If your startup pitch deck has the letters “A” and “I”, the feds would like to hear from you.
What happened: As part of its new AI strategy, the federal government will launch an investment fund focused on backing promising Canadian AI startups, per The Globe and Mail. The full AI strategy is expected to be announced later this week.
The Canadian Tech Growth Fund will focus on making smaller investments in startups in return for equity stakes, while the new sovereign wealth fund will be tapped to make pricier investments in larger AI companies.
Why it matters: The new investment fund will aim to tackle one of the biggest challenges facing Canada’s startup ecosystem: Founders leaving for the U.S. to get funding. When American firms fund Canadian startups, they take equity, control, and a bigger chunk of the eventual payday.
That startup migration has picked up in recent years. Just under a third of “high-potential” startups with Canadian founders launched in 2024 were headquartered in Canada, down from 67% between 2015 and 2019.
In the first quarter of last year, U.S. investors participated in 80% of Canadian venture capital deals — up from 68% in 2023.
Why it’s happening: Canada has fewer deep-pocketed investors and a VC culture that many view as more risk-averse, making it harder for startups to scale. American investors, on the other hand, are often more willing to back riskier, long-term bets.
Even Canada’s largest investors, like the Maple 8 pension funds, will often forgo startup funding rounds entirely because they’re too small to invest in directly.
Our take: Canada has the tech talent pool (some argue one of the best in the world) to build high-value AI startups at home. The real question is whether this new federal startup fund will put up enough cash to make a dent in the Canada-U.S. funding gap and overcome other, less tangible advantages enjoyed by tech startups in the U.S.—LA
