2. Angel Investment as a Leading Indicator for Venture Capital Canada’s innovation economy continues to face persistent challenges in securing sufficient capital at its earliest and most formative stages. In 2024, the country’s angel investment ecosystem demonstrated renewed strength, with $137.3 million deployed across 539 deals—a 19.4% increase in capital and a 30.2% increase in transaction volume over 2023. However, the average deal size decreased by 8% to $254,700, reflecting broader dispersion and investor caution. Despite this rebound, Q1 2025 data from the Canadian Venture Capital and Private Equity Association (CVCA) reveal that pre-seed and seed-stage funding have fallen to their lowest levels since the pandemic. Just 116 VC deals were recorded nationwide, and early-stage capital has declined sharply. The CVCA warns that these trends threaten the strength of Canada’s future innovation pipeline, as early capital is the foundation for later-stage success. While venture capital has grown impressively, its effectiveness is now constrained by gaps in the earlier pipeline. A fragmented funding landscape means that promising companies are struggling to reach Series A readiness, reducing deal flow quality and increasing perceptions of risk for institutional investors. Angel and early-stage capital are not separate from venture capital success—they are its precondition. Canada’s capital policy remains fragmented. In the absence of a federal-level incentive for investing in startups and innovation-driven small businesses, provinces have developed localized approaches. While valuable, these programs are fragmented and inadvertently discourage capital from flowing freely across provinces. As fund managers mature and look to invest nationally, they frequently lose access to these regional incentives, inadvertently disincentivizing scale. A federal National Investment Tax Credit would address this fragmentation by harmonizing incentives, removing capital flow friction, and supporting the free movement of capital across Canada. British Columbia’s Small Business Venture Capital Tax Credit, for example, has successfully extended tax credit eligibility to Venture Capital Corporations and investment funds, enhancing the attractiveness of alternative assets. Programs in New Brunswick, Nova Scotia, and Newfoundland and Labrador provide further evidence of the model’s viability. To drive growth-oriented capital formation, Canada should scale best practices nationally. Canada is falling behind other jurisdictions that have taken decisive action in mobilizing early-stage capital at scale, such as: ● United Kingdom : SEIS and EIS programs complement institutional VC by incentivizing early-stage investors. These tax credit programs have mobilized over £33 billion in private capital, demonstrating the ability of national-level incentives to significantly enhance early-stage funding.
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