The Government of Canada has shared how it plans to deploy its previously announced “early growth-stage” funding envelope, alongside a call for expressions of interest in the latest version of its longstanding fund-of-funds program.
The breakdown of the former had been eagerly awaited by Canada’s venture capital (VC) sector, with leading investor advocacy organizations having presented competing visions for how the funds should be distributed in recent months.
Both developments were announced this afternoon in Toronto at local autonomous driving unicorn Waabi’s office. The two programs total $1.75 billion CAD; the programs will be managed by the Business Development Bank of Canada, and encompass the Government of Canada’s Venture and Growth Capital Plan. The feds hope the funds will help to attract at least $3.8 billion CAD in private capital to invest in Canadian technology companies across stages.
“The hardest cheque isn’t the first one,” Waabi founder and CEO Raquel Urtasun said, while introducing Minister of Industry Melanie Joly at Thursday’s announcement. “The pre-revenue growth rounds are really where too many promising companies are lost along the way. That’s the gap that today’s announcement seeks to address, with the idea that many more founders will be building many more Waabis in Canada.”
The federal call for expressions of interest for that first stream of Growth VCCI opened today and will close on Jan. 21.
With the $750-million Early and Growth Stage Investment Strategy, first promised in Budget 2025, the federal government has confirmed that it aims to address financing gaps for nascent and scaling domestic technology companies alike, though the bulk of the funding has been allocated towards the latter group.
Of that fund, $675 million will go to addressing “later- and growth-stage” gaps and ensuring that more tech firms at the Series B stage and beyond have the capital they need to scale and remain anchored in Canada. The remaining $75 million has been dedicated to bolstering the country’s pre-seed and seed-stage startup investment landscape in sectors like advanced manufacturing, cleantech, life sciences, quantum, and other strategic industries.
The feds have not yet made clear how much of this $750 million will go directly towards other funds versus startups. Given that the government is seeking feedback to inform the design of the later stream before Nov. 23, those plans appear to still be under development.
“We’re betting that Canadian companies can start, can scale, and can stay here,” Joly said.
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A spokesperson for Innovation, Science, and Economic Development Canada (ISED) told BetaKit over email that consultations for the pre-seed and seed investment portion, as well as calls for proposals for both that and the growth-stage stream, would follow at a later date.
The other key part of the Government of Canada’s Venture and Growth Capital plan is its $1-billion Growth Venture Capital Catalyst Initiative (Growth VCCI), initially announced in late 2024 by the previous Liberal government. Through that initiative, the feds aim to attract an additional $2.1 billion in private dollars to invest in Canadian firms by co-investing in other fund-of-fund managers.
The country’s current Liberal government revealed earlier this year that Growth VCCI would include a core, $700-million venture capital (VC) stream for other fund-of-fund managers, $200 million for firms that invest directly in life sciences startups, and $100 million for emerging managers, who typically invest in early-stage companies, including VCs focused on strategic sectors and located outside traditional hubs.
The federal call for expressions of interest for that first stream of Growth VCCI opened today and will close on Jan. 21.
The ISED spokesperson told BetaKit the matching ratio for Growth VCCI will be at least 3:1 private to public capital, but declined to share any further information regarding the program’s eligibility, structure, or requirements ahead of the official announcement to protect the process.
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Canada’s VC sector has been waiting for this news since 2025 and 2024, respectively. While industry leaders whom BetaKit spoke with expressed excitement that the process is finally moving, based on historical precedent and the current stage, it could still take at least 12 to 18 months before this capital actually reaches the country’s fund managers and, ultimately, tech startups, if the government does not take steps to expedite the process.
On the Growth VCCI side of the equation, feds must now gather submissions and choose recipients, and then those firms will need to secure a certain amount of private capital in order to unlock any government funding. The ultimate size of fund managers’ Growth VCCI allocations will be dependent on how much they are able to raise elsewhere. Given the state of the VC fundraising market, which has seen steep declines in dollars raised and funds closed in recent years, that last step could take longer than usual.
The same will likely hold true for the Early and Growth Stage Investment Strategy, which has yet to release a call for expressions of interest at this time.
Competing visions
This year, industry organizations representing Canadian investors, including the National Angel Capital Organization (NACO), the Canadian Venture Capital & Private Equity Association (CVCA), and the Canadian Startup Capital Association (CSCA), had each put forth differing assessments on where the ecosystem’s biggest challenges lay alongside competing visions for how that $750-million envelope ought to be spent. NACO had pitched for the envelope to go to supporting early-stage funds and infrastructure programs, while the CVCA had argued the money should be targeted to growth at the Series B stage and beyond. CSCA had proposed a bit of both, asking the feds to allocate 10 to 20 percent to pre-seed and seed, and the remainder to growth.
While its ultimate breakdown aligns much more closely with what the CVCA had been calling for, rather than NACO’s wishlist, it still includes some funding for the early-stage ecosystem, and the $75 million for pre-seed and seed falls within the range that the CSCA had requested.
“CVCA has been making the case for a strong capital base that can follow Canadian companies as they grow, and the announcement today really is a continuation of that,” CVCA CEO Benjamin Bergen told BetaKit in an interview.
Bergen said this response illustrates understanding on the part of government “that they have done a tremendous amount of work” since the plan for the VCCI program was first developed 13 years ago in order to get seed, pre-seed, Series A, and Series B funds created and structured. Now, Bergen argued, “we’ve got to close that gap in Series B and beyond.”
CVCA had previously shared data on this growth funding gap, illustrating the outsized role that US investors play in scaling Canadian tech firms. The next marker of success, Bergen added, will be the pace at which the feds deploy capital through both programs.
Feds need to move with “agility and speed”
NACO CEO Claudio Rojas hopes to see the feds move with “the agility and speed” that today’s “hyper-competitive global environment” requires.
The government could do that by speeding up its consultation and decision-making processes and lowering the minimum amount raised necessary to access Growth VCCI funding.
Though this is a far cry from what NACO had initially sought, Rojas hailed today’s announcement as a positive development for early-stage Canadian tech. “For the first time, Canada’s VC strategy starts at pre-seed … This adds capacity at the stage that past programs didn’t reach,” he told BetaKit in an interview.
Rojas noted that this new $75-million commitment, coupled with the $100 million for emerging managers through Growth VCCI, will help entrepreneurs building at that level.
As to how far these amounts move the needle in terms of filling the early-stage financing gap NACO has previously identified, he argued that “it’s the start of a journey” that “makes [Canada’s] whole strategy stronger.”
In the future, Bergen said the CVCA would like to see the federal government turn VCCI into an evergreen fund that is not beholden to federal budget structures and timelines.
Feature image courtesy Melanie Joly via LinkedIn.