As Canada continues to adapt to shifting economic sands, a new generation of entrepreneurs faces a more measured and disciplined investment climate than their predecessors. With interest rates remaining higher than normal and a possible recession looming, global capital flows are realigning, forcing founders and investors to rethink their startup strategies.
According to the latest figures from Statistics Canada, business incorporations in the first quarter of 2025 held steady compared to last year, signalling a continued appetite for entrepreneurship despite macroeconomic uncertainty. At the same time, private capital in Canada remains cautious. The most recent report from the Canadian Venture Capital and Private Equity Association (CVCA) shows that deal volume has declined again year-over-year, while smaller, milestone-based funding rounds are on the rise.
“Investors are still writing cheques,” says David Birkenshaw, managing director of Birkenshaw & Company Ltd., a Toronto-based capital markets firm with investments spanning mining, tech, and private enterprise. “But there’s a clear pivot away from speculative bets. What we’re seeing now is investment tied to execution, to cash flow, and management teams with experience in the game.”
This marks a cultural shift in the Canadian startup scene. In place of high-burn, scale-now models that dominated earlier in the decade, entrepreneurs are increasingly focused on leaner teams, long-term strategies, and flexible capital.
A large share of new businesses are founded by experienced operators within traditional sectors like clean energy, mining services, and advanced manufacturing. They’re backed by investors with specialized market knowledge who seek out industry expertise in a company’s founders. Many of these ventures attract support from private investors, family offices, and strategic corporate partners rather than traditional VC firms.
“There’s a lot of innovation happening outside of what we used to call the tech sector. Founders from industries like resources or logistics build smart, resilient businesses because they understand how to manage volatility. That’s what the capital markets are rewarding now,” says Birkenshaw.
Recent federal programs have also encouraged this kind of founder-led pragmatism. The Canada Growth Fund and updated Strategic Innovation Fund initiatives have targeted investment into infrastructure, net-zero technologies, and supply chain development, all sectors where entrepreneurship intersects directly with national priorities. But many startups rely on private capital to make the transition from a successful pilot project to creating a commercial-scale business.
Investors are also rewarding the incorporation of AI and blockchain into a company’s product development, financial modelling, and risk management strategies. “The best entrepreneurs are leveraging the tech tools available to them to build stronger businesses and make smarter decisions, whether it’s in developing downside protection or more transparent contracts,” says Birkenshaw.
The higher level of fiscal discipline extends to the structure of the deals themselves. Where startups once sought large seed rounds to chase growth at all costs, many now prefer phased capital infusions linked to concrete milestones to better manage their obligations. Investors, in turn, are more actively involved in offering operational guidance and ensuring board accountability.
The evolution is particularly evident within Canada’s mid-market companies. Small-to-midsize businesses with proven market share, seasoned leadership, and targeted value propositions are attracting attention from investors who prefer clarity and execution over potential and hype.
“Building a business in this market is about knowing your numbers, knowing your customers, and knowing your limits,” continues Birkenshaw. “The entrepreneurs who embrace those expectations are the ones who are going to build real equity.”
As 2025 hits its halfway mark, Canadian entrepreneurs are less concerned with chasing unicorn valuations and more focused on building durability and trust, both within their ranks and with potential investors. If these new founders stay the course, it may result in a more resilient foundation for Canada’s future economic growth.
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