We submitted our 2026 pre-budget proposal to extend Canada’s Flow-Through Share mechanism to qualifying technology startups.

Almost immediately, the evidence kept arriving.

To be clear, this is evidence pointing at the underlying problem. It is independent Canadian organizations examining the country’s startup, investment, productivity, and competitiveness challenges and repeatedly arriving at the same conclusion.

Canada needs to mobilize substantially more private risk capital into Canadian technology companies while those companies are young.

Increasingly, these organizations point to the tax system as one of the tools Canada should use to make that happen.

That is precisely the problem FTS-Tech was designed to address.

Look Beneath the Venture Capital Headline

At first glance, Canadian venture capital appears to be recovering.

The Canadian Venture Capital and Private Equity Association reported that $2.69 billion was invested across 250 Canadian venture deals during the first half of 2026, up 17% from the same period in 2025.

Look beneath the headline and the picture changes.

Seed financing fell 31%, to just $285 million across 82 deals. Meanwhile, only 16 financings of $50 million or more absorbed 59% of all venture capital invested during the period.

Aggregate numbers can improve while the financing environment facing young companies deteriorates. That is exactly what the data shows, and it follows a pattern that has been building for years. Canadian pre-seed and seed activity slumped through 2025, with seed rounds in Canada running 37 to 40 percent smaller than in Tier-1 US cities.

Young companies are where this matters most. When a Canadian startup cannot obtain its first meaningful financing, there is no scale-up problem later. There is nothing to scale.

That is why the FTS-Tech proposal focuses on helping qualifying technology startups attract private risk capital at the startup and commercialization stages.

Canada Does Not Lack Money

A recurring mistake in Canada’s innovation debate is treating the problem as though the country simply needs another government fund.

Canada has capital.

The harder problem is getting enough of that capital to flow toward risky, intangible, early-stage companies where enormous future value gets created or lost.

On August 13, the Council of Canadian Innovators made that argument explicitly while examining access to early-stage capital in Quebec. CCI pointed to British Columbia’s Venture Capital Tax Credit as a model for mobilizing angel and early-stage private capital. It noted that more than half the capital raised by Quebec venture funds comes from public or government-affiliated sources, and it argued that an investor tax incentive could help rebalance the ecosystem toward private capital.

Consider what that means for the policy conversation.

The question is no longer how much more money government should put into startups. The better question is how to persuade more private investors to put their own money at risk financing Canadian startups.

That is a very different question. It is the right one.

Use the Tax System to Change the Risk Equation

CCI sharpened the argument again on August 31.

It called for a Canadian version of the U.S. Qualified Small Business Stock incentive, arguing that Canada needs stronger tax incentives for founders, employees, and investors prepared to take risks on innovative companies. CCI specifically argued that Canada needs to encourage investment in higher-risk, higher-upside companies in sectors such as artificial intelligence, clean technology, and life sciences, and to encourage earlier-stage bets.

FTS-Tech differs from QSBS. The mechanisms are different, and CCI has not endorsed our proposal. We want that stated plainly.

The underlying policy logic, however, is remarkably similar:

If Canada wants more private money financing high-risk innovation, change the economics facing the people prepared to take that risk.

Then, on September 4, CCI went further. Writing as the federal government prepares its next budget, CCI Vice President of Policy and Advocacy Laurent Carbonneau argued that Canada should use the tax system to increase the upside for investors and innovators who build and scale companies here.

He made another important point. Additional deductions for conventional capital investment will not necessarily produce the risky bets on high-upside innovative companies that Canada needs.

CCI’s preferred mechanism differs from ours. We are staring at the same problem.

This approach has precedent abroad. The United Kingdom’s SEIS program was built to change investor behavior directly. A higher-rate taxpayer investing 100,000 pounds receives 50,000 pounds back immediately, and loss relief limits the worst-case outcome to a net loss of 30,000 pounds. That is proven infrastructure that redirects private capital by changing the risk-reward calculation.

Capital Is Also a Sovereignty Issue

This debate extends beyond financing startups. It is about what happens after successful companies get created.

CCI CEO Patrick Searle made that connection on September 1, arguing that Canada’s nation-building strategy should include the companies Canadians are building alongside mines, ports, and energy infrastructure.

Canadian companies need customers, capital, and talent to grow globally from Canada. When they do, the benefits include jobs, intellectual property, experienced executives, future founders, investment wealth, and strategic decision-making remaining anchored here.

The stakes are already visible. Research on recent foreign takeovers found that three-quarters of the patents held by venture-backed Canadian startups involved in those acquisitions are now in foreign hands, and ownership of more than 200 promising young companies has left the country since 2017.

These companies succeeded. They simply succeeded without enough Canadian capital backing them early.

We understand intuitively why ownership matters when the discussion turns to critical minerals, energy, ports, defense assets, or infrastructure. It matters in technology too.

The next generation of globally important Canadian assets will include artificial intelligence companies, quantum companies, biotechnology companies, and advanced manufacturing technologies. Some have yet to be founded.

The question is who will finance them while the ownership is still being created.

Canada Already Understands This Principle

None of this requires Canada to invent a new philosophy of tax policy.

We already use Flow-Through Shares.

For decades, Canada has used the tax system to encourage private investors to put capital at risk financing qualifying resource exploration. The mechanism works at scale. Flow-through financings account for over 65 percent of the funds raised on Canadian stock exchanges for mineral exploration within Canadian borders.

The structure is straightforward. Government establishes the rules. Companies undertake qualifying expenditures. Investors decide where to invest their own money. The tax system changes the economics of taking extraordinary risk.

FTS-Tech asks whether the same Canadian principle can be adapted for another strategically important area of the economy. Adapted with safeguards, with defined eligibility, and with clear compliance rules.

Our proposal recommends a three-year FTS-Tech pilot designed to mobilize up to $500 million annually in private risk capital for qualifying Canadian technology expenditures through Flow-Through Shares.

That $500 million is private investment capital. Private investors choose the eligible companies they back and put their own money at risk. Government defines eligibility, qualifying expenditures, reporting requirements, and compliance rules, and provides the tax mechanism that makes taking that risk more attractive.

Another Pathway, Alongside Everything Else

FTS-Tech carries no criticism of Canada’s venture capital industry. It sits alongside venture capital, angel investment, SR&ED, BDC, government research support, and foreign investment. Canadian technology companies need all of them.

What they also need is another pathway for bringing Canadian private capital into the ecosystem.

The CVCA’s own H1 2026 numbers illustrate why. Foreign participation increases sharply as financing rounds grow larger. Foreign investors participated in 56% of later-stage rounds during the first half of 2026, up from 30% a year earlier. U.S. investors participated in 44%.

Canadian companies should attract the world’s capital. The goal is to give Canadian investors greater capacity to get in. Earlier.

The Evidence Is Converging

Here is what has changed.

The FTS-Tech proposal started with a hypothesis: Canada’s innovation problem is also a capital formation problem.

Now the evidence keeps accumulating around it.

Seed investment falls while headline venture investment rises. Canadian innovation leaders call for tax incentives to mobilize more private early-stage capital. They argue the risk-reward equation facing investors needs to change. They connect capital availability to where companies grow, where talent stays, and where ownership accumulates.

The federal government itself has identified boosting investment, competition, and Canadian sovereignty as priorities in its Budget 2026 consultations.

These organizations propose different mechanisms. What matters is that they increasingly diagnose the same problem.

So Here Is the Question

Canada already has a financing mechanism built around a powerful idea. When Canadians put their own money at risk financing activity of strategic importance to the country, tax policy can make that investment more attractive.

We use that principle for mineral exploration. We know how it works. We know how to administer it. We know private investors will use it.

As Canada searches for ways to mobilize more private capital, improve productivity, commercialize more innovation, and keep more of the resulting economic value here, the question becomes very simple.

Why aren’t we testing it for technology?

The FTS-Tech proposal is now before the Government of Canada. The evidence that Canada needs more private risk capital for technology startups is becoming difficult to dispute. The remaining question is whether Canada is prepared to use a financing mechanism it already understands to do something about it.

Buy Canadian. Build Canadian. Own Canadian.