As the Government of Canada decides how to deploy the $750 million CAD it pledged towards “early growth-stage funding gaps,” two leading investor advocacy organizations have put forth differing visions for how those dollars should be allocated.
The Canadian Venture Capital & Private Equity Association (CVCA) published an analysis Thursday morning laying out a case for the capital to be concentrated on scaling companies. The organization, which represents over 340 private capital member firms, recommends that the feds use the funding to provide more domestic capital to growth-stage firms at the Series B level and beyond, including later-stage and private equity (PE) financings.
“What we actually have is a domestic capital problem for companies looking for [Series] B, C, D, and up [rounds],” CVCA CEO Benjamin Bergen told BetaKit in an interview.
CVCA has found “domestic capacity declines sharply as companies move into Series B and growth.”
Bergen cited 2024 CVCA data indicating that US investors play an outsized role in supporting scaling Canadian firms. That analysis found 67.5 percent of $50-million-plus rounds were funded by Canadian-US syndicates, compared to only 16.5 percent of sub-$5-million financings, suggesting domestic firms must turn abroad to fill larger rounds.
Bergen argued that the statistic means a greater share of the economic upside from investment in those businesses is also flowing south of the border, and creates a higher risk of those companies relocating to the US or being acquired by American firms.
In Budget 2025, the Government of Canada committed $750 million towards developing a new strategy “to support Canadian firms facing early growth-stage funding gaps.” This came in addition to $1 billion for a Venture and Growth Capital Catalyst Initiative (VGCCI) aimed at incentivizing pension funds to invest in venture capital (VC), supporting new and emerging fund managers, and key sectors like life sciences.
While early-stage investment activity “has contracted materially in recent years,” the CVCA found Canada continues to exhibit relatively stronger domestic participation at smaller deal sizes,” whereas “domestic capacity declines sharply as companies move into Series B and growth financings, where reliance on foreign capital remains high.” The CVCA asserts that this points to a key “structural gap in Canada’s ability to support companies at scale,” amid an already especially tough VC fundraising market.
The CVCA hopes to see this $750 million deployed quickly and targeted towards both new and established funds for scaling companies in sectors like AI, quantum, aerospace, defence, life sciences, advanced manufacturing, and cleantech. It also wants the feds to review Canada’s corporate and investment tax regimes to support the growth and expansion of VC and PE.
The CVCA’s recommendations for this program contrast with the early-stage-focused vision outlined by the National Angel Capital Organization (NACO), coming two weeks after a NACO roundtable where industry leaders weighed in on the state of Canada’s early-stage funding ecosystem and a week after NACO published a report with Startup Genome positing that gaps at the pre-seed and seed stages are where the real problem lies.
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NACO, which plans to share its full recommendations publicly in the coming days, has other ideas for the $750-million envelope. NACO CEO Claudio Rojas told BetaKit that NACO has called on the feds to allocate $250 million to angel networks, venture studios, pre-seed and seed funds, syndicates, and emerging managers across Canada, with $500 million to establish a speedy matching fund program for pre-seed and seed-stage funds, angel sidecar funds, syndicates, and venture studios.
“If the $750 million is directed only at later stages, we are watering the top of the tree while the roots are dying,” Rojas said. “The data is unambiguous that the gap is most severe at the earliest stages, and that’s where these funds must be concentrated.”
For his part, Bergen argued that VGCCI and this $750-million envelope signal that the feds realize there is a need to provide greater support to pre-seed and seed-stage businesses and the emerging managers who typically tend to back them. He expects VGCCI to help tackle this.
“The [Canadian tech] ecosystem of today is very different than the one in 2013, when the first [Venture Capital Catalyst Initiative] was launched,” Bergen said. “We’ve gotten a number of firms to the size where they actually could potentially scale and go global.”
Focusing this $750 million on later-stage companies could help create “a more sophisticated [and] more fulsome flywheel,” Bergen argued.
With files from Madison McLauchlan.
Feature image courtesy Council of Canadian Innovators.