● Cross-Border Investment : Increasing connections with U.S. startup ecosystems ● Persistent Gaps : Early-stage funding gaps persist, particularly the "Series A gap" The rise of formal angel groups has helped address fragmentation by pooling capital, standardizing due diligence, and increasing deal syndication, thereby improving both professionalism and geographic reach. While Canada has over 45 active angel groups, the pace of new group formation has slowed. This suggests a maturing market and points to the need for targeted strategies to seed new groups, particularly in underserved regions. 7. Comparative Analysis: Key Differences Between U.S. and Canadian Risk Capital Ecosystems Structural Differences in Venture Capital ● Scale and Concentration : U.S. features larger funds in major hubs; Canadian VC is smaller and more dispersed ● Government Role : Canadian VC relies more heavily on direct government intervention and tax incentives ● Return Profiles : U.S. VC has generated higher returns, creating self-reinforcing capital attraction ● Stage Focus : U.S. spans full spectrum while Canadian VC has historically concentrated in early stages Contrasts in Angel Investing ● Organization Level : U.S. benefits from greater professionalization, larger check sizes, and developed networks ● Policy Approaches : U.S. has implemented significant federal tax incentives (e.g., QSBS exemption); Canadian support primarily at provincial level ● Investment Culture : U.S. angels typically demonstrate greater risk tolerance and comfort with longer timelines ● Sector Preferences : U.S. spans broader technology sectors; Canadian angel investing shows more concentration The U.S. has implemented significant federal tax incentives for early-stage investment, notably the Qualified Small Business Stock (QSBS) exemption under Section 1202 of the Internal Revenue Code. This provision allows individual investors to exclude up to 100% of capital gains on qualified stock held for more than five years, up to the greater of $10 million or 10 times their investment basis.
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