Founders read their first term sheet looking for the trap. Reasonable instinct, wrong target. The clauses that alarm people — participating preferred, full ratchet, redemption — barely exist in Canadian early-stage deals, and if one appears you can say so with a number in your hand. The clause that actually determines what an angel gets is a defined-term threshold buried on page three that most founders skim past.
The numbers below come from Osler's 2025 Deal Points Report, published in May 2026 — 686 preferred share financings from 2021 to 2025, of which 140 closed in 2025. One caveat to carry: it is one firm's deal flow, not a census. It is also the best Canadian dataset that exists.
What the market has already decided
| Term | 2025 Canadian market | What it means for you |
|---|---|---|
| Liquidation preference | 1x in ~94%; non-participating in 96.8% | Anything above 1x, or participating, is off-market at seed. Ask why. |
| Participating preferred | 3.2% (four-year average 6.9%) | Rarer in Canada than in the US, where Osler puts it near 5%. |
| Anti-dilution | Broad-based weighted average in 100% | Full ratchet did not appear once in the 2025 sample. |
| Ranking | Pari passu in 79.6%; senior in 20.4% | Seniority is a real ask, and it is declining (25.6% in 2024). |
| Redemption rights | 7.4%, up from 4.3% | Osler calls these "generally uncommon." The doubling is the story. |
| Cumulative dividends | 4.2%, down from 5.2% | 95.8% are non-cumulative. Push back on an accruing dividend. |
| Documentation | 96.8% CVCA/NVCA-based | A bespoke term sheet is itself a signal worth asking about. |
Read that table as a negotiating tool rather than a description. When an investor proposes participating preferred at seed, the useful response is not a principled objection. It is that it appeared in 3.2% of Canadian financings last year and you would like to understand what makes this deal one of them.
The clause that actually decides what you get
Pro-rata rights and information rights were granted to some but not all preferred holders in 94.7% of 2025 financings. Only 5.3% extended them to every preferred shareholder.
Which means the negotiation at the angel stage is almost never about whether these rights exist. It is about where the Major Investor definition sets its dollar threshold, and whether your cheque clears it. Pro-rata rights are what let an early backer maintain their position through the Series A — the single most valuable right an angel holds, because it is a call option on the company's best outcome. Information rights are what let them know whether to exercise it. An angel who writes $100,000 into a round where "Major Investor" means $250,000 has bought a passive minority position with no way to follow on and no obligation on the company to tell them anything.
Two practical moves. Ask for the threshold in the term sheet, not the long-form documents, because that is when it is still cheap to change. And if the round has several small cheques, ask whether an aggregation right is available — letting angels who invest through a syndicate or a special-purpose vehicle count collectively toward the threshold. Osler's own commentary on minority investor rights makes the same point from the other side: sponsors should "clearly define the thresholds for these rights," and define "the pro rata formula carefully, including fully diluted calculations."
Drag-along: the term that moved in 2025
Drag-along provisions are universal. What changed last year is how they are approved. Financings using a single preferred-shareholder approval threshold fell to 77.1%, while those using multiple thresholds jumped to 22.9%, from 9.5% the year before. Osler links the shift to widening valuation gaps — where parties disagree about worth, they build more gates into who can force a sale.
For a founder, the question to ask is simple and specific: at what point can I be compelled to sell, and does the trigger require approval from the common shareholders as well as the preferred? A drag that runs on preferred approval alone, at a price that clears the preference and little more, is a mechanism for an exit that pays the investors and not you.
Board seats, and what the data does and does not say
The average board across all Canadian venture financings in 2025 was 4.9 directors, and only 58.9% of financings included a board seat for the sitting CEO. Common directors first fall below a majority after the Series A round — which implies that at seed, founders generally still control the board.
I will not give you a seed-specific board composition figure, because Osler publishes that only as a chart and I am not going to read a number off a graph and present it as data. What the evidence supports is this: an angel seeking a board seat at seed is asking for something the market does not clearly require, and a board observer right is the standard middle ground. Observers get the information and the room without the fiduciary duty or the vote.
Where Canadian angel money actually is
Some context for what a realistic round looks like. NACO's 2026 report put Canadian angel investment at $113.79 million across 490 investments in 2025 — down 22% in capital and 20% in deal count, and a five-year low, 57% below the 2021 peak. The national mean cheque was $232,000. Women reached 40% of angel network members, a record.
On the venture side, the CVCA recorded $8.0 billion across 571 deals in 2025, with pre-seed averaging $0.88 million across 138 deals and seed averaging $3.03 million across 215. Osler's median seed investment was US$2.4 million. And the CVCA's seed report contains a number Canadian founders should sit with: US participation in Canadian pre-seed rounds fell to 8.51% in the first half of 2025, from 23.31% in 2024.
Two-thirds of the market is early stage by count and a sixth of it by dollars: seed and Series A were 70% of Canadian financings in 2025 but only 15.9% of the capital. Up rounds rose to 76.3%. AI companies took 54% of everything invested.
Start from a form, and know which one
Roughly 97% of Canadian financings use CVCA or NVCA-based documentation, and the CVCA model documents are free and public — a model term sheet, share purchase agreement, investors' rights agreement, voting agreement and unanimous shareholders' agreement, in English and French.
One thing to understand before you use them. The CVCA form is deliberately neutral, not founder-friendly. Its term sheet offers three bracketed liquidation preference alternatives — non-participating, fully participating, and capped participation — and includes an optional redemption provision. The market positions in the table above are where Canadian parties negotiate to. They are not where the form starts.
For a seed round specifically, Osler's Series Seed financing templates are free, Canadian-law, and lighter. DLA Piper's caution on the CVCA suite is worth repeating: the documents are "not appropriate for every company at every stage" and are a poor fit for rounds under about a million dollars, where complexity buys nothing but deal fatigue.
The four questions to ask before you sign
- What is the Major Investor threshold, and does my cheque clear it? If not, ask for aggregation.
- Is the preference 1x non-participating, and is it pari passu? Both are market. Seniority is a live ask; participation is not.
- What triggers the drag, and who has to approve? Preferred-only approval at a low threshold is the term to negotiate.
- Board seat or observer? Observer is the normal answer at seed.
And one that is not about the term sheet at all: check the exemption. Every share issued in that round needs one, and the rules on which exemption applies do not soften because there is a term sheet on the table.
A term sheet is mostly non-binding, which founders take as licence to move quickly through it. The market has settled the clauses that would have been worth fighting over. What is left is the handful of thresholds and definitions that nobody sets by default, and those are yours to get right while the leverage still exists.
Part three of the series on funding a Canadian startup. Next: what a SAFE actually does to your cap table.
Common questions
What is a normal liquidation preference in Canada?
1x non-participating. In 2025 a 1x preference appeared in roughly 94% of Canadian venture financings and 96.8% were non-participating, according to Osler's 2025 Deal Points Report. Participating preferred appeared in 3.2%, below the four-year average of 6.9% and below the roughly 5% Osler reports for the US.
Is full ratchet anti-dilution used in Canada?
Not in the current data. Broad-based weighted average anti-dilution was used in 100% of the financings in Osler's 2025 sample, regardless of whether the round was up, flat or down. Full ratchet did not appear.
What is a “Major Investor” and why does it matter?
It is a defined term setting the minimum investment that carries pro-rata rights, information rights and often consent rights. It matters because 94.7% of Canadian financings grant those rights to some but not all preferred holders. An angel below the threshold has no right to follow on and no right to be told how the company is doing.
Should an angel investor get a board seat?
At seed, a board observer right is the usual answer. The average Canadian venture board is 4.9 directors and common shareholders keep a majority until after the Series A, so a seed board seat for a small investor is not something the market requires. An observer gets the information and the meeting without the vote or the fiduciary duty.
How big is a typical Canadian angel investment?
NACO reported a national mean cheque of $232,000 in 2025, on $113.79 million invested across 490 investments — a five-year low, down 22% from 2024. The CVCA put average pre-seed rounds at $0.88 million and average seed rounds at $3.03 million.
Are there free Canadian model financing documents?
Yes. The CVCA publishes a free public set based on the NVCA forms, including a model term sheet, share purchase agreement, voting agreement and unanimous shareholders' agreement. Osler publishes free Canadian-law Series Seed templates. Note the CVCA form is neutral rather than founder-friendly — it offers participating preferred and redemption as bracketed options.
What changed in Canadian venture terms in 2025?
Two things. Drag-along provisions with multiple approval thresholds jumped to 22.9% from 9.5%, which Osler links to widening valuation gaps. And redemption rights rose to 7.4% from 4.3% — still uncommon, but close to doubled.
Is a term sheet binding?
Most of it is expressly non-binding, with the usual exceptions for confidentiality, exclusivity or no-shop, and expenses. That does not make it unimportant: the commercial terms recorded in it are what the long-form documents get drafted to, and reopening a point after signature costs goodwill you may need later.