Why We Need to Eliminate Cap Gains for Canadian Startups

Investing across Canada, the US, and Israel, I've had a front-row seat to the inner workings of different ecosystems.

For the past few years, I've had a nagging feeling that Canada's startup engine just isn't firing like it used to.

👉 Canadian tech activity seems to slowing while the US, EU, and Israel are busier than ever.

👉 The only pipeline that's been built in Canada in the last decade is from Waterloo to YC, and US investors reap the benefits.

👉 🇨🇦VCs have shifted language from “we invest in Canada” to “we back Canadians wherever they build.”

Until now, the conversation has largely been based on vibes and anecdotes. What we lacked was hard data. So we teamed up with Specter to dig in. The numbers confirm our intuition:

We're at high risk of losing our next generation of scale-ups.

Here's what the data told us:

📊 COVID was disastrous for Canada's tech ecosystem.

📊 While the US and Israel have rebounded, It’s unclear if Canada has.

📊 Last year, the US outproduced Canada 45:1 in High-Potential startups (vs. 10:1 in 2015).

📊 Half of Canadian-founded High-Potential startups were based in the US in 2024, vs. 1 in 5 in 2015.

📊 Founders who raise in the US raise 2x more capital, at a faster pace.

We should always expect founders to make decisions based on what's best for their business, not national pride. If we want them to build here, we need to offer a better product. If we don't, they'll leave.

We know it's possible to build winners here. Shopify, ada CX, Wealthsimple and 360insights prove it. We're seeing exciting new companies like turbopuffer, Mantle and Datacurve being built. There's fresh energy with people like Jesse Rodgers in Waterloo and New Systems in Toronto.

The question is how do we add fuel to this fire, and convert it into global companies being built here.

It starts with urgent and bold action. As the US is making it harder to immigrate, we need to make it easier to choose Canada:

🚀 Eliminate capital gains on startups.

🚀 Make Canadian tech purchases tax deductible.

🚀 Channel government resources into priority industries where we can be #1 like Chinda did with EVs.

We also need to change the culture.

Celebrate people like Tobias Lütke who have had every opportunity to move, but chose to stay and build. Put his name on the $5 bill for god's sake.

If you’re a founder building here I want to hear from you.

Download the full brief and dive into the findings + solutions.

Thank you to Mike Murchison, Alan Bekerman, Specter, and my Leaders Fund colleagues for your eyes on this.

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