Canada’s early-stage startup ecosystem is under increasing strain, with fewer companies raising venture capital and total funding falling sharply year-over-year in the first quarter of 2026, according to new data from RBCx.
The findings show both the number of early-stage companies securing venture capital and the total capital raised declined 40 per cent compared with the same period in 2025, even as average seed round sizes remained steady. RBCx says the trend points to fewer founders accessing capital rather than reduced funding requirements among startups.
The data arrives alongside RBCx’s Capital Under Pressure report, which highlights increasing concentration in Canada’s venture capital market and a growing gap in financing available to early-stage companies compared with historical norms.
The findings point to a tightening financing environment at the earliest stages of company formation, with implications for founders seeking seed capital and for the venture ecosystem that traditionally supports high-risk, early innovation.
RBCx tracked fundraising activity among more than 700 pre-seed and seed-stage Canadian companies over a two-year period. It found the number of companies raising capital has steadily declined since early 2025, including a 31 per cent drop from the fourth quarter of 2025 to the first quarter of 2026, and a 40 per cent decline from the first quarter of 2025.
Despite fewer companies raising money, RBCx reported that average seed round sizes held at about $3 million across 2025 and into the first quarter of 2026. The bank’s innovation arm said this suggests funding needs remain consistent, even as fewer startups are successfully securing investment.
“Venture capital plays an important role in the early stage, especially for businesses in cleantech and life science with heavy upfront costs in research and development. Without funds available, the innovation pipeline narrows,” said Tony Barkett, Head of Banking.
“RBCx remains committed to early-stage companies. Our team, many of them former founders themselves, offer tailored financial products and direct connections to VCs, helping founders unlock growth at every stage, especially when the fundraising environment is tough.”
The report also highlights pressure on emerging venture capital managers, which RBCx describes as a key source of funding for early-stage companies.
Emerging managers raised about $2.8 billion, roughly 36 per cent below expected levels based on historical patterns, according to the analysis.
RBCx’s data shows a significant shift in how venture capital is distributed in Canada. In 2025, five of the largest venture capital funds accounted for nearly 80 per cent of total capital raised, compared with 46 per cent in 2023 and 67 per cent in 2024.
The report also indicates that while fundraising among the largest funds has declined since 2021, the drop has been far more pronounced among other market participants. RBCx said the top five funds saw fundraising fall from $3.5 billion in 2021 to $1.7 billion in 2025, a decline of about 50 per cent, while all other funds combined fell from $4.5 billion to $444 million over the same period, a drop of nearly 90 per cent.
“Emerging managers are the engine of early-stage innovation in Canada. They’re willing to take on the riskier bets by backing first-time founders solving problems the market hasn’t fully recognized yet,” said Matt Roberts, Managing Director, Venture Coverage.
“That diversity of risk appetite is what keeps a healthy ecosystem moving. When emerging managers are underfunded, it’s not just a financing gap – it’s an innovation gap.”
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