Canadian Tech Startups Face Funding Challenges Despite Calls for Domestic Support

Despite increased rhetoric around supporting Canadian businesses, funding for domestic tech startups is declining, prompting founders to seek investment and opportunities abroad, according to new data released today.

PitchBook data reveals that Canadian venture capital investments in domestic firms have decreased by nearly four percent compared to 2023 and 2024. In the quarter ending September 30, Canadian VCs made just 66 investments in Canadian companies, a significant drop from 125 deals in the previous quarter and 104 a year earlier. Approximately two-thirds of all deals backed by Canadian investors now go to foreign companies. This trend comes as many Canadian entrepreneurs struggle to secure funding within the country, potentially hindering innovation and economic growth.

Jason Robinson, co-founder and CEO of Evoco, a Toronto-based cleantech materials company serving global brands like Vans and Michael Kors, is currently attempting to raise between $25 million and $30 million to build a domestic manufacturing facility. “There’s lots of talk, very little action,” Robinson stated, noting he’s finding more traction with investors in Europe and Asia. A recent study by Leaders Fund found that the number of high-potential Canadian startups relocating to the U.S. has accelerated, with only 32.4 percent remaining in Canada in 2024, down from 70.3 percent in 2015-2019. This exodus is shrinking the pool of attractive investment opportunities within Canada, as explained in a recent report by the Innovation, Science and Economic Development Canada.

Industry leaders are urging the government to address the issue, with the Council of Canadian Innovators calling for an overhaul of procurement processes to favor startups. While Ottawa has announced a $5-billion Buy Canadian policy and a broader plan to support innovation, some believe further incentives, such as tax credits for private sector purchases and angel investing, are needed. Gideon Hayden, co-founder of Leaders Fund, noted a shift in venture capital language, from investing in “Canadian companies” to investing in “Canadian founders wherever they reside,” highlighting a prioritization of returns over national origin.

Industry Minister Mélanie Joly’s office stated that the government is committed to supporting homegrown innovation and will continue to explore measures to incentivize investment in Canadian businesses.