We create the talent. We create the technology. Too often, somebody else finances the scale — and owns the upside.
Canada is very good at creating things.
We produce world-class scientists, engineers, researchers and entrepreneurs. Canadians are building companies in artificial intelligence, quantum technology, cybersecurity, clean technology, biotechnology, advanced manufacturing and other fields that will help determine where economic power resides over the next generation.
What we have not been nearly as good at is financing enough of those companies with Canadian private capital while they are still young enough for ownership to matter.
That distinction is becoming impossible to ignore.
Earlier this year Canadians were confronted with a remarkable number: at least 517 U.S.-based technology companies have been founded by Canadians, or by entrepreneurs educated in Canada who subsequently moved south, and together those companies have raised more than US$400 billion.
Let me be very clear about that number because figures like this can get abused quickly. Canada did not somehow “lose US$400 billion.” Capital raised is not GDP, payroll, profit or tax revenue.
But it is one hell of a signal.
Canadian talent is obviously capable of building extraordinarily valuable technology companies. The more important question is why so much of the financing, scaling and resulting ownership happens somewhere else.
I looked at that question in The Founder Exodus Is a Capital Design Failure — and Canada Already Owns the Fix.
The more I dug into the issue, the more obvious the underlying problem became.
Canada does not have an innovation problem. Canada has a capital formation problem.
And here is the maddening part: we already own part of the solution.
What If They Had Built More of It Here?
That was the question I could not get out of my head after seeing those 517 companies.
Not, “What if all 517 had stayed in Canada?” That would be nonsense.
Canadian entrepreneurs should build global companies. They should raise capital internationally, sell internationally, recruit internationally and compete everywhere. The United States will always have advantages Canada cannot wish away: a larger domestic market, deeper capital pools and extraordinary concentrations of investors, customers and experienced technology executives.
The useful question is much narrower.
What might have happened if Canada had created a financing environment in which more of those companies could have built and scaled substantially more of their operations here?
So I modelled it.
Not as a prediction and certainly not as some grandiose claim about exactly what Canada “lost.” I created a transparent scenario whose assumptions anyone can challenge.
In the middle case, where only 50% of the company-building activity occurred in Canada, the model produces approximately 129,250 direct Canadian technology jobs. Using a deliberately conservative one-for-one employment spillover, that becomes roughly 258,500 total jobs, $20.6 billion in annual payroll, $20.7 billion in annual GDP and approximately $7.2 billion in associated annual tax capacity.
Challenge those assumptions. Please do. Cut them in half if you want. The bigger argument survives.
You can see the assumptions, formulas and complete reasoning in What If They Had Built Here? The Economic Cost of Canada’s Founder Exodus.
The economic value is bigger than the jobs we can count
The most important consequence may actually be the one that cannot be placed neatly into a spreadsheet.
An engineer spends eight years helping build a world-class technology company and later becomes a founder. A successful founder becomes an angel investor. A product executive becomes a mentor. Someone whose stock options created meaningful wealth writes the first cheque into another startup. Lawyers, accountants, recruiters, marketers and suppliers learn how to support companies moving at global speed.
One successful company can become a school for entrepreneurs.
That is how ecosystems compound.
When Canada loses a scaling company, we may therefore lose far more than today’s payroll. We can lose part of an entrepreneurial family tree containing tomorrow’s founders, investors, executives, suppliers and companies.
Talent follows opportunity. Companies follow capital. Prosperity follows the companies.
TD Economics Just Added Something Important to This Conversation
On August 26, 2026, TD Economics published Triggering a Canadian Investment Supercycle.
TD is not advocating Flow-Through Shares for technology. I am.
But the report is important because TD’s economists arrive at many of the same underlying problems from an entirely different direction.
TD argues that Canada could be on the verge of an investment supercycle lasting a decade or longer. More than $1 trillion in announced projects are already approved or on the table, while its high-investment scenario sees the possibility of $1.5 trillion to $1.7 trillion in investment over the longer term.
You can read the original TD Economics report here: Triggering a Canadian Investment Supercycle.
Here is the part I think should matter to every policymaker interested in Canadian innovation: TD does not argue that government should simply keep writing bigger cheques. It argues that Canada needs to improve the ecosystem so that private capital is attracted organically and less public funding is ultimately required.
Now we’re getting somewhere.
Because that is the question Canadian innovation policy keeps dancing around.
How do we get more private Canadian capital to move?
Not another government fund. Not another grant application. Not another collection of bureaucrats deciding which entrepreneur deserves support.
How do we persuade Canadians with private money to put more of it at risk building Canadian companies?
That is a very different question. And Canada already has experience answering it.
TD calls it the “flywheel effect”
TD uses an interesting term for what happens when initial investment generates returns, confidence and additional investment. It calls it the flywheel effect.
Investment begets investment. Successful projects increase private-sector confidence. Greater confidence produces additional private investment, creating a self-reinforcing cycle.
Think about what that means in technology.
A Canadian invests in an early-stage Canadian company. The company hires engineers, develops intellectual property, adds salespeople and starts exporting. Employees acquire skills and perhaps equity wealth. Suppliers grow around the company. The founder eventually invests in another startup. One employee leaves and creates another company. Experienced executives move into younger businesses. More capital follows the results.
Now the flywheel is moving.
The trick is getting it started.
TD Also Identified the Leak in Canada’s Innovation Economy
This is where TD’s report becomes particularly relevant to Canadian startup financing.
TD says Canada has fewer sources of growth-stage financing than the United States. Canadian-founded businesses increasingly rely on foreign investors as they scale, and many subsequently move south to access deeper capital pools, larger markets and stronger networks.
Then come two numbers I think should make Canadian policymakers distinctly uncomfortable.
Canada’s share of high-growth companies across Canada, the United States, the European Union and Israel fell from 4.7% in 2016 to 1.5% in 2024.
More strikingly, between 2016 and 2024 the proportion of high-potential companies founded by Canadians that remained in Canada fell from 74.9% to 32.4%. Those moving to the United States were also able to raise nearly twice as much funding.
74.9% to 32.4%.
TD points to insufficient growth capital, weak commercialization, tax and regulatory frictions and limited pathways for promising businesses to become global leaders as parts of Canada’s scale-up problem.
This isn’t CanFlowThrough.com saying Canada has a capital problem. It’s TD Economics.
So now let’s get to the useful question: What do we do about it?
Canada Already Solved This Kind of Capital Problem Once
Canada has a bad habit. Whenever we identify an economic problem, somebody immediately proposes another government program.
We do not need to invent one here.
Canada already created one of the most effective mechanisms in the world for attracting private investment into exceptionally risky ventures.
It’s called the Flow-Through Share.
Why Canada created Flow-Through Shares
Resource exploration is risky. A company can spend enormous amounts of money before earning a dollar of revenue. It needs specialized people, expensive technical work and investors prepared to finance an uncertain outcome. Everyone involved can do everything right and still discover there is nothing economically viable at the end.
Traditional capital markets did not provide enough money for that sort of risk.
So Canada changed the economics.
We didn’t eliminate the risk. We gave private investors a reason to accept it.
Through Flow-Through Shares, qualifying expenditures can be renounced to investors, who can deduct those expenses for tax purposes. Government establishes the rules. Private investors choose where their capital goes.
The mechanism helped Canada build one of the most sophisticated mining-finance ecosystems in the world.
For a detailed explanation of the existing mechanism and how it might be adapted, see How Flow-Through Shares for High-Tech Startups Could Work in Canada.
If Canada can use its tax system to encourage private citizens to finance risky exploration below the ground, why can’t we apply the same principle to risky technological exploration above it?
That is also the central argument in Canada Already Owns the Fix for Its Innovation Financing Gap.
Technology Has Become a Strategic Resource
Look at the technologies increasingly determining economic and national power: artificial intelligence, quantum computing, cybersecurity, defence technology, semiconductors, robotics, clean technology, biotechnology and advanced manufacturing.
These aren’t side industries anymore. They’re strategic capabilities.
And many of the companies developing them face a financing challenge surprisingly similar to resource exploration: large upfront expenditures, expensive technical talent, long development periods, uncertain outcomes, little early revenue and the very real possibility of failure.
Canada’s tax system recognizes that problem when somebody is looking for nickel. It largely ignores the same capital-formation problem when somebody is developing quantum computing.
That distinction makes less sense every year.
The case for applying the Flow-Through Share principle directly to technology is laid out in Flow-Through Shares for Tech Startups: The Wealth Creation Tool Canada Won’t Let You Use.
Flow-Through Shares for Tech Would Not Replace Venture Capital
Canada needs venture capital.
Good venture investors bring far more than money. They provide judgment, governance, networks, customers, recruiting capability, follow-on financing and hard-earned experience.
FTS-Tech should not replace venture capital. It should help create more Canadian companies worth venture capital investing in.
That’s different.
The earliest money into a business behaves differently from growth capital. There is less information, more uncertainty and a much greater possibility of failure. That’s precisely where changing the risk-versus-reward calculation can have the greatest effect.
The objective isn’t to make every startup succeed. That’s impossible.
The objective is to finance a wider portfolio of attempts. Some will fail. Some will survive. Some will become solid companies. A small number may become extraordinary.
That’s what risk capital does.
I’ve explored the broader problem of how Canadian capital reaches these businesses in Canada Has a Capital Structure Problem — and Ordinary Canadians Can Fix It.
Let Canadians Put Their Own Money at Risk
There is another part of this debate that receives surprisingly little attention.
Canadians are already financing innovation. We finance it through taxes, government programs, publicly supported venture funds, pension plans and other institutional structures.
What we rarely ask is whether more Canadians should have the opportunity to participate directly in the upside.
An appropriately designed FTS-Tech mechanism could help make that possible.
Government would determine which companies qualify, which expenditures qualify, how large the deductions can be, what reporting is required and which safeguards prevent abuse.
But government would not decide which individual entrepreneur gets financed.
The investor would. With their own money. Taking their own risk. Making their own judgment about whether the company is worth backing.
That changes the public-policy question from: “How much money should government give Canadian technology startups?” to: “How do we cause more private Canadian capital to compete to finance them?”
That’s capital formation. And it is much closer to the private investment ecosystem TD says Canada needs.
Britain Has Already Demonstrated the Principle
We also don’t have to guess whether investor-side tax incentives can alter the behaviour of private capital.
Britain has been doing it for decades through the Enterprise Investment Scheme and Seed Enterprise Investment Scheme.
The British programs aren’t the same as Canadian Flow-Through Shares, and I am not suggesting Canada photocopy the British tax code.
The important lesson is simpler.
Investor-side tax incentives change capital behaviour.
Canada demonstrated that in resource exploration. Britain demonstrated that the underlying principle can be applied to young, innovative companies.
We don’t need to invent the economics. We need to adapt them to Canada’s circumstances.
This Is Also About Who Owns What Canadians Create
Capital is not neutral.
Who finances a company matters because financing affects ownership. Ownership affects control. Control influences where the headquarters sits, where the intellectual property resides, where senior executives are hired, where procurement takes place and where wealth gets recycled after a successful outcome.
That is why I describe Flow-Through Shares for technology as one of the cheapest sovereignty plays available to Canada.
This is not an argument against foreign capital. Quite the opposite. Canada should attract enormous amounts of intelligent foreign investment.
But attracting foreign capital and failing to mobilize your own capital are two very different things.
A serious country should be capable of doing both.
I developed that argument further in The Cheapest Sovereignty Play on the Table Is Already in Canada’s Tax Code.
What Would FTS-Tech Actually Look Like?
The basic concept does not have to be complicated.
Qualifying Canadian-controlled technology companies would be allowed to renounce carefully defined eligible innovation expenditures to investors. Investors would receive the applicable tax benefit, while the companies would receive another domestic source of genuine risk capital.
Government could define eligible businesses and expenditures, impose annual company and investor limits, establish holding requirements where appropriate, coordinate the mechanism with SR&ED and other tax incentives so the same expense isn’t subsidized twice, require transparent reporting and establish strong anti-abuse provisions.
The objective isn’t unlimited tax preference.
It is to change the risk/reward calculation at precisely the point where promising Canadian technology companies are most capital constrained.
Then let private investors decide which companies deserve their money.
Please, Don’t Build Another Bureaucratic Monster
There is an important warning sitting right in front of us.
An investment incentive is only valuable if businesses and investors can rely on it.
Canada’s experience with the Clean Technology Investment Tax Credit demonstrates what happens when good intentions collide with slow execution. Refundable credits intended to support major private investment became caught in processing and review, introducing uncertainty precisely when project financiers and companies needed predictability.
Capital hates uncertainty.
That lesson is examined in detail in Canada Passed a $93 Billion Clean-Tech Credit. Then the Refunds Stopped Moving.
If we create FTS-Tech, the administration should be boring. That’s a feature, not a bug.
Set the rules. Make eligibility clear. Enforce them. Audit companies and investors who abuse the program. Then get out of the way.
Because the incentive isn’t the press conference announcing it. The incentive is what actually reaches the market.
Start Canada’s Private Investment Flywheel
This is where the TD Economics report and the Flow-Through Share proposal meet.
Not because TD endorsed FTS-Tech. It did not.
They meet because TD describes exactly the economic outcome we should be trying to create: a self-reinforcing private investment ecosystem.
Early investment creates economic activity and returns. Those returns encourage further investment. Capital attracts talent. Talent creates companies. Companies create jobs, expertise and wealth. Successful founders and employees become tomorrow’s investors, mentors and entrepreneurs.
Then the cycle begins again.
A successful Flow-Through Share program for technology should therefore not be judged simply by the dollar value of tax deductions investors claim.
Judge what happened because those deductions existed.
How much new private Canadian capital was mobilized? How many companies obtained financing they might otherwise have struggled to raise? How much follow-on investment resulted? How many businesses scaled? How many Canadian jobs were created? How much intellectual property stayed here? How much payroll and economic activity resulted? How many successful founders, executives and employees subsequently became investors in the next generation?
Did the flywheel start turning?
We Don’t Need to Keep Every Canadian Founder in Canada
Nor should we try.
This is not about constructing an economic wall along the 49th parallel.
Canadian founders should go to Silicon Valley. They should raise capital in New York, sell in Europe, find partners in Asia and recruit brilliant people wherever they happen to live.
The objective isn’t to make leaving Canada difficult.
The objective is to make staying and scaling here competitive.
A Canadian entrepreneur ought to be able to say: I can raise serious capital here, hire the team here, build the intellectual property here, locate the headquarters here and still create a company capable of winning globally.
When that happens more often, American capital becomes an option. Not a financing requirement.
Canada Has Seen This Movie Before
There is something hauntingly familiar about this problem.
In the 1950s, Canada assembled an extraordinary concentration of engineering talent around the Avro Arrow. When the program disappeared, the people didn’t somehow become less talented. They moved.
Many went south and contributed to the expanding American aerospace industry and emerging U.S. space program.
The lesson is not that the Arrow should necessarily have survived regardless of its cost or circumstances. The lesson is simpler.
Talent goes where opportunity exists.
More than six decades later, the technologies have changed. Today we’re talking about AI researchers, quantum scientists, software engineers, cybersecurity specialists, roboticists, biotech founders and semiconductor experts.
But the underlying economics look very familiar.
Capital moves. People move. Intellectual property moves. Companies move. Opportunity moves with them.
We Have the Talent. We Have the Capital. We Already Have the Tool.
Canada has spent decades building the front end of a world-class innovation economy. We have outstanding universities, scientists, engineers and entrepreneurs. We have SR&ED, incubators, accelerators, government laboratories, AI institutes and venture funds.
We are very good at helping create innovation.
Now we have to become equally serious about who finances what happens next.
TD Economics argues that Canada has an opportunity to ignite a multi-year investment supercycle and that successful policy should ultimately create a natural private-investment ecosystem requiring less reliance on public subsidy.
Good.
Then let’s have a serious conversation about one distinctly Canadian mechanism already sitting in our tax code.
Extend Flow-Through Shares to qualifying Canadian technology companies.
Use the tax system to improve the risk/reward equation. Mobilize Canadian private capital. Let investors choose the entrepreneurs they want to support. Give more Canadians the opportunity to participate in the upside. And give promising Canadian companies another serious source of financing before the only attractive term sheet comes from somewhere else.
Because ten years from now, I don’t want another generation of Canadians staring at another list of extraordinary Canadian-founded companies built somewhere else and asking: What if they had built more of it here?
Let’s ask the better questions now.
Why not here? Why not technology? Why not us? WHY NOT NOW?
The talent is here. The ideas are here. The entrepreneurs are here. The capital is here.
And the mechanism is already sitting in Canada’s tax code.
Let’s start the flywheel.
If you believe Canada should seriously explore extending Flow-Through Shares to qualifying Canadian technology companies, learn how Flow-Through Shares for high-tech startups could work and add your voice at CanFlowThrough.com.
Then send this article to your Member of Parliament and ask one simple question:
Why not?
