The Council of Canadian Innovators and the Canadian Venture Capital & Private Equity Association, along with other industry associations, are calling on the federal government to increase a tax incentive for entrepreneurs to encourage startup founders to stay and grow their businesses in Canada.

In an open letter to Finance Minister François-Philippe Champagne, the groups also propose that Ottawa defer capital gains when proceeds from one qualifying Canadian business investment are reinvested in another qualifying Canadian business.

Six industry associations are leading the campaign: the Council of Canadian Innovators, the Canadian Venture Capital & Private Equity Association, the National Angel Capital Organization, the Chartered Business Valuators Institute, CPA Ontario and C100, a network of Canadian entrepreneurs in Silicon Valley. 

“If we want ambitious entrepreneurs to build here, talented employees to join Canadian companies and investors to keep putting capital to work here, Canada needs to make that choice more compelling,” said Patrick Searle (photo at right), CEO of the Council of Canadian Innovators. “The objective is to create a stronger cycle of Canadian company-building, where the capital, talent and experience created by one success can help finance the next.”

The letter’s signatories include more than 150 Canadian CEOs, investors, entrepreneurs and business leaders. The letter comes as the government prepares the fall 2026 budget.

Companies that scale here train specialized workers, develop experienced executives and build commercial expertise that becomes part of Canada’s economic capacity, the letter says.

“Their employees can become founders, their founders can build again, and the people who helped finance and lead them can invest their capital and experience in the next generation of Canadian businesses.”

The letters’ signatories call on the government to build on the original proposal for the Canadian Entrepreneurs’ Incentive – announced in the 2024 federal budget but later scrapped – to give founders, early employees and investors a stronger reason to commit their time and capital to qualifying Canadian growth businesses.

The letter points out that the United States has long recognized this principle through its Qualified Small Business Stock (QSBS) regime, which provides preferential capital gains treatment for eligible shares held over time. “Canada has an opportunity to establish a competitive counterpart.”

The groups propose raising the incentive cap for each taxable event to $15 million, removing restrictive ownership thresholds and broadening eligibility so that the benefit reaches more of the people taking meaningful risks in building and financing Canadian growth companies.

“These changes would make Canada more competitive with the United States.”

The practical effect would differ depending on who is taking the risk, the groups say. A founder would have a stronger incentive to spend years building a valuable company here. An early employee would receive more meaningful upside from accepting equity as part of their compensation. An investor would have a better potential after-tax return for committing capital when a company’s prospects remain uncertain.

“It would also send an important signal about Canada’s ambition: that we want the world’s most ambitious entrepreneurs to build here, successful investors to keep putting capital to work here, and world-class talent to see Canada as a place where taking a risk can be rewarded.”

This incentive is not a tax break for the technology industry, the groups say. “It is a tool that lets Canadians deploy capital into the Canadian ecosystem by rewarding the risk involved.”

“Most investors who stand to benefit from this kind of incentive are not large institutional players, but ordinary Canadians. At its core, this is about rewarding the risk Canadians take when they invest in other Canadians.”

The groups also propose allowing more entrepreneurs and investors – including those investing through corporations or funds – to defer capital gains when proceeds from one qualifying Canadian business investment are reinvested in another qualifying Canadian business, building on changes made this year.

The tax would be deferred rather than eliminated while the capital remains invested. For someone who has successfully built or backed a Canadian company, that would create a stronger incentive to put the proceeds back to work rather than take them out of the growth economy, the groups say.

A U.S. QSBS-style incentive and a broader capital gains rollover that is more open to investors address two stages of the same cycle: making the initial risk more attractive and making it easier for the capital and experience created by success to be reinvested.

“Over time, as those companies scale from Canada, the value they create can return to Canadians through better jobs, new businesses, a stronger tax base and a deeper reservoir of talent, capital and expertise.”

These policies should not be strictly limited to the technology sector, but to a wider set of productive, innovative industries, the groups say.

Companies in advanced manufacturing, life sciences, mining and natural resources and other innovative sectors face many of the same challenges when they are commercializing intellectual property, developing new products or entering global markets. The common requirement is patient capital prepared to accept risk in exchange for the possibility of significant growth.

“The investors CVCA represents commit capital to Canadian companies for years at a time, from the first cheque into a startup to the expansion of an established business,” said Benjamin Bergen (photo at right), CEO of the Canadian Venture Capital & Private Equity Association.

“These two measures would reward that commitment. When Canada rewards the people who take risks on its companies, it attracts more investment into them, from investors here and around the world,” he said.

When a company remains headquartered in Canada, and more of its ownership, intellectual property, data and strategic decision-making remain here, more of the talent, expertise, investment and fiscal benefits created by its growth can compound here as well, the letters’ signatories say.

“The objective is not simply to produce more successful companies, but to create a cycle in which one Canadian success increases our capacity to produce the next. This is how we can fuel Canadian prosperity for every generation.”

Individual signatories to the letter include John Ruffolo at Maverix Private Equity; Alex Baker at Rely Ventures; Adam Belsher at Magnet Forensics; Brian Boulanger at ARC Financial Corporation; Marc-Antoine Cantin at Anges Québec; Matthew Carlyle at AdMare BioInnovations; Allen Eaves at STEMCELL Technologies; Shelley Kuipers at The51; Chris Morrisey at Invest Nova Scotia; Shez Samji at TD Bank’s TD Innovation Partners; Adrian Schauer at AlayaCare; and many other heads of VC firms and tech companies.

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