1. VC vs. PE: What’s the Difference?
Every biotech company begins its journey with an idea, long before it earns a single dollar. To survive those early years, it needs quite a lot of capital and relies on outside investors. Two groups provide most of that financial support: venture capital and private equity. Although they are often mentioned together, they play very different roles in the life of a biotech company.
Venture capital focuses on the earliest and riskiest stages. These investors back young teams that are still generating data, refining their science, or entering early clinical work. The companies may have no revenue at all, yet strong technology and good biology make them worth the risk. Private equity enters much later, once a company has real products, revenue, and manufacturing capacity. Their money helps companies scale production, expand into new markets, or prepare for an initial public offering (IPO). Venture capital sparks discovery. Private equity accelerates commercial growth. Understanding the difference is important, because Canada shines in early research, while it needs more strength in later stage capital and infrastructure.
2. The Canadian Funding Landscape: A Sector Growing Despite the Headwinds
Global financial conditions have made investment tougher in recent years, yet the Canadian life science sector continues to stand out. According to the Canadian Venture Capital and Private Equity Association, life sciences companies raised close to 894 million dollars in the first half of 2025 across only 58 deals. Even as overall venture activity slowed, biotech deals became larger, reflecting growing confidence in the quality of Canadian science.
This builds on strong performance in 2024, when the sector raised 1.38 billion dollars across 128 deals, surpassing the previous year despite widespread uncertainty. Investors appear willing to commit larger amounts of capital, especially to companies with compelling preclinical or clinical data.
However, the ecosystem faces important challenges. Seed and pre-seed funding, which supports the earliest academic discoveries, has been declining. Founders frequently report that laboratory space is difficult to secure, and limited access to research facilities slows the generation of the early data needed for investment. Many companies also feel pressure to move to the United States to secure larger follow-on rounds or specialized resources. Although Canada excels in basic science, gaps in early infrastructure and later stage capital make the overall path to commercialization difficult.
Even so, global firms continue to take notice. Investors from Versant Ventures and others have publicly stated that some of their most successful companies come from Canada. The science is here. The innovation is here. The question is whether Canada can build an environment strong enough to support these innovations through every stage of their growth.
3. Case Study: Lumira Ventures, Building Companies and an Ecosystem
Lumira Ventures demonstrates what a successful Canadian life sciences investment firm can look like. With offices in Toronto, Montreal, Vancouver, and Boston, Lumira invests in companies at different points along the biotech journey, from early academic spinouts to ventures approaching commercial launch.
Over more than twenty years, Lumira has funded more than one hundred companies and supported over fifty approved health products. Its portfolio companies have raised more than six billion US dollars in follow on financing and generated more than seventy billion dollars in total revenue. These include well known Canadian successes such as Aurinia Pharmaceuticals in Edmonton and Zymeworks in Vancouver, as well as major exits such as OpSens Medical in Quebec City. Each example shows how Lumira helps transform Canadian science into real therapeutic and commercial impact.
A key strength of Lumira is its multistage investment approach. Instead of focusing only on seed stage companies or only on mature ventures, it supports companies across the full development pathway. This helps founders avoid the common funding gaps that can stall progress at critical points. Lumira also invests in talent through its Venture Innovation Program (VIP), which gives PhD, MBA, and MD trainees direct experience with scientific due diligence and investment decision making. Programs like this help grow the next generation of scientifically trained venture professionals, a resource Canada needs in order to sustain a competitive biotech sector.
4. Government Funding Programs, Incubators and Accelerators
Government programs are central to Canada’s innovation strategy. Early-stage science is expensive and risky, and public support could help companies survive long enough to attract private investment. The Scientific Research and Experimental Development tax credit is one of the most important tools for young companies, offering financial relief for costly laboratory work. The Venture Capital Catalyst Initiative, created by Innovation, Science and Economic Development Canada, expands the amount of venture funding available by investing in funds-of-funds and encouraging private sector participation. A dedicated life sciences stream has brought additional capital into the sector at a time when it is urgently needed.
Alongside these programs is a vibrant network of incubators and accelerators. MaRS Discovery District in Toronto provides advisory support, industry connections, and access to investors. Accelerators such as Techstars, the University of Toronto Entrepreneurship Hatchery, and the national Lab2Market program offer structured training and mentorship. Lab2Market is especially valuable for academic teams, helping researchers assess whether their discoveries can become real companies.
Conclusion
Canada’s biotechnology ecosystem is full of talent, innovative ideas, and scientific excellence. Venture capital supports discovery. Private equity enables growth. Government programs help bridge the gap between academic research and commercial readiness. Incubators and accelerators provide founders with space, community, and expert guidance. Yet the system still faces pressure, particularly in early-stage funding, laboratory infrastructure, and competition from larger markets. Strengthening every part of the pipeline is crucial in helping Canada turn its world class science into long-lasting real-world impact.
References
- https://ised-isde.canada.ca/site/canadian-life-science-industries/en/biopharmaceuticals-and-pharmaceuticals/venture-capital-canadian-life-science-industry
- https://thelogic.co/briefing/canadian-biotech-startups-generating-competitive-returns-investors-say/
- https://www.lab2market.ca/launch
- https://my.pitchbook.com/profile/10602-46/investor/profile#investments
- https://visible.vc/blog/venture-capital-firms-in-canada/#Top%20Venture%20Capital%20Firms%20in%20Canada
Tianning Yu
