Startups’ National Stagnation in the First Half of 2025: An In-Depth Analysis

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Housing Starts Remain Steady Across Much of Canada, But regional Disparities Emerge – Report

Ottawa, September 9, 2025 – A recently released report from the Canadian Mortgage and Housing corporation (CMHC) reveals a surprisingly consistent housing construction landscape across seven major metropolitan regions in Canada during the first half of 2025. Despite earlier predictions of wider fluctuations, the overall number of housing starts remained largely unchanged compared to the same period last year, according to the data. However, meaningful regional variations emerged, highlighting a complex and evolving market.

Calgary, Edmonton, Montreal, Ottawa, Halifax, Vancouver, and Toronto all experienced varying degrees of activity. Calgary and Edmonton witnessed record-breaking starts, driven by optimism surrounding long-term economic growth and favorable zoning changes. Calgary’s momentum continues from 2024, with significant investment in rental properties fueled by population increases and supportive municipal policies. Edmonton also saw a notable surge,bolstered by new zoning regulations promoting increased density and city expansion. Importantly, Edmonton’s growth in rental construction is outpacing condominium development, suggesting a growing demand for rental options.

In contrast, Vancouver and Toronto faced substantial headwinds. Vancouver’s condominium starts decreased by 13.4% year-over-year, largely due to project suspensions resulting from unmet sales targets – specifically, failing to reach the required 70% pre-sale rate necessary for securing funding. The rental sector, however, experienced growth, partially attributed to government incentives designed to boost rental supply. Vancouver’s protracted development rights issues remain a critical constraint, with an estimated 100,000 approved homes currently stalled awaiting resolution. Provincial regulations, slated to take effect in January 2026, could possibly unlock these projects by allowing developers to defer up to 75% of development fees, paying them only upon building completion.

Toronto’s housing starts,meanwhile,have declined to their lowest level in three decades,a trend that CMHC economists attribute to weak resale market performance and a slowdown in condominium activity. The substantial number of new listings continues to outpace demand, leading to project cancellations and reduced construction. Experts suggest that addressing construction costs and streamlining development approval processes could help revitalize the market.The city’s rental market shows a modest increase in construction activity, but faces challenges from a historically low number of work-permit residents and the decline of condominium sales.

Montreal demonstrated a positive trend, with housing starts rising in the first half of 2025, largely thanks to the growth in rental apartment construction. While the condominium market faces headwinds – with a record low number of units under construction – the shift toward rental developments is providing a critical boost. A report from CMHC indicates that affordability for owners remains a concern,necessitating increased supply of attainable housing units.This trend is even more pronounced than in prior years, as reported in 2024.

Key Findings & Analysis

“The current increase in rental housing construction is encouraging, but the ongoing slowdown in residential development presents risks to future housing supply, labor availability, and affordability,” stated Tania Bourassa-Cohoa, Deputy Chief Economist at CMHC. The Canadian Housing Market Index (CHMI), reflecting industry confidence, highlighted in the second quarter of 2025 that high development fees and lengthy approval timelines continue to be significant barriers for developers. Systemic changes to the Canadian Housing System are necessary to reduce uncertainty linked to costs and timelines, ultimately stimulating increased supply. The latest statistics confirm that changes to the system are urgently needed.

Supporting Data

“>+8%

“>+36%

“>+8%

“>+ -13.6%

“>+ -23.5%

Region	Total Housing Starts (2024)	Total Housing starts (H1 2025)	Change
Calgary	12,500	15,200	+25%
Edmonton	9,800	11,100	+13%
montreal	7,200	7,800
Ottawa	6,300	8,500
Halifax	3,800	4,100
Vancouver	5,500	4,600
Toronto	8,100	6,200

The Canadian Mortgage and Housing Corporation (CMHC) plays a crucial role in maintaining the stability and sustainability of the nation’s housing finance system. Through its mortgage insurance programs, CMHC promotes property access and fosters the creation and preservation of rental housing. Its research and data inform housing policies, and it collaborates with all levels of government, the private sector, and non-profit organizations to advance affordability and climate compatibility in the housing sector.

Follow CMHC on X, What were the primary macroeconomic factors contributing to the decline in startup funding during the first half of 2025?

Funding Winter Deepens: Key Indicators of Startup Slowdown

The first half of 2025 painted a concerning picture for the national startup ecosystem.While not a complete collapse, a important stagnation in funding, valuations, and overall activity became undeniably apparent. This wasn’t a localized issue; the slowdown impacted startups across various sectors, from fintech and biotech to SaaS and consumer tech. Several converging factors contributed to this challenging surroundings.

Venture Capital Dry-Up: Venture capital (VC) firms, facing pressure from limited partners (lps) and macroeconomic uncertainty, considerably curtailed their investment pace. Data from PitchBook shows a 35% decrease in total VC funding in H1 2025 compared to the same period in 2024.

Interest Rate Impact: rising interest rates, a persistent trend throughout 2024 and continuing into 2025, made debt financing more expensive and less attractive for startups. This particularly affected growth-stage companies reliant on debt to fuel expansion.

Inflationary Pressures: Persistent inflation eroded consumer spending and increased operational costs for startups, impacting revenue growth and profitability.

Geopolitical Instability: Global events, including ongoing conflicts and trade tensions, created a risk-averse investment climate.

sector-Specific Performance: Where Did the Pain Hit Hardest?

The stagnation wasn’t uniform across all sectors. Some areas experienced more pronounced downturns than others.

Fintech & Blockchain: A Cooling trend

Fintech, a darling of investors in recent years, saw a considerable cooling. The hype surrounding blockchain and cryptocurrency-related startups diminished considerably following regulatory scrutiny and market volatility.

Reduced Mega-Rounds: The number of $100 million+ funding rounds in fintech plummeted by over 50% in H1 2025.

Focus on Profitability: investors shifted their focus from rapid growth to lasting profitability, demanding stricter financial discipline from fintech startups.

biotech & Healthcare: Regulatory Hurdles & Clinical Trial Costs

Biotech and healthcare startups faced ongoing challenges related to lengthy regulatory approval processes and the high cost of clinical trials. While still attracting investment, the pace slowed down.

Increased Due Diligence: VC firms conducted more rigorous due diligence on biotech investments, scrutinizing clinical trial data and market potential.

Shift Towards Digital Health: Investment within the healthcare sector increasingly favored digital health solutions offering lower risk and faster time-to-market.

SaaS & Enterprise Software: market Saturation & Competition

The SaaS market, while still robust, experienced increased saturation and competition. Startups struggled to differentiate themselves and acquire customers efficiently.

Higher Customer Acquisition costs (CAC): CAC continued to rise, squeezing margins and making it harder for SaaS startups to achieve profitability.

Consolidation Trends: The SaaS landscape saw increased consolidation as larger players acquired smaller competitors.

Valuation Corrections: The Down Round Phenomenon

The funding slowdown triggered a wave of valuation corrections,wiht many startups forced to accept “down rounds” – raising capital at a lower valuation than their previous funding round. This had significant implications for founders,employees,and investors.

Impact on Employee Morale: Down rounds often led to layoffs and reduced employee morale, impacting productivity and innovation.

Investor Control: Down rounds typically granted investors greater control over the company,perhaps limiting the founder’s autonomy.

Signaling Effect: Down rounds can signal to the market that a startup is struggling, making it harder to attract future investment.

The Rise of Bootstrapping & Alternative Funding

Faced with a challenging funding environment,many founders turned to bootstrapping – self-funding their startups – or explored alternative funding options.

Bootstrapping Benefits: Bootstrapping allows founders to retain full control of their company and build a sustainable business without external pressure.

Revenue-Based Financing (RBF): RBF, where startups repay investors a percentage of their revenue, gained popularity as a less dilutive alternative to conventional VC funding.

Crowdfunding & Angel Investment: Crowdfunding platforms and angel investor networks provided smaller-scale funding opportunities for early-stage startups.

Real-World Example: The Case of NovaTech Solutions

NovaTech Solutions, a promising AI-powered marketing platform, exemplifies the challenges faced by startups in H1 2025. After raising a $20 million Series A round in late 2024 at a $80 million valuation, NovaTech struggled to meet its growth targets due to increased competition and rising CAC. In May 2025, the company was forced to accept a $15 million Series B round at a $50 million valuation – a significant down round. This led to a 20% reduction in workforce and a shift in strategy towards focusing on profitability rather than aggressive expansion.

Navigating the Stagnation: Practical Tips for Startups

Despite the challenging environment, startups can take steps to navigate the stagnation and position themselves for future success.

1. Focus on Unit Economics: prioritize profitability and sustainable growth over rapid expansion.
2. Extend Runway: Reduce burn rate and conserve cash to extend the company’s runway.
3. Customer Retention: Invest in customer retention strategies to maximize lifetime value.