Lifecycle of Capital™ Framework Canada's innovation economy faces persistent challenges in mobilizing sufficient early-stage risk capital:
1. Supply of Capital : Incentivizing initial investment in early-stage ventures. Ensuring sufficient early-stage capital is available for investment. 2. Deployment of Capital : Supporting deployed capital and the growth of early-stage companies post-investment.
3. Momentum of Capital : Enabling liquidity, exits, and facilitating the reinvestment of capital gains into new early-stage investments when exits occur. This consultation specifically addresses the Supply of Capital phase, with future consultations planned for the other topic areas beyond those addressed in this document. For additional context on the evolution of Canada’s risk capital landscape and relevant international comparisons, please refer to the Backgrounder section further below in this document. Policy Mechanisms Under Consideration We are seeking stakeholder input on three tax-based mechanisms to increase early-stage capital supply. Each proposed policy mechanism aims to address specific gaps in early-stage capital availability by directly incentivizing investor behaviors that align with Canada’s broader economic innovation objectives: 1. National Investment Tax Credit A proposed tax credit aimed at incentivizing investments in qualified early-stage companies. Key features under consideration include: ● Encourages broader investor participation by enhancing investment returns through immediate tax relief.
● Determining an appropriate percentage to effectively mobilize capital ● Eligibility for both direct investments and investments through funds ● Requirements for qualifying companies and investors ● Integration with existing provincial programs
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