Building Canada’s Technology Nation: The Urgency of Bold Investment

Canada’s economic future will be defined by how we act on technology investment today. Other nations are mobilizing unprecedented resources, trillions of dollars backed by industrial strategies, sovereign wealth funds, and procurement tools, to ensure their companies lead the next economy. Prime Minister Carney himself has described this moment as “a rupture”, driven by economic nationalism, AI transformation, and the green transition. If Canada hesitates, we will remain on the sidelines, supplying ideas and talent while others capture the value of scaling them.

The numbers tell the story. In 2024, venture capital investment in Canada bounced back to $7.9 billion, breaking a two-year decline. That’s encouraging, but it pales in comparison to the US, which saw over $170 billion invested in the same period. As a share of GDP, Canada reached 0.35%, ranking sixth among OECD countries. Encouraging, but nowhere near enough to secure global leadership.

The release of Budget 2025 underscores that the moment is indeed urgent. The federal government has now begun to align fiscal strategy with long-term economic resilience, including new commitments to venture capital, sovereign AI compute, and scale-up financing. These are positive signals, but the arc of execution will determine whether Canada builds world-leading companies or continues to supply talent to them.

Call to Action: This is a question of relevance: will Canada influence the rules of tomorrow’s economy, or be forced to follow them?

Strengths and Strains

Canada has enviable strengths. We are home to world-class AI hubs like Mila in Montreal, Amii in Edmonton, and Vector in Toronto. We are pushing boundaries in life sciences, agtech, industrial software, and quantum. Ontario, Quebec, and British Columbia accounted for 86% of VC activity last year, while Alberta’s Prairie ecosystem grew at an impressive 40% compound annual rate over the past five years.

But Canada’s strengths don’t stop at emerging sectors. Our traditional pillars, natural resources, manufacturing, and utilities, can be powerful launchpads for tech leadership when combined with AI, automation, and software. It’s not only about inventing the future; it’s also about modernizing the present. By digitizing and transforming the industries that already underpin our economy, we can embed technology leadership into Canada’s economic DNA and anchor the vision of becoming a true technology nation.

The challenges, however, are undeniable. Too many Canadian startups sell early rather than scale into global leaders. In 2024, only 7% of unicorns exited, leaving capital locked up and eroding investor confidence. At the same time, long-term returns have lagged: Canada’s 10-year VC returns slipped to 10%, falling 450 basis points behind the U.S.

Compounding the issue is our reliance on foreign capital. Canadian-investor-only deals accounted for just 22% of invested dollars. By contrast, foreign investors, often in syndicate with Canadians, represented 78% of total venture investment. This influx of foreign capital has been vital to the ecosystem’s growth, but it comes with a cost: too often, our most promising firms are scaled on foreign terms rather than Canadian ones.

Call to Action: The foundations for success are already here. What’s missing is the capital and conviction to grow Canadian innovators into world-class champions.

A Narrowing Window

Despite headwinds, momentum is building. AI now attracts 30% of Canadian VC investment, with homegrown players like Cohere already competing globally. Life sciences are on the rise, powered by AI-driven drug discovery and health tech. Clean technology remains central to our climate commitments and to building economic resilience in an era of energy transition. Beyond these, Industrial Software and AI will be the connective tissue of the future economy, embedding intelligence into every process, platform, and industry.

But the window is closing fast. Across the globe, governments are committing billions to position themselves as leaders in AI, semiconductors, clean energy, and advanced manufacturing. The US has deployed the CHIPS and Science Act and the Inflation Reduction Act, Europe has launched multi-billion-euro sovereignty funds, and Asian economies are doubling down on state-backed technology investments. These countries are not waiting for the market to decide; they are shaping it.

At the same time, protectionism is reshaping global capital flows. Tariffs, supply-chain restrictions, and industrial policies are increasingly designed to favour domestic champions. Foreign investors who have long been essential to Canada’s venture market may retrench to their home markets, reducing the pool of capital available here.

Without decisive action, Canada risks a hollowing out of its innovation economy. Our most promising tech companies could face pressure to relocate in search of deeper capital pools or be acquired before they ever scale into global leaders. The risk is not abstract; it is already happening. 

What Must Be Done Now

Recent federal actions, including Budget 2025’s capital commitments and procurement shifts, signal progress. But they do not yet constitute a national growth strategy for technology. To secure Canada’s technology future, the following actions are essential:

Government

• National Tech Growth Strategy: Develop a coordinated national technology strategy that aligns federal and provincial efforts, sets measurable scale-up targets, and prioritizes export growth. Budget 2025’s capital commitments are a start; now, Canada needs a clear roadmap for where we intend to lead globally.
• Procurement Reform: Implement a “Canadian-first” pilot mandate across public agencies with approval cycles under six months. Budget 2025’s Buy Canadian procurement direction is a strong signal, but it must translate into actual adoption of domestic software and AI, not just access to pilot programs.
• Capital Incentives: Complement Budget 2025’s venture capital initiatives by modernizing Canada’s capital gains framework. A QSBS-style exemption, applied per investment, would incentivize domestic LPs and high-net-worth investors to support Canadian scale-ups over foreign alternatives.
• Scale Public–Private Capital Platforms: Budget 2025 introduced both the $1B Venture & Growth Capital Catalyst Initiative and a $750M envelope for early growth-stage firms. The intent is right, now these vehicles must be deployed at speed and structured to co-invest alongside Canadian pension funds and corporates to anchor scaling companies here.

Investors

• Mobilize Canadian Capital: With $11.5 billion in dry powder sitting idle, institutional LPs, especially pension funds, must commit more to Canadian later-stage rounds. This should include not only direct investment, but also greater allocations into venture and growth funds dedicated to Canada’s strategic sectors such as AI, clean energy, industrial software, and life sciences.
• Strengthen Secondary Markets: Create mechanisms for liquidity in late-stage companies, unlocking capital from unicorns and recycling it into the next generation of startups.

Corporates

• Anchor and Accelerate: Corporations should commit 1–2% of annual R&D or innovation budgets to domestic startups through direct investments, vertical-specific funds, and export acceleration partnerships. To reinforce their commitment, this contribution should be made tax-deductible, effectively reducing taxable income and aligning corporate strategy with national innovation goals. Canadian corporates must be called into the arena more prominently, not just as customers, but as co-builders of the ecosystems that will produce global champions.
• Adopt Faster: Streamline procurement and pilot processes. Giving Canadian startups early validation here at home is the most effective way to help them scale globally. By acting as early adopters and risk-takers, corporates can unlock a pathway for Canadian innovators to compete internationally.

Ecosystem & Academia

• Commercialization Pathways: Expand CDL-style accelerators nationwide to help researchers and founders turn cutting-edge research into global businesses.
• Talent Pipeline: Build stronger pathways linking Canadian graduates and researchers to scaling firms, ensuring our best talent grows at home. In areas of specialized need, enable companies to draw on global talent to support and reinforce Canadian teams.
  
  

Call to Action: Incremental change will not close the gap. What’s required now is decisive, coordinated action that matches the scale of the challenge and opportunity.

The Canada We Could Build

Canada has every reason to be a leader in the industries of the future. We are home to cutting-edge research, a deep bench of entrepreneurial talent, and an emerging track record of building global companies. What we lack is the ambition and commitment to transform these advantages into enduring leadership.

If Canada seizes this moment, we can be recognized worldwide for the technologies we design and deliver: AI-driven manufacturing systems, clean energy platforms, and industrial software that transforms how industries operate. The benefits are profound: high-value jobs, a diversified and resilient economy, and a stronger voice in setting the global standards of tomorrow.

Call to Action: With bold action today, Canada can secure its place as a nation defined by world-leading technologies, not just by its history of resources.

The next five to ten years will determine whether Canada becomes a technology powerhouse or remains a branch plant to global giants. The question is no longer whether we can lead; it is whether we will choose to.

Note: Source material includes BDC’s Canada’s Venture Capital Landscape – May 2025, Budget 2025 Announcement, and the federal announcements by Prime Minister Carney regarding new policies for Canada’s strategic industries (Sep 5, 2025)