Near record funding. A rebound in new company launches. Megadeals in Newfoundland and Labrador. Notable strength in AI and medical technologies. Persistent concerns about early-stage funding.

Those are the headlines from Entrevestor’s 2025 Atlantic Canada Data Report, which we’re launching today at the New Brunswick Innovation Foundation's Venture Capital Outlook in Fredericton. But the most consequential story in this report runs deeper.

It is the growing number and economic strength of the Elite and Scaling startups in Atlantic Canada. These high-growth, innovation-driven companies generally have more then 10 employees and $1 million in annual revenues, and have raised more than $2 million.

We’ve identified 98 of them, or 13 percent of the community, more than ever before. In 2025, they expanded their workforces by more than 15 percent, achieved strong revenue growth, and raised over $330 million in equity capital. Their performance provides compelling evidence that Atlantic Canada’s long-term investment in innovation-driven companies is delivering results. It’s what so many of us envisioned when we began to discuss the startup economy’s potential 15 to 20 years ago.

The second most important story is probably the surging influence of artificial intelligence, which has impacted nearly every major trend in 2025.

First, AI was a driving force behind a surge in funding. Atlantic Canadian startups raised $482 million in equity capital – the strongest annual total of the decade, and possibly the highest on record. A major contributor was the performance of two St. John’s-based AI companies, CoLab Software and Spellbook, which together attracted $171 million in venture capital – more VC than the rest of the community combined. The only concern in the funding realm – and it’s been a problem for a few years – is the weak funding by pre-seed and young companies.

AI also powered company formation. The IT sector – which we now refer to as the AI & IT sector – accounted for nearly three-quarters of all new startups. In 2025, we identified 136 new companies, along with several that had previously operated in stealth. This strong pipeline marks a meaningful shift after two years of concern about a shrinking pipeline and declining community size. While the total number of startups in our database declined to 741, the resurgence in new company creation offers clear grounds for optimism.

Employment trends tell a similar story. Startup employment grew for the first time in three years, reaching approximately 8,900 workers by the end of 2025, up from 8,400 a year earlier. Larger AI firms such as CoLab and Spellbook played an important role, but so did a growing cohort of smaller AI startups. Many of these young companies are able to generate early revenues and secure non-dilutive funding, allowing them to sustain operations and contribute meaningfully to overall job growth.

Revenue Growth

Revenue growth across the ecosystem was also strongly influenced by AI. Based on survey data, we estimate average revenue growth of 30.8 percent in 2025. Several larger companies reported that their revenues more than doubled. While data is incomplete, the overall trend is clear: AI-enabled companies are accelerating both the speed and scale of revenue generation.

The influence of AI extends beyond individual companies to the ecosystem. Groups such as Volta, DeepSense, and the Genesis AI Garage are among those offering programs in AI development. Meanwhile, support organizations are encouraging startups to prioritize rapid product development and early revenue generation using AI tools, rather than focusing primarily on fundraising.

There were also notable developments outside the AI sphere. St. John’s-based oceantech company Kraken Robotics surpassed a $1 billion valuation and continued to expand. Listed on the TSX Venture Exchange, the company raised $115 million – exceeding even the Spellbook and CoLab financings – and is well positioned to book the largest funding round again in 2026. Atlantic Canada has determined it will be a global force in oceantech and it’s a huge accomplishment to have a billion-dollar-plus company in the sector. Also, the huge funding deals by Kraken, CoLab and Spellbook are the cornerstones of an exceptional year of startup development in Newfoundland and Labrador.

The life sciences and medtech sectors also delivered strong results. These industries saw robust company formation and revenue growth exceeding 70 percent. Several medtech firms – including ABK Biomedical, Sound Blade, and Sparrow BioAcoustics – raised eight-figure funding rounds, while another life sciences company Mara Renewables secured US$9.1 million.

Greater Focus on M&A

In terms of exits and transactions, Atlantic Canadian companies are increasingly acting as acquirers rather than targets. Fredericton-based Remsoft, a long-established forestry software firm, received strategic investment from San Francisco private equity firm Banneker Partners and used the capital to acquire Lim Geomatics. With Banneker’s support, it made another acquisition in 2026. Four companies exited during the year, with the most notable being Charlottetown’s Abbey Island Foods, which sold for $20 million plus future considerations.

Beyond financial metrics, the ecosystem is evolving in other important ways. Environmental and diversity priorities have receded somewhat on the national policy agenda, while there’s an increased focus on economic and defence concerns. That means new opportunities have emerged for startups, particularly those with technologies applicable to defence and security.

In our Ecosystem section, we note that governments and support organizations are constrained by huge fiscal deficits on the part of federal and provincial governments. However, we once again find a surfeit of support organizations – 64 overall, of which only 17 make equity investments. At the end of the report, we make a case for the 65th member of the ecosystem – Entrevestor. While the ecosystem is plagued by multiple groups providing duplicated services, Entrevestor plays a unique role in providing deep and timely information to all parts of the community. We’ve issued a call for leaders to work with us on a plan to maintain this service after its current owners retire.

In these belt-tightening times, we appreciate the organizations that didn’t pull their belts so tight that it strangled funding for our data report. A huge thanks to these groups that supported our research: Atlantic Canada Opportunities Agency, Invest Nova Scotia, NBIF, Halifax Partnership, Propel and the Nova Scotia Department of Growth and Development.