Liam Gill leads the capital program at MaRS Discovery District.
Garry Tan is the president of San Francisco-based Y Combinator, one of the world’s most prominent accelerators, which helped companies such as Dropbox, DoorDash, Stripe and Airbnb get started. Earlier this year, he claimed Canadian startups reincorporating in the United States could increase their access to capital by at least two times. This claim was the driving force behind YC’s decision to stop investing in Canadian incorporated companies.
While that decision was overturned after significant backlash from Canada’s tech community, YC’s conclusion about the availability of capital in the Canadian innovation ecosystem remains true.
Silicon Valley venture firm Andreessen Horowitz, also known as a16z, raised US$15-billion across five new funds, it announced on Jan. 9. That dwarfs the $2.1-billion raised by all Canadian venture-capital firms combined throughout 2025. That’s a single Silicon Valley firm raising 10 times more, nine days into 2026 than our entire venture-capital industry did last year.
The lack of active capital in our country has serious consequences. Data from The Globe and Mail show that only 32.4 per cent of startups founded by Canadians that raised $1-million were incorporated in Canada. This directly affects jobs, tax revenue and intellectual property ownership, all of which we are losing to the U.S.
To slow and ultimately reverse this exodus, Ottawa should look to a proven international model that has been used in the United Kingdom. The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) were designed to increase investment in seed and Series A companies, respectively.
Launched in 2012, SEIS and EIS have delivered measurable, long-term results. Since their inception they have driven more than $63-billion in private capital investment into 59,000 innovative startups. In 2023, these startups accounted for 386,000 jobs and generated $50-billion in annual revenue.
The schemes leverage tax incentives to increase the attractiveness of startup investments, unlocking dormant wealth stuck in savings accounts and real estate and turning it into active investments in the country’s most innovative startups. This is accomplished through three core incentives that Canada can replicate.
First, they provide income tax credits to investors in innovative startups. Second, they allow losses from startup investments to be directly offset against income. Third, all shares purchased in innovative startups through the schemes are exempt from capital-gains tax.
If we apply the existing SEIS framework to an investor in Ontario, we can see how the field can be derisked. A $100,000 investment in a preseed startup would immediately be rewarded with a $50,000 tax credit. If the company failed, the remaining $50,000 could be offset against the investor’s income, providing an additional tax offset of roughly $27,000 at the top marginal tax rate. This means an investor writing a $100,000 cheque is risking approximately $23,000, and their upside is higher because the shares are not subject to capital-gains tax.
Canadians hold upward of $470-billion in GICs and another $8.5-trillion in real estate. Along with investments in public markets, these are the asset classes where most professionals in Canada store their wealth. While these limit downside exposure, they also limit upside. By creating a series of tax incentives that allow startup investments to match or surpass the risk-reward of these investments, the country could incentivize professionals – such as doctors, lawyers and engineers – to redeploy a portion of their wealth as angel investors into innovative startups. If this mobilized just 0.1 per cent of the dormant wealth in our country, it could unlock $9-billion in additional funding for our innovation ecosystem, 4.5 times more than our entire venture-capital ecosystem raised last year.
Beyond just a raw infusion of cash, these incentives draw more experienced professionals into the innovation ecosystem. The secret to the success of technology hubs like San Francisco is that successful founders and others invest not just their capital, but their expertise in the next generation. This policy can help build a self-sustaining mentorship flywheel where professionals invest in startups and mentor founders, then as these companies grow and investors exit, that wealth, knowledge and experience is naturally recycled.
SEIS and EIS show a different way that a mid-sized economy can support its innovation ecosystem. While we may not have the institutional finance of the U.S., the right incentives can ensure citizens support each other in growing the economy by choosing active investments that support innovation, job creation and growth instead of locking away wealth in bank accounts.
The capital in Canada’s innovation ecosystem does not meet the potential of its founders. The government knows it can no longer be a bystander as our best ideas and people move to American cities. Minister of AI and Digital Innovation Evan Solomon has been clear he wants Canadian innovation to be commercialized and scaled here.
The U.K.’s SEIS and EIS are a blueprint for creating thousands of jobs and billions in revenues without massive public spending by unlocking the wealth within our borders. If American investors, who account for 58 per cent of venture capital in Canada, aren’t willing to invest in incorporated companies north of the 49th parallel, the question is no longer whether the country can afford to try a similar approach, it is whether it can afford not to.