Ottawa’s new venture capital strategy promises $1.75 billion to keep startups at home

The federal government says it will invest $1.75 billion to support startups and keep them in the country.

The first part of the plan, Backing the Builders: Canada’s Early and Growth Stage Investment Strategy, will direct $75 million towards pre-seed and seed-stage companies, particularly those in R&D-intensive sectors such as quantum technologies and advanced manufacturing, while $675 million will go to later- and growth-stage businesses.

Ottawa will also provide $1 billion starting in fiscal 2026 to 2027 to the Venture and Growth Capital Catalyst Initiative to help strengthen venture-capital funds that invest in homegrown companies, something that was announced in the last budget.

The government will co-invest with the private sector to try to tap pensions and other institutional investors to invest in startup-focused funds and support fund managers investing in life sciences companies and those focusing on strategic sectors.

“Our government’s new venture-capital strategy will be bold, forward-looking and transformative for Canada’s venture-capital industry by unlocking more private capital to back Canadian entrepreneurs and innovators,” Industry Minister Mélanie Joly said in a statement on Thursday.

Canadian tech and business leaders have long called on Ottawa to do more to encourage entrepreneurs to stay in the country.

Many have launched or relocated their startups to the United States because of what they say is easier access to more investors and talent. There are 517 U.S.-based tech firms with Canadian or Canadian-educated founders that have collectively raised more than US$400 billion, according to a recent analysis by tech advocacy group Build Canada.

Industry groups say the new government investments will give Canadian founders improved access to domestic capital to fund and scale their companies while remaining at home.

“More Canadian capital at both stages gives founders more options as they grow,” Benjamin Bergen, chief executive of the Canadian Venture Capital Association, said, adding it boosts Canadian investors’ ability to finance innovative homegrown companies,

Claudio Rojas, chief executive of the National Angel Capital Organization, said companies are more likely to incorporate, hire and grow from Canada if a homegrown investor cuts its first cheque.

“It often decides where a company builds its future,” he said. “When their first investors are Canadian, their intellectual property and earliest decisions are anchored here.”

But Bergen said what’s missing is a timeline for getting the new capital to fund managers.

“Fund managers raise on market schedules and limited partners make decisions on their own timelines. Federal commitments made while managers are raising can unlock additional private capital,” he said.