The Business Development Bank of Canada (BDC) has issued a stark warning that the nation's heavy dependence on foreign capital is jeopardizing its economic sovereignty. While Canada excels at launching innovative startups, it struggles to help them scale and retain them domestically, according to a new report.
Scaling challenges for Canadian startups
Geneviève Bouthillier, executive vice-president of BDC Capital, stated, “Canada is exceptionally good at creating innovative companies. Where we fall short is helping them scale and stay here.” She emphasized that the reliance on foreign capital to fill the growth gap has significant implications for ownership, decision-making, and long-term value, calling it an “economic sovereignty issue.”
BDC, Canada's most active investor by deal count, notes that Canadian-only investor groups account for 40% to 60% of investments in early-stage rounds valued between $1 million and $20 million. However, for deals valued at $50 million and above, foreign investor participation contributes 80% to 90% of capital, with Canadian-only involvement dropping to low double-digits.
Risks of foreign dependence
The Crown corporation warns that this dependence risks losing high-growth companies, talent, intellectual property, and the economic benefits that come when companies mature domestically. “Growing companies are among the most powerful economic engines of innovation, jobs, and wealth,” the report states, adding that they could help address Canada's productivity challenges and bolster economic sovereignty.
Venture capital investment in Canada fell 6% to $8 billion in 2025, and domestic fundraising dropped to its lowest level in years. Few exits occurred, and Canadian venture capital returns lagged behind global peers like the United States. These conditions create pressure on startups and entrepreneurs, BDC says.
Brain drain concerns
Although fewer Canadians are moving permanently to the U.S., more are using temporary entrepreneurship pathways. The share of entrepreneurship visas granted to Canadians rose to 3.4% between 2015 and 2024, up from 1.7% in the previous decade. Meanwhile, venture capital activity in Canada is concentrated in fewer, larger deals: the top 10 disclosed deals accounted for 49% of investments but only 1.8% of total deal count, amplifying reliance on foreign capital.
Industry groups are now competing for the $750 million the federal government reserved for startup support in its latest budget.
