in Canada over two years for the report.

“It was clear that data probably had some value to the wider ecosystem, and certainly decision-makers in government, and just for entrepreneurs and people to understand what we were seeing and what we were concerned about,” he said.

The report found that for those early-stage investors, the numbers were even worse.

“Emerging managers or funds that are smaller: $50 million ordinarily, and usually, the ones who do the first checks into early-stage companies, and those firms are missing significant amounts of money based on the percentages they would ordinarily have gotten historically,” Roberts said.

“There’s less of them closing, and then you have the basic fact that the numbers are not taking into account inflation, and if we were to take the inflation into account, the numbers become even more dramatic.”

Many reasons for dramatic drop off

So why the steep decline in funding? There is no one answer, according to Roberts, but there are a number of factors affecting the landscape.

“Companies getting liquidity has been difficult. There has been an erosion in the valuations of companies.”

For certain types of software start-ups, there may be a looming crisis on the horizon that is fueling “uncertainty,” Roberts warned.

“There’s a thing in our industry called the SaaSpocalypse, saying that companies who have software valuations have come down over the past 18, 24 months by about half and so people are feeling a little bit pinched on the companies that they thought were worth a lot of money are now worth less, and that’s translated into the private markets as well.”

Compounding these scenarios is that many Canadian funders are absent, he said, as both home-grown and foreign investors aren’t buying into the market.

“Our pension plans are MIA (missing in action) to some extent, so that’s disappointing, and then international, large institutional investors are also not really engaged in the Canadian ecosystem. Altogether, it means that there’s just a lack of large cheque sizes in Canada,” Roberts said.

While the smaller players, and institutional investors are scaling back, this continues a recent trend: “It’s been a consistent decline over the past six, seven years, even during the 2021 period,” he said, when perhaps investors were “overly enthusiastic.”

The largest five funds however, are putting more funding into startups: 80 per cent of total money raised came from them in 2026, versus 46 per cent and 67 per cent raised in 2023 and 2024, according to the report.

But since 2021, overall investing from the larger funds has dropped by 50 per cent.

“It’s a little bit distressing. It’s not great to see a moment in time where Canada should be playing at a really high level because AI to some extent, was a Canadian invention.”

Difficulty accessing money and customers

For small entrepreneurs looking to make it big in Canada, the two biggest missing pieces are clear. “Capital, and clients. They can’t find people. They can’t find people to sell to in Canada, and they can’t find places to get money to grow their companies,” Roberts said.

However, there is money being invested, it’s just not as spectacular as in recent years, and all stakeholders should pay attention.

“There seems to be something in the innovation-capital space that is just not going well right now, and public policy people; my colleagues in the bank who are in charge of where money goes, we should all be keeping an eye on this because this is the forward edge of growing the Canadian economy, and if this goes away, then that’s just not great for Canada.”