I have spent years inside the gap between Canadian capital and Canadian innovation. From that vantage point, one fact stands out.

Ottawa already owns the tool it needs to keep Canadian technology Canadian. It built the tool decades ago. It runs the tool every year through the CRA. It simply refuses to point the tool at the sector that needs it most.

That tool is the Flow-Through Share.

My argument to the Prime Minister and Cabinet is simple. Extend Flow-Through Shares to technology startups in the Fall Budget. The legislation exists. The administration exists. The private capital is waiting. The only missing ingredient is a decision.

Follow the Patents. They Leave the Country.

I want to start with what is actually happening, because the pattern is documented and it is ugly.

Three quarters of the patents produced by Canada’s two leading AI institutes leave the country. The U.S. collected $127 billion in foreign IP income in 2022 while Canada sits seventeenth internationally. We generate the innovation. Someone else monetizes it.

Since 2017, ownership of more than 200 promising young companies has left Canada, and three quarters of the patents held by acquired VC-backed Canadian startups now sit in foreign hands.

That is systematic extraction, running quietly, year after year, while we hold panels about innovation strategy.

Here is the mechanism behind it. Canadian tech firms starve at the early, risky stages. Capital arrives late, foreign, and on foreign terms. Head offices follow the capital. IP follows the head office. Jobs follow the IP. Then we celebrate the “exit” and repeat the cycle.

Capital structure determines ownership. Ownership determines who benefits. Everything else is commentary.

That is why I increasingly think the innovation debate is being framed too narrowly. The problem isn’t simply that Canadian companies need more money. It is that Canada has not built enough incentive into the system for Canadian private capital to finance Canadian innovation early enough for ownership to matter. I develop that larger argument in Canada Doesn’t Have an Innovation Problem. It Has a Capital Formation Problem. Sovereignty is the downstream consequence. Capital formation is the upstream problem.

The Fix Requires Zero New Bureaucracy

The Flow-Through Share mechanism lets a company pass eligible expenditures through to investors, who deduct them against their own income. Investors absorb early risk in exchange for a tax deduction. Companies get patient domestic capital at the stage where nobody else shows up.

Mining and energy have run on this engine for decades. The rules are written. The CRA processes are tested. The market understands the instrument.

Extending it to technology means one substantive change: update the definition of eligible expenditures to include R&D, product development, commercialization, and cybersecurity costs. Restrict eligibility to Canadian-controlled tech startups. Set annual caps. Done.

Compare that to the alternatives Ottawa keeps reaching for:

• Grants require bureaucrats to pick winners. They pick incumbents. The supercluster experience proved this.
• SR&ED is complex, slow, and unpredictable enough that firms hire consultants just to navigate it.
• Fund-of-funds programs move institutional money through institutional plumbing and leave ordinary Canadians outside the ownership structure entirely.

Flow-Through Shares put the allocation decision where it belongs: with investors risking their own money. Capital flows to merit. Losses are cushioned. Gains are taxed. Taxpayers share the upside because the tax system participates in every success.

💡 The design insight most policy debates miss: FTS makes risk explicit and shared instead of pretending to remove it. That honesty is why it works.

The UK Already Ran This Experiment. It Worked.

This is commonly overlooked in Ottawa, so I will state it plainly. A major developed economy has been steering private risk capital into early-stage technology through tax policy for three decades, at scale, with published results.

The UK’s Enterprise Investment Scheme has raised roughly £24 billion across nearly 33,000 companies since 1994. In 2024-25 alone, EIS mobilized £1.575 billion across 3,735 companies, and SEIS investment surged 14 percent to £276 million. Information and communication companies took 35 percent of all EIS investment.

Those programs drew inspiration from Canadian flow-through thinking. We invented the logic. Britain industrialized it for tech. We can adopt it back in a single budget cycle.

The framework already exists in mining and energy. The legislation is on the books. The administrative machinery is tested and proven. This is a shovel-ready reform.

Year-one estimates for a Canadian FTS-Tech program point to $500 million in new private investment, $1.25 billion in economic activity, and $375 million in new tax revenue. You can read the fiscal math yourself: near-term forgone revenue buys a broader tax base as firms scale, hire, and generate taxable gains.

Why This Is a Sovereignty Decision, Told in Numbers

The context makes the timing non-negotiable. Canada’s GDP per capita sits near 75 percent of U.S. levels, down from 88 percent. From 2018 to 2023, Canadian business productivity declined 0.6 percent while the U.S. gained 10.1 percent.

The talent numbers cut deeper. A record 126,340 Canadians emigrated in 2022, the highest exodus in over fifty years, with 67 percent aged 20 to 44. Among software engineering graduates, 66 percent now work outside Canada. Selective emigration of our highest earners accounts for up to 75 percent of the GDP per adult gap with the United States.

And the founders themselves are voting with their incorporation documents. Nearly half of Canadian founders who raised at least US$1 million in 2024 were based in the U.S., where they raised nearly twice as much as founders who stayed.

Each of those data points traces back to the same root cause. Early-stage capital is scarce here and abundant there. Founders go where the capital is. Everything they build follows them.

In a tariff-heavy world, dependence on U.S. markets and capital stopped being an inconvenience and became a strategic vulnerability. Economic strength is the real wall against external pressure. FTS for tech pours the foundation of that wall using domestic private money.

The Objections, Handled Honestly

“It will crowd out venture capital.” The evidence points the other way. FTS absorbs risk at the stage VCs avoid, which builds the pipeline VCs later fund. It crowds capital in.

“It will overheat.” Guardrails on eligible spend and annual caps handle concentration risk. These controls already exist in the resource-sector version.

“It will become another SR&ED.” Only if government lets it. Keep the program lean, resist add-ons, and the simplicity that makes FTS work stays intact. Complexity creep is a governance choice, and Cabinet controls it.

⚠️ The real risk sits on the other side of the ledger: the cost of doing nothing compounds every quarter. Every acquired startup, every departed founder, every offshored patent is capital infrastructure Canada rebuilds later at a premium.

The Political Window Is Open Right Now

Stakeholder momentum already exists on the public record. The Canadian Chamber of Commerce, Smart Prosperity Institute, National Bank, Gowling WLG, and TMX Group have all endorsed or favorably featured extending FTS to technology. The Globe and Mail, Financial Post, BNN Bloomberg, and The Logic have covered it.

The Prime Minister brings capital markets expertise that makes this instrument legible at the Cabinet table without a briefing binder. Public urgency around economic sovereignty gives the policy its narrative. The Fall Budget gives it its vehicle.

The announcement writes itself: a time-limited, nationally available FTS-Tech program for Canadian-controlled technology startups, running on existing CRA rails, effective for expenditures after a specified date, with draft legislation attached to the budget.

No new agency. No pilot purgatory. No supercluster sequel.

The Bottom Line for Cabinet

Canada keeps producing world-class innovation and keeps losing ownership of it. The briefing note I have laid out here identifies the leverage point: redirect domestic private risk capital to the earliest, riskiest stage of Canadian technology, using an instrument the government already administers successfully.

The mining sector proved the mechanism. The UK proved it works for tech. The fiscal case shows taxpayers share the upside. The precedent, the machinery, and the capital all exist today.

What remains is a signature in the Fall Budget.

Here is what you can do right now. Send this argument to your MP. Send it to Finance Canada. If you believe more of the upside from Canadian innovation belongs in Canadian hands, add your voice at CanFlowThrough.com. The decision gets made this fall. Make sure the people making it hear from you first.