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. Data Context and Methodological Note: While deal counts offer a useful lens for comparing activity levels across stages, it is important to note that some double counting may occur—particularly where angel group investments are also reported by venture capital funds or appear in multiple data sets (e.g., CVCA and NACO). Additionally, angel investment activity is characterized by a higher volume of smaller bets, whereas institutional venture capital often concentrates capital in a smaller number of large transactions. These differences highlight the importance of interpreting deal counts and investment volume as complementary, rather than directly comparable, indicators of ecosystem health.
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