Backgrounder: The Evolution of Venture Capital and Angel Investment in the U.S. and Canada Executive Summary Canada's risk capital ecosystem faces a critical imbalance: while the venture capital (VC) industry has experienced substantial growth through successful government initiatives like VCAP and VCCI, the pre-institutional capital ecosystem (angel investors) has not kept pace. This disparity threatens the sustainability of Canada's innovation funding continuum and risks undermining the significant public investment in building the country's venture capital capacity. Key Findings: ● The ratio of venture capital to angel capital in Canada has reached approximately 56:1 ($14.7B to $262.1M in 2021), compared to a healthier 20:1 ratio in the U.S. ● Canada’s current venture capital to angel capital ratio highlights a valuable opportunity to enhance early-stage capital availability. Emulating aspects of the U.S. model, where strong angel investment significantly enhances venture capital performance, could reinforce our broader innovation ecosystem. ● While VC investment grew by 308% between 2017 and 2021, angel investment grew by only 61% during the same period. ● Canada's pre-seed ecosystem remains fragmented and less professionalized than the venture capital industry, with inconsistent support across regions. ● Institutional and pre-institutional capital operate under fundamentally different dynamics, requiring distinct policy approaches. Note on Terminology: In this document, pre-institutional capital refers to early-stage investment —such as angel networks, family offices, or micro funds—that typically operate below the scale or structure required to attract investment from institutional sources like pension funds or endowments. Institutional capital , by contrast, refers to capital allocated by large-scale capital providers (e.g., pension funds, sovereign wealth funds, endowments) into professionally managed venture capital funds and other investment vehicles with institutional-grade structures, governance, and scale.
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