geographically dispersed group region with a population of only 700,000. This rate of investment is the equivalent of unlocking more than $7 billion of angel capital from the Canadian population. Sadly, the current rate of angel investment for the rest of Canada is signifcantly below this benchmark. The key issue for tax incentives is how to design them. What businesses qualify and how? Most impose age limits on businesses, annual and total limits on the size of investment, and excluded activities. They may offer higher tax breaks for targeted businesses (e.g. seed stage, knowledge sectors). Other questions to consider are: ● How generous should the tax incentives be for investors? ● What form(s) should the tax breaks take (e.g. just on the amount invested)? ● What is the upper annual investment limit? ● How long should investors be required to hold their investment without losing their tax relief? A further issue concerns whether tax incentives should be transferable across provinces. On the one hand, limiting tax initiatives to investments made by residents in businesses located in the same province discriminates against investors in small provinces and those living close to provincial boundaries. On the other hand, it is understandable that provincial governments will not want to see lost tax income supporting out-of-province businesses. The reality is that angel investing is geographically concentrated due to local networks that angels use to identify and appraise investment opportunities. Hence inter-provincial investments will always account for a small proportion of total angel investment. And any fnancial gains that an angel derives from an investment in an out-of-province business might be reinvested in within-province businesses.
(iii) Convertible Debt Instruments
A number of commentators identify the need for governments to create a convertible debt instrument. This instrument should be aimed primarily, but not exclusively, at seed stage start-ups to buy them time to survive COVID-19 and get back to their growth trajectory prior to the pandemic. The drop in economic activity caused by COVID-19 will mean that successful startups will face postponed sales, curtailed growth opportunities and increased monthly "burn rates". Their growth milestones will shorten, and ultimately they will run out of cash.
Convertible debt instruments are a form of short-term debt that converts to equity at the next funding round. Investors effectively loan money to the business, with these convertible
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