Canada’s policy tools aren’t keeping pace. Without federal incentives to invest in startups, provinces have built their own programs. These are very valuable locally but can unintentionally wall off capital from moving across borders. As fund managers grow and seek national opportunities, they often lose access to those regional incentives, oftentimes discouraging the very scaling the country needs. If Canada wants a strong venture market tomorrow, we need to start by fixing early-stage capital today.
2.2 Canada Risks Falling Behind in the Global Capital Race
Around the world, countries are implementing bold, coordinated strategies to mobilize innovation capital—leveraging tax incentives (to correct for risk), public-private co- investment initiatives (to increase scale), and capital recycling mechanisms (to sustain momentum)–driving flywheel effects and long-term economic competitiveness. These are not theoretical initiatives; they are producing measurable results at scale. In Israel , government-backed angel incentives and a world-class public-private co- investment model help mobilize more venture capital per capita than other comparable jurisdictions, illustrating the impact of combined matching grants, tax incentives (Angels Law), and support for organized angel networks. This has generated a seamless progression of capital from ideation to scale. In Estonia , a 0% tax on reinvested corporate profits and a digitally integrated innovation ecosystem have enabled the country to lead Europe with €1,056 in venture capital per capita—far surpassing the European average of around €140. This level of investment corresponded to approximately 3.59% of Estonia’s GDP in 2022, underscoring the substantial impact of VC funding on the country’s economy. The United States provides a structural advantage to early-stage investors through the Qualified Small Business Stock (QSBS) exemption, which allows up to US$10 million in capital gains to be excluded from federal tax, provided the investment is held for at least five years. In the United Kingdom , the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) have mobilized over £33 billion in private capital, offering investors 30%–50% tax relief on qualified early-stage investments.
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