As Canadian venture capital and private equity investors set their sights on 2025, they face a landscape shaped by both persistent challenges and emerging opportunities. Drawing from CVCA’s latest member survey, this article offers a closer look at the trends and expectations driving the market in the year to come.
Out of all survey participants, 50% identified as a VC investor, 30% identified as a PE investor and 20% identified as another type of investor (e.g angel/family office, debt provider, etc). Respondents could select multiple investor types.
Here’s a breakdown of the survey respondents and what types of companies they invest in:
Current and Future Challenges Faced by Portfolio Companies
Private capital investors cited a variety of current challenges across their portfolio companies.
Talent acquisition emerged as a significant pain point, with 65% of survey respondents citing this as a current challenge for their funded ventures.
Broken down by investor type, VC, PE, and other respondents all identified this as a current challenge, though especially critical for PE-backed firms, as seen in the chart below.
All PE respondents identified it as a current hurdle for their companies, while 50% of VC and other respondents echoed this concern.
Notably, looking back at 2024, PE investors had already anticipated talent recruitment as a top challenge for their portfolio companies last year. Some Canadian sectors, such as tech, continue to grapple with significant brain drain and talent acquisition challenges, as evidenced by the exodus of two-thirds of recent software engineering graduates from top universities to the United States.
Securing financing is a top concern that VC and other investors identified for their portfolio companies (PE investors did not cite this challenge), reflecting their growth-stage needs, while PE-backed companies face unique hurdles like regulation and supply chain issues tied to their industry focus.
Global competition was also highlighted as a shared concern among all three investor types, driven by factors such as Canada’s innovation gap.
Looking ahead, talent acquisition remains the most commonly anticipated challenge investors foresee for their portfolio companies, with 60% of respondents identifying it as a key concern for the future. Canadian startups may find it valuable to explore new talent acquisition strategies and put more resources into recruitment in the coming year.
Following a similar pattern as the top current challenges investors see for their portfolio companies, securing financing was a major concern for both VC (70%) and other investors (50%).
Out of all respondents, 45% cited customer acquisition and retention as a challenge, the third-most common challenge. Notably 100% of the non-VC, non-PE investors pointed out customer acquisition and retention as an upcoming challenge for 2025 for their companies.
Investment Opportunities, Exit Conditions, and Valuation Trends
In terms of new investment opportunities, there is some optimism among respondents. Sixty percent expect the number of new investment prospects for their firms to increase in 2025 compared to previous years, while the remaining 40% anticipate the volume of prospects to remain steady. No respondents expect a decrease in new investment opportunities this year.
PE and other investors were more optimistic than VC investors about new investment opportunities. A vast majority (70%) of VC investors expect the number of new investment opportunities to stay the same, likely reflecting a more conservative outlook due to tightening funding conditions and the slower pace of early-stage startup growth in certain sectors.
As seen in the visualizations below, VC and PE investors are not pulling back on capital deployment this year – 100% of all VC and PE investors say they plan to deploy capital to both existing and new investments.
A majority (75%) of non-VC, non-PE investors said they plan to focus on deploying capital to new and existing investments, and a quarter said they will focus on new investments only.
Exit opportunities, exit prices, and company valuations for investors’ portfolio companies are projected to generally stay the same or improve slightly this year.
Most respondents across investor types expect exit opportunities to either stay the same or improve slightly.
PE and other investors were more optimistic, with 17% and 25% of respondents respectively expecting opportunities to significantly improve in 2025, while a small share (10%) of VC investors expect exit opportunities to slightly deteriorate this year.
On exit prices, the outlook for 2025 is generally neutral, with 50% of VCs, 33.3% of PE investors, and 25% of other investors predicting stability in the market, while a small number of investors from each group expect a slight increase.
Similarly, VCs were less optimistic than their peers, with a small share (10%) expecting exit prices to significantly decrease this year.
Portfolio company valuations are expected to see a slight increase by most investors in 2025, with 30% of VCs, 66.7% of PE, and 50% of other investors forecasting this trend.
However, a notable portion of VCs and PE investors expect a slight decrease, and a small share (10%) of VCs expecting their company valuations to significantly decrease this year.
Challenges Faced by Private Capital
Private capital investors cited a range of challenges in the current market, from fundraising difficulties to regulatory hurdles.
As the landscape evolves, key issues such as exit environments, market volatility, and taxation continue to shape the strategies and outlooks of VCs, PE firms, and other investors.
Currently, the biggest challenges facing the Canadian private capital market currently are fundraising, exit environments, and political uncertainty.
Fundraising is particularly pressing for VC firms, with 80% of respondents identifying it as a top concern. For other investors, fundraising is also a significant issue, with 75% citing it, while PE investors are less focused on fundraising, instead prioritizing challenges related to the exit environment (67%) and market volatility (83%).
Political uncertainty is another major concern, particularly for PE investors, 67% of whom view it as a pressing issue, while VCs and other investors are also impacted (40% and 50%, respectively).
High investee company valuations, IPO market conditions, and competition from other investors are additional hurdles, though they rank lower in comparison to fundraising and market volatility.
When it comes to regulatory challenges, capital gains taxes are the most significant issue for all investor types, with 60% of VCs, 50% of PE investors, and 50% of other investors highlighting this concern.
Other challenges include a lack of incentives or accessibility, particularly for other investors (25%), and regulatory uncertainty, which is more pronounced among PE investors (33.3%).
For a small subset of other investors, global market access and trade policy are also noteworthy challenges, but these concerns are not widely shared across the broader private capital landscape.
Carbon taxes, competition law, ESG disclosure, and other taxation issues, and clean fuel regulations were not seen as major regulatory obstacles, with no respondents from any group citing them as key issues.
One respondent highlighted the challenge of a “lack of corporate VC activities,” suggesting that increased government investment in incentives could encourage corporate involvement and help invigorate exit markets for VC-backed enterprises.
Despite these challenges, overall confidence in the long-term growth prospects of the private capital industry is relatively stable, with an average rating of 63.1 out of all respondents on a scale of 1 to 100.
Non-VC, non-PE investors were the most optimistic, with an average rating of 72.3, followed by PE investors at 70.8.
VC investors were significantly less optimistic, with an average of 51.1, reflecting concerns about current market conditions and the challenges specific to early-stage investments.
Looking ahead to 2025, Canadian VC and PE investors are navigating a complex landscape. While concerns about talent acquisition and market conditions remain, there’s optimism about the potential for new investments and capital deployment, with a relatively stable outlook for long-term growth.
Kayla Zhu, Freelance Data Journalist, presents a comprehensive analysis of CVCA Members’ responses to a 2025 Investor Forecasting survey, highlighting evolving sentiments and trends among VC and PE investors in the current market landscape.