Canadian Startups Struggle In Q3, Despite AI’s Popularity


Canadian startups faced a difficult third quarter as funding declined significantly, according to data from Tracxn. The country saw a 57% decrease in funding, with only $808 million raised in Q3 2023. This marks an 84% drop from Canada’s record-breaking fundraising quarter in Q2 2021, when startups collectively raised $5.12 billion. Additionally, no new Canadian unicorns emerged in the quarter, highlighting the challenging investment climate.

Key Takeaway

Canadian startups faced a significant decline in funding in Q3 2023, with a 57% decrease compared to the previous quarter. The lack of new unicorns and a decline in deal activity further underline the challenges faced by the Canadian venture capital market. Despite the popularity of AI, it did not alleviate the funding woes for startups. This highlights the need for innovative strategies to navigate the difficult investment landscape.

Decline in Deals and Funding

The decline in funding was accompanied by a decrease in the number of deals. In Q3 2023, only 71 Canadian startups secured investments, compared to 102 in Q2 2023 and 146 in Q3 2022. This downward trend is indicative of the global venture capital market’s overall struggles.

AI’s Influence

Despite the popularity of artificial intelligence (AI) technologies, they did not significantly impact the fundraising landscape for Canadian startups. The only company to raise over $100 million in Q3 2023 was Toronto-based AI chip startup Tenstorrent, which achieved unicorn status back in 2021. This suggests that while AI remains an exciting field, it may not be a panacea for fundraising challenges.

Insights from Canadian VC

Eva Lau, a Canadian venture capitalist at Two Small Fish Ventures (TSFV), shared insights on the situation. The data aligns with a gloomier fundraising climate across the country, indicating a broader trend rather than isolated challenges for specific startups. This downturn will likely prompt Canadian entrepreneurs and investors to evaluate strategies for navigating the difficult investment landscape.

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