Canada's young entrepreneurs are fleeing south. We need to keep them here

Naila Moloo, 19, won the 2022 Canadian Youth Innovation Award at the age of 16 for creating a flexible solar panel prototype when she was a Grade 11 student at Elmwood School in Ottawa. She plans to become an entrepreneur, pursuing her own AI-startup, Periodwise, which assists with menstrual management for women.

She’s attending the University of North Carolina at Chapel Hill — and considering living in the United States permanently to pursue her dream.

Why not Canada? “There are a lot of opportunities in the U.S., especially in the tech scene,” she says.

Moloo is not alone in that thinking, studies suggest. Last year, Canada lost about 65,000 residents to net emigration , according to Statistics Canada. A paper by the Canadian Labour Economics Forum suggests it is mostly young, high-skilled workers who are being lost. A 2025 report by the Leaders Fund warned that Canada risks “missing out on the next Shopify.”

“We’re seeing a pretty significant exodus of our most ambitious entrepreneurs. They are leaving Canada and moving to the U.S., and that’s intensified over the last decade,” says Charles Lammam, Senior Fellow at the Montreal Economic Institute (MEI), a free-enterprise thinktank.

Nearly one in two Canadian company founders who raised over $1 million in 2024 are now based in the U.S., he notes, citing the Leaders Fund study.

It’s a problem politicians, economists and the business community want to solve. Prime Minister Mark Carney’s planned Investment Summit Sept. 14 and 15 is part of the strategy, aiming to stem the outflow of investment dollars from Canada and attract new capital – particularly at a time when acrimonious trade talks with the U.S. have added instability. Boosting investment could help keep Canadian innovators at home, building successful businesses here.

Why are young innovators — tomorrow’s successful entrepreneurs — leaving Canada? Hint: It’s not about their ideas.

“There’s no shortage of smart, talented people in Canada,” says Michael Buhr, a serial entrepreneur and executive director of C100 – an association of Canadian tech veterans from Silicon Valley dedicated to building up Canadian innovation. Buhr says Canada has great educational and research institutions.

Canadian talent has, in the past, created giants such as Nortel, Research in Motion, Shopify and more. A new report by CBRE, a real estate corporation, writes that of the top 15 tech talent markets in North America, six are in Canada. (Toronto ranks third, with Vancouver and Waterloo Region also in the top 10. Montreal weighs in at 11, Ottawa 14 and Calgary 15.)

But great research, talent and ideas are not enough, says Daniel Debow, founder of DMI – Debow Musical Instruments, company producer at Ambitious Adventurers and a board director at Loblaw Companies Limited, based in Toronto. “Innovation … is not invention, innovation is applying an invention to a market.” In other words, it has to be successfully “commercialized.”

The critical players in this field are incubators, which give very early-stage companies access to mentorship, investors and other support, as the Business Development Bank of Canada (BDC) describes them.

University of British Columbia, as one example among many, has three flagship programs: HATCH Venture Builder , Lab2Market and Venture Founder . According to the university, these have helped create 296 spin-off companies, 91 per cent of which remain in Canada.

But by themselves, incubator programs are not enough.

There are “517 American companies started by Canadians. They’ve raised about $414 billion,” wrote Lucy Hargreaves in a recent LinkedIn post, citing statistics in The Dominion List . “Nearly all of the founders went to school in Canada.”

Canada is paying for their schooling, and they are taking their ideas across the border.

Examples of major American companies founded by Canadians who emigrated to Silicon Valley include Instacart’s Apoorva Mehta, Uber’s Garrett Camp and Slack’s Stuart Butterfield.

One reason, argues Lammam, is Canada’s tax policy, which is “not competitive globally – and certainly not more attractive than the U.S.” Canadians “are paying the fifth highest marginal tax rate in the entire set of OECD economies,” he says.

Canada used to be relatively competitive on corporate taxation, but this advantage has dwindled since 2017 when the U.S. cut its rates, he says. Trump’s “One Big Beautiful Bill Act further strengthened U.S. tax advantages” for entrepreneurs, he adds.

Even Canada’s Small Business Deduction has been only a limited help to starting entrepreneurs, according to Lammam.

While some taxes might be lower in the U.S., the costs of doing business in certain cases might still be higher than in Canada, however.

Buhr, who moved to Silicon Valley after university for a job with Apple, has lived in the U.S. for decades, founding his companies, Bridge Strategies and Voice Over IT, there. He says private health care insurance and other mandatory expenses south of the border even the playing field: “In the U.S., 38 per cent of your (company) fundraising goes to paying for employees. You raise $10 million, $3.8 million of that goes to paying health care for your employees. ”

Too much red tape and regulation is also cited as a reason young Canadians leave for the South.

Chathura Fernando, CEO of FDO Energy, a Canadian startup developing portable garbage incinerators, is entering his final year of engineering at Western University in London, Ont. He’s frustrated by Canada’s slow regulatory speed: “In some other jurisdictions, things are a lot faster. You don’t need four approvals or three approvals to build something. You can just go and build it and get quick approval.”

“Less entrepreneurship happens when markets are overly regulated or protected from competition,” says Lammam. “Contrast us with the U.S. where it’s a bit more cutthroat, you have to innovate or run the risk of becoming obsolete.”

Regulations and taxes aren’t necessarily the top of the list of obstacles facing startups.

The core requirements of any successful expanding business, Buhr says, boil down to supports such as mentorship, networking and capital.

Natasha Penzo, CEO of Homekin, which specializes in the home design marketplace, says the Toronto Metropolitan University incubator DMZ provided her with “support, collaboration with other startups” and advice for creative solutions.

But funding to scale her business remains a particular challenge. “I found that (in) any conversations with Canadian venture, they really wanted to focus more on Fintech and health tech.”

Even in those sectors, however, things aren’t easy. Saumik Biswas, co-founder and CEO of Tenomix, a Canadian health tech startup focused on cancer diagnostics through AI and automation for lymph node examinations in biopsy samples, says he also had problems attracting capital.

Biswas said he had to pitch to “205 investors, and we ended up getting 16 of them.” Even that required “a lot of resilience.”

“We ended up raising … just north of $2.1 million Canadian. And it was all Canadian route, which is awesome,” he said.

Even so, there’s often an investment ceiling in Canada. “Once you reach a certain scale, if you’re a tech company, moving to (Silicon) Valley makes a material difference because to get that next round of funding, you need the right people on your board,” says Mark Daley, chief AI officer at Western University in London, Ont.

Buhr, though, notes the fierce competition in Silicon Valley for capital. “What you don’t see is there are 1,000 times as many companies chasing that money.”

Keeping talent in a company matters as well and is as tough for individual companies in the U.S. as it is here, he adds.

“All those great employees that you’re hiring … will last on average 12 to 18 months because there’s always somebody sexier, shinier who’s going to pay you more,” says Buhr. “By coming (to the U.S.) you’re going to trade off problems you know about for problems you don’t know about.”

Among other challenges, ironically, are sometimes the very programs governments in Canada offer to boost innovation and provide more capital.

As of July 2024, the federal government had invested $2.4 billion in AI. And it says it plans to commit $180 billion in defence procurement with a further $290 billion in defence-related capital investment through The Defence Industrial Strategy.

In the emerging fields such as AI, Daley says, placing multiple bets on numerous firms, is “the right approach,” because it “give(s) everyone enough that they have a chance to make it to the next level.”

But MEI research concludes that a higher level of government venture capital can crowd out private venture capital. “If BDC is competing with private providers, the unintended impact can be (that) the private providers of venture capital retrench,” says Lammam.

He also points to the confusion of having multiple support programs at federal, provincial, and municipal levels.

Penzo says she has experienced this with her company. “I’m hiring a consultant to help me with it; these programs and grants take a lot of time out of a founder’s already very busy schedule,” she says.

“I often hear some people don’t even end up going for them because they’re just so time-consuming.”

Still, Daley argues, Canada has had real successes. “We still have lots of great startup companies; we have Cohere (Canadian AI firm).”

However, for Buhr, the issue is that “you get a Shopify or a Cohere every 10 years. We need those every month.”

The biggest — and hardest to avoid — factor is Canada’s proximity to the US, both a blessing and a curse, experts say. “The money is concentrated geographically,” like the people who control it, says Daley.

Matt Bazely, the Entrepreneurship Department Director at Huron University College in Ontario, believes that the problem of entrepreneurs leaving the country as soon as their business gets to a certain size is “a very specific Canadian phenomenon.”

“It’s much easier to move offices and business operations into the States from Canada than, let’s say, from Australia or New Zealand.”

To stay in Canada, there would have to be Canadian customers. But caution about the unknown has always been “part of the natural DNA” here in Canada, Buhr says.

“You can talk to a lot of companies that say their first customers were not in Canada,” says John MacRitchie, president of the Canadian Council for Small Business and Entrepreneurship and co-founder of incubator Lab2Market, noting that it makes a profound impact on international credibility “if you don’t have those (customer) references back in your home country.”

Debow recalls that some of the businesses he has run relied substantially on foreign customers. “In the case of Rypple (which was a social media monitoring platform) … virtually every customer came from the United States for a very long time,” he says.

“What will typically happen is if that U.S. customer becomes the first customer; those companies then start to get dragged more into the U.S. to a certain point that some of them just get acquired by US companies,” Buhr says.

Penzo says expanding to the U.S. “makes most sense for our business model, and the market is so much bigger.”

“Canadians sometimes are a little more hesitant … to use a technology until it’s really gotten off the ground or has that track record of success,” she adds.

With a critical mass of talent and capital, mentoring and support are added advantages for the United States.

“The people that are successful are very good at tapping into the right resources and talking about what they’re doing and getting feedback,” MacRitchie says. In other words, they rely on a like-minded community.

In Silicon Valley “you’re naturally surrounded by people who inspire you,” says Buhr, and who will tell you “how you should get to $150 million or … a billion.”

“Canadian entrepreneurs aren’t surrounded by that,” he says, adding that the lack of mentorships leads many to sell their companies too early and too cheap, because “$50 million is a lot of money,” and there is no one to say “you’ve got a $5 billion company in front of you. You should not even consider that offer.”

Fernando says it’s important to have links to an innovative community post-graduation: “There’s a lot of early-stage help. It’s just from the middle to kind of the end… there’s not as much.”

But it’s not just about taxes, regulation, geography, or the critical mass of entrepreneurial peers and mentors south of the border.

Buhr says that out of 40 early-stage entrepreneurs who came to Silicon Valley for a bootcamp with C100, many expressed doubts about whether their own country needs or wants them.

Sustained criticism in part is what drives people south. “They keep saying how what we’re doing is bad and, you know, technology is not good,” and that is a big discouragement for many, Buhr says.

Meanwhile, “Silicon Valley cares about what we are doing,” so many end up leaving, thinking “I’m a proud Canadian, I want to build Canada, but I just don’t hear that my country wants me there,” he says.

“It has everything to do with this sheer human nature of ‘do you want me to build this thing in Canada or not?’ ”

Some aren’t concerned with these critiques; they plan to build here regardless.

Biswas started his health tech company after losing a close family member to cancer. He was inspired to become an innovator after a surgeon used transformative technology to regrow leg bones for his younger brother, who was born without a tibia. Through the process, Biswas had to translate what the doctor was saying to his Bangladeshi parents. His brother recovered.

So he wants to give back to Canada: “I made a promise to myself that whatever I do in this life, I’d love to give back to this community, through medical innovation.”

Buhr’s convinced “what Canada needs to do is … to celebrate the (entrepreneurial) ecosystem on a national scale.”

Arguably, the federal government has made efforts in this direction — for instance, through innovation hubs and the appointment of a minister of Artificial Intelligence and Digital Innovation.

Additionally, Carney’s planned Investment Summit this month aims to “catalyse $1 trillion in total investment in Canada over the next five years,” according to a government press release . The federal government wants to do that by investing $280 billion over five years, hoping to attract the rest in foreign investment.

Buhr does not believe this is enough; in the U.S., he says, entrepreneurs are encouraged to just “go build something exciting.”

Daley, though, considers government involvement a cornerstone of a successful innovation policy. “Silicon Valley exists because of policy decisions made by the U.S. government after WWII,” particularly military investment.

Indeed, “For the people and institutions in the business of researching cutting-edge science and technology, the US government was the original venture capitalist,” Margaret Pugh O’Mara, professor of American History at the University of Washington, once wrote , highlighting that this investment was mostly made between 1939 and late 1960s through military contracts.

“We should be thinking on that time scale,” Daley says, arguing that as AI becomes more prevalent, Silicon Valley’s capital advantage will wane. “Tech companies are cheaper than manufacturing companies, and AI-native tech companies are cheaper still.”

Lammam thinks it would be more valuable “to focus on getting the framework conditions right” — specifically the tax system, which hasn’t been comprehensively reviewed for 60 years. It has become “not only uncompetitive” but is “holding back entrepreneurs,” he says.

Yet Bazely argues the system is not broken; it is “producing exactly what it’s designed to produce,” which is stability. “We do not have the economic downturns that the United States might have, for example,” he says.

For him, the debate revolves around a conscious tradeoff between stability and innovation. Embracing the degree of market freedom involved in U.S. innovation might also mean tolerating such consequences as “people losing their houses,” and “banks failing.”

“The States is a great place to be if you’re successful. It’s an awful place to be if you’re not,” he adds.

For Canada, more and better entrepreneurial education is among Bazely’s suggestions.

Marie-Claire Wasson, a co-founder of Oncolinc Therapeutics, a Halifax biotech startup that focuses on immune therapy cancer treatment, went through Lab2Market training. She says such guidance from a university incubator of this sort is “invaluable.”

Graduate students are perfect targets for such training “because they’re motivated by the work that they’re doing in the research” and “they need a path forward that’s not necessarily in the academic range,” says MacRitchie.

Incubators in post-secondary institutions can play “a wider role in introducing entrepreneurship, providing a real training environment and potentially supporting commercialization,” he notes.

Debow is unsure that entrepreneurship is “purely a set of skills that you learn,” in a classroom, comparing it to a demanding sport. “I could take a class on triathlon. But you have to go run a triathlon… before you actually know what it is to be a triathlete.”

Another piece is risk reduction. “You don’t have the pension, (and) you don’t have the benefits,” says Bazely. Even creating the arrangements for entrepreneurs to be enrolled in the CPP could go a long way, Bazely suggests.

Next-generation entrepreneurs do see hope in the Canadian landscape.

“We’re very proud to be Canadian,” says Biswas, adding that it is his heartfelt hope to launch commercially in Canada and keep his company rooted in the country as it expands to global markets.

Wasson says innovators’ successes can inspire future innovators: “If I see other people do it … we can do it too.”

“There just need to be a way where we can maintain Canadian ownership, hiring more Canadian talent, and advancing an economy in a way of solving global problems.” Biswas says, adding that he believes this is what “generates billion-dollar ideas.”

In other words, says Daley, “Canada’s moment is right now.”

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