What's Broken in Canada's Startup Ecosystem? A Recap.
A recap of our recent Tech Thursday Ottawa session, co-hosted with Deloitte's Technology Fast 50, featuring Jesse Wiebe, Caroline von Hirschberg, and Suzanne Grant.
There’s a growing sense that something isn’t working in Canada’s early-stage startup ecosystem. Founders are struggling to raise. Investors say there aren’t enough fundable companies. The government keeps rolling out new programs. The gap persists.
So what’s actually broken?
Last week, we co-hosted a panel with Deloitte’s Technology Fast 50 to ask exactly that. No polished answers. No diplomatic non-answers. An honest look at where the system isn’t connected and what would actually move the needle.
The panel featured:
Jesse Wiebe, Founder & Executive Director, Canadian Startup Capital Association
Caroline von Hirschberg, Co-CEO, Spring Activator
Suzanne Grant, Executive Director, Capital Angel Network
Moderated by Darryl Bandoro, Tech Thursday Ottawa
This is our recap of the top ideas from the conversation.
“The whole thing is f*cked. It’s really messed up because we haven’t spent the time and the attention to build the critical infrastructure across the entire thing.” Jesse Wiebe
Missed this one? Check out our recap videos on YouTube, Spotify, and Apple Podcasts.
1. The Capital Activation Problem
The takeaway: Canada doesn’t have a deal flow problem. It has a capital activation problem. Most accredited investors in this country are not deploying anywhere near the asset allocation they could be, and the wealth managers they talk to have a structural incentive to keep it that way.
Jesse opened the substantive part of the panel by reframing the problem most people in the room came in worrying about.
“Our biggest problem in Canada at the moment is capital activation. When you look at the reports from BDC in particular last year, you look back to the 2010, 2014 vintage, only the top quartile has actually returned more than a 1x of capital. Derek Hunter at Tech Thursday Calgary last week also said he estimates only 10% of Canadian VCs are ever going to hit carry. So most people that have invested in this asset class over the last 15 to 20 years haven’t seen the ROI.” Jesse Wiebe
His explanation of why is mechanical, not cultural. The accredited investor rule (you have to make over $200K a year or have $1M in net worth excluding your home) limits who’s legally allowed to invest in startups. The economics of doing it well at the individual level require building a portfolio of 20 to 40 companies, which means a half-million to a million dollar asset allocation. Most people in the accredited investor category can’t make that allocation work as individuals.
The model Jesse spent five years scaling at Startup TNT, where 51 cohorts of investors each put in $5,000 and collaboratively pick one company over eight weeks, is a workaround for exactly this. Over 21 million dollars deployed into nearly 130 pre-seed companies, from over 550 investors. Most of whom, on their own, could not have run a venture portfolio.
Suzanne added the generational wealth transfer dimension that’s about to make this question urgent.
“The number is in the trillions of generational wealth that is just ready to transfer. This is an amazing opportunity if we think about next generation and how they have a very strong alignment with acting on their values. What if a percentage of that wealth was actually allocated for early-stage investing? And what does anybody know about it? How do we elevate the awareness and the education for those next gen folks who are going to catch that capital when they go to the wealth managers and they’re told this mutual fund, this bond, this whatever, and the conversation isn’t even on the table about becoming an LP in a VC fund or about becoming an angel investor?” Suzanne Grant
Jesse picked up the thread with a more provocative version of the same idea.
“To those in the audience, there is some people more in my generation here that do have parents that are quite well off. Don’t just wait around for them to die to start deploying the capital. That’s essentially one of the things I had to get over in my own head. My father and I had a conversation when my grandfather passed away. I honestly started finding myself during COVID thinking, what would I do with that money if I had access to it? And realizing that was really stupid. Why don’t I figure out a living inheritance model where I’m not only able to deploy the capital into the things that I believe in, but into what I want to see in my country that I’m going to be living in for the next 50 plus years?” Jesse Wiebe
Why this matters: The conventional framing of the Canadian startup capital gap is that we need more government money in the system. The panel’s argument was the opposite. There is already enough latent private capital in this country to fund the entire early-stage ecosystem several times over. The problem is that nobody has built the rails to activate it. Until that gets built, more government money mostly serves to mask the underlying problem.
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2. The Culture Problem
The takeaway: Even if the capital existed, Canada has a cultural problem at both the founder-customer interface and the investor-fund interface. First to be second is the dominant mode, and it’s killing returns.
This was the section where Jesse went furthest, and it’s worth quoting him at some length because the structure of the argument is the point.
“The culture in Canada, unfortunately, is still too much first to be second. We have a company in Regina, shout out Offstreet. They’re doing incredibly well selling parking for universities. They’ve got UCLA, Stanford, MIT. They can’t get the U of S or the U of R in Saskatchewan, which is insane. Why do I have to go down there to find my first customer when I’ve got one in my back door?” Jesse Wiebe
The same pattern shows up on the investor side, where it’s even more structurally damaging.
“So many fund managers in Canada, and it drives me up the wall because I think it’s cowardice, will literally tell me, ‘All we do is follow.’ And I’m like, ‘What do you mean all you do is follow?’ I’m an LP in VC funds. If a VC fund tells me that, I’m not going to invest in it, because what’s your competitive advantage if all you’re going to be is first to be second? That’s ridiculous. We need to create a culture in Canada where people are willing to place that first bet.” Jesse Wiebe
He went on to connect that cultural problem to the structural incentive problem that government LP money creates.
“Government funding creates these weird perverse incentives amongst fund managers. Most VC funds don’t hit what’s known as carry, which is a percentage of the profits. So most VC funds are making their money off of management fees, which is based off of assets under management. If they’re getting the funding from either the federal government through VCCI or one of the provincial fund-to-fund programs like AEC, Venture Ontario, Investissement Québec, they have an incentive not to take the high-risk bets that might blow up before the next fund is raised. They need to make sure that fund one portfolio and fund two portfolio stay intact so they can raise fund three from the same group of LPs.” Jesse Wiebe
The result, in his telling, is a venture capital market coalescing around consensus picks. The flashy thing instead of the weird thing. Or, in his words: investing in the flashy guy when you should be investing in the weirdo in the corner.
Suzanne tied this back to the procurement side of the same problem.
“Buy Canada is a nice slogan, but we’re not seeing it translating into technology. We’re seeing technology maybe as a little bit of an afterthought in some of the big announcements about the future of our country. We need to be at the decision-making tables and the advisory tables for where the country is going. We are an engine for growth, and we really need to be there.” Suzanne Grant
Why this matters: The cultural critique connects the two sides of the same coin. If your first instinct as a Canadian institution is to wait for someone else to validate the founder before you buy from them, that’s the same instinct your fund managers are operating under when they evaluate a deal. Neither leads to the kind of early conviction that builds anchor companies.
3. The Capital Stack Problem (and the Matchmaking Problem Beneath It)
The takeaway: Not every founder needs venture capital. The Canadian ecosystem keeps pushing founders into equity when other capital types would serve them better, and the cost of that mismatch shows up as wasted time and stranded companies.
Caroline made this argument cleanly, and it’s the one structural point from the night that doesn’t depend on Jesse’s framing to land.
“Venture might be right for them later, but it also may not be the path that they actually want to go down. So it’s about equipping founders so that we all have the success rates we want to see, and so that we aren’t, frankly, putting our capital in the wrong direction.” Caroline von Hirschberg
Spring has been experimenting with the kind of alternatives most founders never hear about from a generic accelerator, including loans where the interest converts to equity once they repay, revenue-based financing, and convertible notes structured to bridge into customer revenue.
Jesse extended the same argument to what he calls the mighty middle, the companies that can build great businesses without trying to be Shopify.
“You can create scalable businesses. You can build value for both yourself and for your investors by getting a 25, 50, 100 million dollar outcome. The key piece is that you need to be realistic about where your entry valuation needs to be because of where you’re going to exit. I’ve had founders pitch me time and time again that are essentially building a mighty middle company but they want a $10 million valuation. I’m saying, no, you got to start at like two and a half, because otherwise then in order to get out, you got to get it all the way to a hundred.” Jesse Wiebe
The sports analogy that followed is the line that travels.
“If San Francisco is the Yankees, we’re the Oakland A’s, and we need to play Moneyball and start trying to just get on base repeatedly so we can actually start making the playoffs.” Jesse Wiebe
He closed the section on a regulatory-adjacent point that quietly slows Canadian fintech-adjacent companies down at scale.
“We need to start educating our banks and our lenders on SAFEs. One of the unfortunate realities of international accounting standards is that SAFEs live as liabilities on the balance sheet when they’re equity. The bank and FCC and others won’t lend on that. They don’t understand it. We have a great company called Vegan out of Vancouver that raised a million dollars, a lot of it through Front Funder. The bank is like, ‘Wait, you’re not a profitable business.’ And it’s like, you can only be one or the other at a time. Growing, hyperscale growth, or profitable. If we’re pushing people to say, ‘Hey, be ambitious, think big in this country,’ and then meanwhile, all of our lending institutions are like, ‘Wait, why aren’t you making any money?’ Those two things don’t jive.” Jesse Wiebe
Why this matters: A lot of the gap people perceive between Canadian and US ecosystems is, on the ground, a matchmaking problem. A founder who needs revenue-based financing but ends up taking equity, or who builds for a $100M exit when the realistic path was a $30M exit, loses time and ownership for no reason. Better matching of capital to company doesn’t require new policy. It requires founders, investors, and lenders all knowing what’s actually on the menu.
A Few Takeaways for Builders
A few practical points that came out of the conversation:
Capital activation, not deal flow, is the actual bottleneck. If you’re a founder, this changes how you should think about your local investor base. There are far more potential angels in your city than the active ones you know.
Know who your VC’s LPs are. If a fund is 80% government LP capital, the GP’s incentives are different than if it’s 80% private. Those incentives shape how they’ll behave at every decision point in your relationship with them.
Be realistic about entry valuation. If you’re building a mighty middle company, a $10M seed valuation locks you out of a clean $30M exit. Start where the math works.
The accredited investor in your life probably doesn’t know how to allocate capital to startups. That’s not their failing. It’s a system failure. Be the person who tells them where to start.
A massive thank you to Jesse, Caroline, and Suzanne for being so candid, and to Darryl for running a panel that didn’t soften the edges. Thanks also to Deloitte’s Technology Fast 50 for co-hosting the evening with us in Ottawa.
The Fast 50 program is now open for applications. It celebrates Canada’s most innovative, high-growth technology companies, with three award categories and no cost to apply. Worth looking at if you’re building.
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