Canadian entrepreneurs are building the future—they just aren’t building it in Canada. A new study warns the country’s startup scene failed to recover post-pandemic, with Canadian-educated founders increasingly creating jobs elsewhere. The authors blame rising domestic friction and call for cultural and financial incentives to reverse the trend. But the report overlooks the biggest hurdle to startups—and the jobs they create: Canada’s real estate addiction.
About The Study
Today we’re looking at a study on Canadian startups. Leaders Fund, a VC firm focused on early-stage enterprise software, analyzed 2,932 venture-backed companies that raised at least US$1M between 2015 and 2024. The firm’s report serves as both a public analysis and an internal market check, drawing its data from Specter—a startup database tracking more than a million companies worldwide.
Startups are a critical but underappreciated growth engine in advanced economies. An OECD study found that while startups make up just 20% of firms, they generate 50% of new jobs. They also drive innovation and productivity—two areas where Canada lags badly, with the Bank of Canada calling the latter a national “crisis.”
High-profile tech scandals have left many Canadians wary of the industry. But the rise of AI means nearly every problem will soon be a tech problem. As former BoC governor Stephen Poloz told us, the rise of advanced automation means a third of workers may need retraining by 2030. Canada can either build the solutions here, or fall behind while resisting the inevitable.
Canada Squandering Its Talent: Fueling Job Creation Abroad
Canada’s share of high-potential startups is collapsing. In 2015, it produced 1 for every 11 in the US; by 2024, the ratio had fallen to 1 for every 45. Over the same period, Canada’s global share dropped from 4.3% to 1.5%, while the US and Israel gained further ground.
The problem isn’t a lack of talent. Canada trains and attracts some of the top talent in the world—they’re just building companies abroad, where they experience fewer barriers to traction. Fewer than a third (32%) of Canadian-educated founders launched in Canada, while nearly half (48%) went to the US—with the report noting those companies raised twice as much capital, scaled faster, and achieved a higher success rate.
Canada spends billions cultivating talent but fails to keep it. The result: taxpayers subsidize the growth engines of competing economies. How did Canadians end up financing the rope and wood to build the gallows for their own economy?
Canadian Startups Struggle To Bounce Back From The Pandemic; Targeted Policies Needed
The study identified Canada’s pandemic recovery as a key turning point. “Our restrictions and lockdowns were among the longest in the world. At the same time, the rise of remote work lowered the barriers to relocating, and the US became the main beneficiary,” the report notes. The report adds: “…what began as a temporary shock has left a lasting drag on our innovation economy.”
To reverse the shift, the report calls for cultural changes and broader policies—not just incentives for the largest, best-connected firms. Recommendations include a Canadian version of the US Qualified Small Business Stock program, allowing shareholders in small businesses to pay 0% capital gains on exits if held for more than 5 years. This would create direct incentives for founders, employees, and investors—at minimal cost to taxpayers.
The report also points to international models. Israel’s “buy blue” campaign encourages domestic tech adoption through pride and tax incentives; a Canadian “buy red” strategy could do the same. China’s “mass entrepreneurship and innovation” approach targets resources to encourage competition, rather than backing a few state-endorsed winners. That’s right—China’s communists are better at capitalism than we are these days.
Finally, the report stresses the need for cultural changes: letting founders shape policies that affect them and celebrating Canadian ambition to counter the country’s tall poppy syndrome.
Despite the relative simplicity of these solutions, the report overlooks one of the biggest hurdles to startups: real estate.
Canadian Real Estate: An Underdiscussed Risk To Domestic Startups
Canada’s obsession with real estate doesn’t just starve entrepreneurship—it’s a drag on housing itself.
Startup hubs like Toronto and Vancouver are increasingly out of reach for young adults, especially post-pandemic. Soaring shelter costs leave less disposable income for spending, meaning fewer customers for startups. It also means less risk-taking—an important issue since successful startup founders tend to be in their early 40s, the same age Canadians finally scrape together a down payment for their first home. Are tax perks and cultural praise really enough to cover a first home, a first company, and a family—all at once? Hardly an ideal window to build a startup.
Decades of policy have hardwired real estate as a safer, more rewarding bet. Why back a risky startup when tax and finance policy tip the scales toward property investment? Even banks are warning that rate cuts intended to boost business investment are at risk of being swallowed by housing speculation.
Why build a company for the gov to take half your income and give it to real estate developers? I’m sure even if they read their report, the takeaway is going to be that Canada needs to fund a “Brookfield startup incubator”
Its been very disappointing in Vancouver to watch every single dollar being pumped into real estate—from “affordable” subsidized housing that’s more expensive than market rent to things like bike lanes, and outdoor cafes for the handful of businesses that can afford to expand because they own their lease.
Solid startup and entrepreneurial community being forced out by real estate speculators pretending they’re community activists.
You aee absolutely right. The feds, if they wanted to make housing more affordqble would have removed all incentives for real estate, began taxing developers and speculators not as capital gains but as income.
Howevrr, it is clear that between protecting large banks and the chmc, the liberals believe that maintaining high prices of housing is better than seeing a majod drop back to fmv. Now for banks and developerz that may be true, but not for 98% of canadians. So if you are struggling to pay your rebt, mortgage, etc, and are angry about it, carney and the liberals are the root cause. Dont get conned that supply will drop prices, when ws know that the govt attempts to increase supply have increased costs not lowered them.
I would start a small shop……
But I bought a house later in life and it cost so much that even with 500000 unencumbered cash it is not enough for a small business….. ridiculous. If I could go to the states I would.
No, we only have two industries. Housing if it’s a Liberal government and oil if it’s a Conservative government. Everything else is just to pay for the dukes and barons that run those industries.
The problem with an economy based around debt based real eatate wealth generation is that real estate is actually riskier and less profitable than investmentwhen one looks over a reasonable period.
The other major problen is the huge transaction costs and delats in real estate mean it is difficult to exit when its fallinv apart.
Finally, if the feds had not used the real estate sector to cover for ab abysmal loss in real gdp since 2014, and that will continue for at least 15 more years, we could see some gdp growth from investing. At this poi t, investimg in real estate is both unproductive and very risky for everyone. We need the feds to make investmebts outside of real estate attractive to fix the serious trade/capital imbalances that are now in place. Wirhout that, the economy will continue to erode, as will the dollar and pur standard of living.
Do you ever use spell check? There’s hints that you might have something compelling to say, but your comments are practically unreadable so not worth the effort to decipher…
I am just a little guy and lucky but;
I managed to save enough for a start up in the machining industry. I love the business, I know several kids that would love to work with me and I have the unencumbered cash to do it,BUT WHY WOULD I??? It’s stupid to think that I have any chance in an environment where overhead is now astronomical and landlords are favored and subsidized by MY government. A ton of my money went to pay for my house, dumb. All of Canada’s fanciest neighborhoods are filled with foreign buyers ;and maybe some of them money launderers?
I would just be running a business to keep landlords fat,again Dumb. Why does the arrogance of Ottawa always think that interference and picking a winner is good for Canada.Look at the record. They have not succeeded at helping grow Canada since Paul Martin. And now the build Canada multi billion dollar boondoggle. Gimme a break; STOP MESSING WITH REAL ESTATE. LET THE MARKET FUNCTION LIKE ITS SUPPOSED TO OTTAWA!!!
Thanks!
Stop calling them Canadians when you’re not talking about Canadians. It’s so obvious and it’s incredibly frustrating and really quite ignorant.
They aren’t starting startups here because they’re not from here and they don’t care about here smarten up.
Most of TMR in Montreal is money laundering from foreign countries bought in the last ten fifteen years.
Canadians are a minority here now