BDC report: Venture capital gaps are 'sovereignty issue'

BDC has published its Canada's Venture Capital Landscape 2026 report, which says Canada continues to struggle to scale startups and keep them at home.

Venture investment in Canada fell 6 per cent to CAD $8 billion in 2025, but the sharper shift was a growing concentration of capital in fewer, larger deals. Late-stage financings of more than CAD $50 million remained heavily reliant on foreign investors, who supplied 80 per cent to 90 per cent of the capital deployed in those rounds.

According to the report, that pattern reflects a broader scale-up gap in the domestic market. Canada continues to produce a steady flow of early-stage companies, but fewer secure the larger pools of capital needed to move from initial growth to commercial expansion.

BDC linked that funding imbalance to a wider debate about economic sovereignty, arguing that reliance on overseas investors in later rounds can shift ownership, intellectual property, and strategic decision-making outside Canada.

"Canada is exceptionally good at creating innovative companies. Where we fall short is helping them scale and stay here. The heavy reliance on foreign capital to fill that gap is no longer just a feature of the market, it has implications for Canada's ability to retain ownership, decision-making, and long-term value. This is now an economic sovereignty issue," said Geneviève Bouthillier, Executive Vice President of BDC Capital.

This phenomenon, also referred to as "brain drain", has long taken place while Canadians move to the United States for work. The report published that between 1991 and 2023, approximately 1.1 million Canadian citizens obtained permanent residency in the U.S. While the numbers had been declining since 2010, there was an uptick following the COVID-19 pandemic.

The report found that artificial intelligence stood out, attracting nearly half of all venture capital invested in Canada in 2025. That underscores both the sector's strength and the extent to which later-stage growth could be shaped by foreign capital.

Returns and exits also remain under pressure. Canadian venture returns continue to trail those of the United States, while domestic fundraising has fallen to its lowest level in years, and exit activity has remained constrained.

Bouthillier said the implications now extend beyond the venture industry itself. "When ownership, intellectual property and decision-making shift outside the country, Canada risks losing not only economic upside but also influence over the industries and technologies that will shape its future," she said.

Bouthillier framed the issue as one of ownership as much as innovation.

"The question is no longer whether Canada can innovate," she said. "It's whether we are willing to mobilize the capital and partnerships required to own and benefit from that innovation here at home. Data and system sovereignty, especially AI, is mission critical for Canada's commercial interests as a productivity lever. It's a base element that we need to build in Canada, by Canadian companies, for Canada's unique market needs."