Startup ecosystems around the world are seeing steep drops in value and Toronto-Waterloo is no exception.
Ranked as Canada’s top startup hub, the region fell two spots to #20 globally in the 2025 Global Startup Ecosystem Report, released today by Startup Genome. While it continues to lead the country in research and talent, the region faces rising costs, intensifying global competition, and persistent questions about how effectively it converts intellectual strength into commercial scale.
Globally, the report shows a 14% average decline in ecosystem value, with total value falling more than 31%. North America fared slightly better, but still saw an 18% drop.
Yet amid this contraction, one sector stands apart: artificial intelligence.
AI now accounts for 40% of global venture capital investment, becoming a defining force in the startup economy.
In Toronto-Waterloo, the AI surge that spans both applied technologies and foundational research has helped counterbalance broader funding challenges and is increasingly shaping the region’s innovation trajectory.
Toronto-Waterloo is holding its position as Canada’s startup ecosystem
Toronto-Waterloo remains Canada’s top-ranked startup ecosystem in the 2025 report, though its global ranking sits at #20 (tied), down two places from last year. Despite slipping two spots in the global rankings, Toronto-Waterloo remains one of the most robust and resilient startup ecosystems in North America.
The region continues to lead the country in research, commercialization, and deep tech capacity.
Toronto-Waterloo ranks #2 in North America for “Knowledge” in the report’s framework, a metric that measures innovation through research output, patents, and foundational tech development. With a Knowledge Factor score of 7 out of 10, the region demonstrates its capacity to generate intellectual property and convert it into commercial opportunity.
That same intellectual infrastructure has positioned Toronto-Waterloo to lead in the shift toward AI-native businesses.
Between 2022 and 2024, AI-related funding in the region increased more than tenfold, reflecting a dramatic surge in investor confidence. The ecosystem now holds an AI-Native Transition score of 8 out of 10, one of the highest in North America. This shift suggests that AI is not only a research strength, but an increasingly central driver of startup formation and venture activity in the region. That said, the GSER does not indicate whether this surge in AI funding is translating into new global market leaders, an important component to ensuring the city does not remain a strong research centre only.
Talent remains a core strength. The region earns a 6 out of 10 overall in Talent and Experience, but shines in the subcategories. It scores a near-perfect 9 in Tech Talent Quality and Access and a full 10 in STEM Access.
These scores reflect both the presence of world-class institutions and a growing density of skilled workers, from early-career developers to experienced machine learning engineers.
That said, the cost of talent is inching upward. The region scores a 7 in affordability of software engineering salaries, suggesting that while it remains competitive globally, it may be less attractive on a cost basis than other Canadian cities like Vancouver.
Toronto-Waterloo also continues to build out a formidable startup pipeline.
It is home to five active unicorns and has raised more than $9 billion in venture capital between 2020 and 2024. This sustained level of investment, paired with high-quality exits and a dense network of accelerators and innovation hubs, gives the region the infrastructure it needs to weather the global downturn.
See how Toronto-Waterloo ranks relative to other Canadian cities, and learn more about the ecosystem in this podcast. This podcast summary is entirely generated and voiced by AI.
A region positioned for resilience
The story of Toronto-Waterloo in this year’s report is one of maturity and strategic evolution. It may not be climbing the global rankings in dramatic fashion, but it is holding its ground in a time of market volatility.
More importantly, it is betting on the future by investing in AI, continuing to generate world-class research, and building the conditions for long-term success.
For Canadian founders, policymakers, and investors, Toronto-Waterloo remains a cornerstone of the national innovation economy. Its ability to pair research depth with sector leadership in AI positions it well for long-term relevance. While the region’s global ranking slipped, its sustained investment levels, talent density, and institutional strength suggest a foundation that can support the next wave of growth, provided momentum continues and scale-stage outcomes follow.
Startup ecosystems unpacked
Digital Journal has published in-depth coverage of the 2025 Global Startup Ecosystem Report, including key findings and local analysis. Explore:
This article was created with the assistance of AI. Learn more about our AI ethics policy here.
