The earliest stages of venture investing are the most insulated from macroeconomic conditions. When the public market dislocation started causing a broad venture funding pullback, it appeared seed investing would be safe for a while. Data indicates that that is bearing out as expected. But checking in halfway through the year, some markets are faring better than others.
Canada, for one, is having a great year. The second quarter saw the most capital invested into Canadian seed-stage companies yet. New data from the Canadian Venture Capital and Private Equity Association found that CAD$263 million (USD$202 million) was invested in Q2 through 104 seed deals, the second highest deal count on record.
Canada’s seed investment volume increased by 30% in Q2 over Q1 and was up 8% over its second-best quarter on record, Q2 2021, when CAD$243 million was invested. Meanwhile, U.S. seed funding declined 35% from Q1 to Q2 of this year, according to data from PitchBook.
Yes, the Canadian market is not very big; for comparison, total U.S. seed volume in Q2 2022 was $3.9 billion. But Canada’s seed market is heading up and to the right, which is not something that can be said about the U.S.
It’s fun to speculate on why Canada’s seed market is growing while the United States’ is retracting.