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Between Slowdown and Strength: A Contrasting Quarter for Quebec Private Capital

WHAT’S NEW IN THIS QUARTERLY REPORT:

• Economic note from Investissement Québec’s Economic Intelligence team
• Legal note from BCF law firm
• Growth equity outlook and trends on the Centre of Expertise’s radar

In venture capital, 22 transactions totaling $297 million have been recorded in Québec since the beginning of the year. Deal count and total capital invested declined by 44% and 24%, respectively, compared to the fourth quarter of 2025. This slowdown is primarily attributable to the absence of investments at the late and growth stages, partially offset by the resilience of the early stage, where invested amounts increased by nearly 189% compared to the previous quarter. Québec’s quarterly performance mirrors trends observed across other Canadian provinces. In this context, Québec ranked second nationally in both deal count and total capital invested during the quarter.

Globally, the venture capital landscape is currently shaped by four major structural dynamics: the concentration of funding in agentic AI, the rise of robotics (Physical AI) and deep tech, the emergence of defense as an asset class, and the realignment of traditional software business models. In this environment, Québec possesses the necessary strengths to position itself advantageously, allowing the province  to look ahead to the coming quarters with optimism.

In private equity, Québec recorded a solid quarter, with 90 deals totaling $3.6 billion. The province maintained its leadership position nationally, accounting for 65% of Canadian deal count and 93% of total dollars invested. Following two years of exceptional performance, majority stake transactions returned toward more normalized levels, with activity remaining slightly above historical averages. However, buyout activity increased sharply, with deal count rising by 133% and total dollars invested increasing by 1,493% compared to Q4 2025.

Looking ahead to 2026–2027, the Canadian and Québec private equity markets are returning to more normalized levels following a period of exceptional activity, with renewed focus on mid-market transactions and SMEs. As exit pathways become increasingly constrained, fund managers are turning toward a rapidly expanding secondary market and accelerating the democratization of private funds toward high-net-worth individual investors. Performance is now driven less by leverage effects and increasingly by tangible value creation, supported by artificial intelligence and operational excellence. This strategic shift reflects both caution regarding tariff-related pressures and continued ambitions in digital transformation.

The economic and geopolitical environment remains uncertain in the first quarter of 2026, both in Canada and internationally. Trade tensions with the United States persist, particularly regarding tariffs on steel, aluminum, and certain manufactured goods, while financial market volatility and slowing global demand continue to weigh on business and investor confidence.

Venture capital highlights:

• The absence of later stage deals during the last quarter represents a first since 2013.
• In Q1 2026, Québec maintained its second-place national ranking in both deal count (21% of national activity) and total dollars invested (31% of capital deployed in Canada).
• At the seed stage, total dollars invested declined by 32%, while deal count decreased by 64%. Despite this quarter-over-quarter decline, Q1 2026 ranks 10th out of 53 quarters for seed stage invested amounts.
• The early stage recorded a rebound, with deal count increasing by 37.5% and total dollars invested rising by 189% compared to Q4 2025.
• Although the ICT sector ranked first in both total dollars invested and deal count during the quarter, it ranked 51st out of 53 quarters historically in terms of deal count.
• In Q1 2026, $297 million was invested in Québec across 22 VC deals. Down from Q4 2025, this level of activity also remained below the historical average of 36 deals per quarter.

Private equity highlights:

• In Q1 2026, Québec recorded $3.6 billion invested across 90 deals, positioning the quarter above historical averages for both deal count and total dollars invested.
• Québec accounted for 65% of Canadian private equity deals, ahead of British Columbia (12%) and Ontario (11%). The province also represented 93% of total dollars invested nationally, ahead of British Columbia (4%).
• Q1 2026 was characterized by a marked increase in buyout activity, with deal count rising by 133% and total dollars invested increasing by 1,493% compared to Q4 2025.
• With 11 growth deals totaling $330 million, growth activity recorded a slight decline in deal count during the quarter, while total dollars invested remained in line with historical averages.
• The industrial and manufacturing sector continued to generate significant deal activity, with 33 deals totaling $475 million, representing 37% of deal count and 13% of total dollars invested during the quarter.
• Overall, Québec private equity activity in Q1 2026 recorded a 9.8% increase in deal count and a 262% increase in total dollars invested compared to the previous quarter.