Reversing the Trend: What Canada Needs to Keep Entrepreneurs at Home

Canada has a problem. We're losing our entrepreneurs. In the past two decades, the country has shed 100,000 net entrepreneurs despite adding 10 million people. Business closures now outpace openings. Our best founders are packing their bags for Silicon Valley, and the pipeline of new ventures is running dry.

But here's the thing: this isn't inevitable. Other countries have faced similar challenges and turned them around. Ireland slashed its corporate tax rate and saw GDP per capita surge from $29,600 to $115,300. Israel built a startup ecosystem from nothing to become a global tech hub. Canada can do this too, but it requires acknowledging the problem and acting on real solutions.

Here's what Canada needs to do to keep entrepreneurs at home.

Fix the Capital Gap

The numbers are stark. US investors make up 40% of all venture capital money flowing into Canadian startups. That's not a thriving ecosystem. That's dependency. Canadian corporate venture capital is even worse, with only 12% of Canadian companies having CVC programs, compared to 40% in the United States.

When Canadian founders need Series A funding, they often have no choice but to look south of the border. This creates a cycle where Canadian investors miss out on early-stage gains, making them even more reluctant to invest locally. Breaking this cycle requires deliberate action. One entrepreneur told Reddit: "The VC/angel system in Canada is nonexistent. I had to get investors from Europe for my series A and then we moved there."

The federal government's 2025 Productivity Super-Deduction, which allows accelerated depreciation on business capital assets, is a step in the right direction. But more is needed. Canada should explore tax incentives specifically tied to domestic investment, encourage pension funds to allocate a portion of their portfolios to Canadian startups, and create larger risk-sharing programs between government and private investors.

Ireland's success offers a template. By cutting corporate tax rates and creating investor-friendly policies, the country attracted multinational companies and built a domestic ecosystem that generates wealth and jobs. Canada doesn't need to become a tax haven, but it needs to be competitive on the global stage.

Another approach is learning from Israel's playbook. Despite having a population similar to Canada, Israel built one of the world's most vibrant startup ecosystems through aggressive government-backed venture capital funds, military technology spinoffs, and a culture that celebrates entrepreneurship. The Canadian government could replicate similar programs, particularly in emerging sectors like artificial intelligence and clean technology where Canada already has research strengths.

Retain and Attract Talent

More than 126,000 Canadians moved to the United States in 2022 alone. That's a 70% increase over the previous decade. Among them are our best engineers, founders, and entrepreneurs. The brain drain is real, and it's accelerating.

The reasons are well-documented. Tech workers in Canada earn significantly less than their US counterparts, sometimes as little as half. Career advancement opportunities are narrower. The latest cutting-edge work often happens in US offices of major tech companies. When you're ambitious and talented, the math is simple.

Retaining talent requires competing on the things that matter to skilled workers. This means higher compensation, not necessarily matched dollar-for-dollar with US tech salaries, but narrowed through other means. Better equity opportunities for Canadian employees, clearer paths to permanent residency for immigrant entrepreneurs, and more aggressive retention of international students would help.

The federal government's Start-Up Visa program was designed to attract entrepreneurial talent, but it's being scaled back. The 2026 Immigration Levels Plan slashes federal business spots by 50%, from 1,000 to just 500 per year. This is the wrong direction. Instead, Canada should prioritize entrepreneurs already in Canada on work permits, giving them clear pathways to stay and build.

Address the Risk-Averse Culture

There's a perception, fair or not, that Canadians prefer security over risk. The "Canadian dream" increasingly looks like a government job with a defined-benefit pension rather than building something from scratch. Self-employment has fallen from 17.2% in 1998 to 13.2% in 2023.

This isn't about shaming people who choose stable careers. Government jobs are important and valuable. But when an entire culture shifts toward safety, we lose the risk-takers who create the businesses that employ everyone else.

Changing culture is harder than changing policy, but it's possible. Entrepreneurship education should start earlier, in high schools and universities, normalizing the idea of building a business as a viable career path. Success stories need to be celebrated and amplified. Role models matter.

Parents and educators play a role too. We need to stop telling kids that the only successful path is getting a good job with benefits. Starting a business should be presented as equally valid, not as a risky gamble.

Reduce Regulatory Burden

It's not the biggest factor, but it's real. Sixty-seven percent of small businesses cite tax and regulatory costs as their top constraint. For a first-time founder, navigating incorporation, permits, taxes, and employment regulations can feel like a second job.

The federal government has taken some steps. The Canada Business Bank was created to provide financing outside traditional channels. Regulatory sandboxes allow fintech companies to test new products. But the overall burden remains high, particularly for small businesses that can't afford legal teams and accountants.

Streamlining startup incorporation, creating one-click registration for simple businesses, and reducing the complexity of tax compliance for early-stage ventures would lower barriers to entry. These are not dramatic interventions, but they signal a government that wants to make things easier.

Ontario's Regulatory Weight

Here's something that doesn't get discussed enough: Ontario drives Canadian investment, and its regulations ripple across the entire country.

Toronto accounts for roughly 40% of all VC deals in Canada, with over $4.6 billion in venture funding in 2024. About 60% of Canadian fintech companies are based in Ontario. When Ontario sneezes, the rest of Canada catches a cold.

The Ontario Securities Commission (OSC) is the country's largest capital market regulator. While Ontario has some advantages like less cumbersome KYC requirements compared to offshore jurisdictions and a strong support ecosystem through organizations like MaRS and the Vector Institute, the regulatory weight adds friction.

Registration requirements often limit investment opportunities to "accredited investors" only, meaning regular Canadians can't put money into startups even if they want to. Cross-provincial regulations create headaches - different rules for Ontario versus Quebec versus British Columbia make it harder to build a national business. Portfolio managers dealing with derivatives and commodities face additional compliance burdens.

Compare this to the United States, where securities laws are more harmonized and state-level innovation hubs like Delaware have built entire economies around business-friendly regulations. It's not that Ontario's rules are unreasonable - they're designed to protect investors. But in a competitive global market for talent and capital, even reasonable friction is a disadvantage.

The solution isn't deregulation for its own sake. It's being smarter about which rules actually protect people and which ones just create paperwork. Ontario has the opportunity to lead here, but it needs to see itself as competing with Austin, not just Vancouver.

Build Exit Pathways

Investors need exits. That's how they make returns, and how they fund the next generation of companies. In Canada, the exit pipeline is thin. Acquisitions by US companies are common, but they often mean headquarters moving south. IPOs are rare.

Creating an environment where Canadian companies can scale to meaningful size without being acquired requires addressing the capital gap first. But it also means encouraging domestic mergers and acquisitions, supporting companies through their growth phases, and building stock exchange listings that work for growing companies.

The Stakes Are High

Small and medium businesses generate roughly 50% of Canada's GDP and account for 64% of private-sector employment. When entrepreneurs stop starting businesses, the entire economy suffers. Productivity declines. Innovation stalls. Good jobs disappear.

The good news is that this is fixable. Canada punches above its weight in early-stage entrepreneurial activity, ranking near the top among G7 countries in the Global Entrepreneurship Monitor. We have talent. We have ideas. What we need is the ecosystem to support them.

Reversing the trend won't happen overnight. It requires sustained policy attention, cultural change, and a willingness to compete with the United States for talent and capital. But countries around the world have done it. Canada can too.

The question isn't whether we can afford to act. The question is whether we can afford not to.

What do you think? Is Canada doing enough to support entrepreneurs, or are we letting our best talent slip away?