What matters
Key Takeaway
Despite an increase in new tech formations across Canada, Panache Ventures notes that the lower pre-seed investment rate signals potential future constraints on growth-stage companies.
Impacted Sectors
Editorial pillar: Other
Next Steps / Actionable Advice
The ratio of startups securing VC funding in the third and fourth quarters of 2026 will provide clearer evidence on whether capital constraints are stabilizing or accelerating.
A new report from Montréal-based venture capital firm Panache Ventures indicates a growing tension within the Canadian technology ecosystem: while more startups are being formed, fewer of them are securing early-stage capital. Prashant Matta, managing partner at Panache and co-author of the annual formation report, stated that this trend presents a significant pipeline development challenge for the sector.
The data compiled by Panache shows 1,703 new tech startups were formed in 2025. Although the pace accelerated sharply in early 2026, driven partly by activity spikes across British Columbia, Alberta, and Québec, the report highlights a persistent drop in funding access. The percentage of companies securing pre-seed investment fell from approximately 13% in 2023 to 8% in both 2024 and 2025.
Matta argues that this decline is critical because fewer early ventures graduating the initial stages will translate into a smaller pool of growth-stage companies down the line. However, Panache also noted qualitative improvements among founders; 44 percent of those launching tech businesses in 2025 had prior experience at VC-backed startups. Furthermore, 60 percent of startups launched in 2025 were building with AI in a meaningful way.
This environment suggests a shift in investment focus, favoring better-prepared founders and companies operating in strategic areas like AI infrastructure, deep tech, aerospace, and defence. Matta expressed hope that this reflects founders recognizing greater opportunities within Canada due to macroeconomic shifts, positioning the current capital crunch as an opportunity for funds like Panache, which is currently raising its third fund.
The first six months of 2026 represent a robust period for startup formation, but the full picture regarding capital adoption remains unclear until later in the year.
Sources & technical notes
Linked sourcesCheck the cited material to distinguish announcements from demonstrated results.
Evidence limit: Findings rely on Panache's combination of proprietary and public formation data, which does not track the full lifecycle or ultimate performance of funded companies.
What to evaluate next
This box highlights the systems, workflows, and decisions the article helps you assess.
- Early-stage founders should prioritize demonstrating high levels of operational preparation and meaningful AI integration to navigate the declining pre-seed funding environment.
- Although the pace accelerated sharply in early 2026, driven partly by activity spikes across British Columbia, Alberta, and Québec, the report highlights a persistent drop in funding access.
- Operational lens: Early-stage venture capital trends in Canadian tech.