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Why aren’t Canadian VCs more “cutthroat?”

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On Tuesday, I moderated a Council of Canadian Innovators panel with Allen Lau, founder of Wattpad, Advise2Rise CEO Susy Martins, and other major ecosystem players about the issues facing Canada’s innovation economy. One of the sticking points? Canadian VCs need to toughen up. 

“We have to be more cutthroat,” Lau said. “When you talk to US investors, the first question they ask you is how big the return is before they look at the risk. Then, for Canadian investors, typically it’s ‘Oh, this is too risky.’ They don’t even think about the return.”

Our neighbours down south have always outperformed Canada in deal volume and activity, which makes sense given Silicon Valley’s gravity and a population roughly 10 times our own. But the numbers back up Lau’s claims that we’re not performing to our potential. 

Analyzing data from the CVCA and PitchBook, the US deployed $170.5 billion to startups in 2023, while Canada invested $7.1 billion. In 2023, there were 13,608 US VC deals (a 23-percent drop from 2022), with 650 deals in Canada (a 13-percent drop from 2022). The US had a steeper decline, but Canadian VCs would need to double their deal totals to match US VCs on a per capita basis. Relative to the US, Canadian venture is a rounding error.

The disparity is also apparent in corporate venture capital: only six percent of Canada’s largest companies participated in a deal last year, compared to 40 percent in the US. Those Canadian firms that did invest mostly did so in American and foreign startups. 

The Americans sink their teeth into risk, which is one of the reasons why Canadian productivity hasn’t been able to keep up, Lau said (Canada’s economy is 30 percent less productive per capita than the US). It’s likely contributing to why we have 100,000 fewer entrepreneurs than two decades ago.

What do you think it would take to get Canadian VCs to choose return over risk? Is it as simple as convincing pension funds to make more Canadian investments? My inbox is open.

Thanks for reading on and ’til next week,

Bianca Bharti

Newsletter Editor


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