startup ecosystems have become the #1 engine of future-proof job creation and economic growth in modern economies. Any continued de-investment by Canadian governments is setting Canada’s economy behind in a strategic sector, especially compared to countries that are aggressively investing in startup ecosystems.
This report does not examine all the potential reasons for this decline, but it does address one very fundamental component: funding.
1.3.2 Seed Funding Startup Genome has been examining Canadian startup ecosystems for many years. One complaint made by ecosystem experts and founders alike is that it is much harder to raise seed rounds in Canada than should be the case. Whilst the difficulty of fundraising is a common complaint from founders in every ecosystem, especially at pre-seed and seed stages, there are often genuine differences between ecosystems, which this research aims to confirm or infirm. Certainly, investment at seed-stage is critical for any startup ecosystem: if this stage – the start of the pipeline or ‘funding funnel’ – is dysfunctional, then it will affect all subsequent stages, from Series A to exit. One common problem is that there is a relative scarcity of investors at seed stage (including pre-seed) since this stage is the highest risk, and experienced investors moving to later rounds over time. Globally, angel investing as an asset class has also been greatly challenged in recent years due to chronically low returns outside of the largest ecosystems, leading to seed funding gaps. Governments often try to remedy this both by creating additional incentives or derisking for early stage investors (via tax credits, for example), and by injecting capital through Funds of Funds. However, the latter typically flows through
Startup Genome | San Francisco • Berlin • London • Delhi • Tokyo • Abu Dhabi • Bangalore • São Paulo
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