Canada's heavy reliance on foreign capital puts economic sovereignty at risk, warns BDC

The Business Development Bank of Canada says a strained venture capital market and continued reliance on foreign capital is making it harder for homegrown startups to expand and is putting economic sovereignty on the line.

“Canada is exceptionally good at creating innovative companies. Where we fall short is helping them scale and stay here,” Geneviève Bouthillier, executive vice-president BDC Capital, said in a statement on Tuesday.

“The heavy reliance on foreign capital to fill that gap … has implications for Canada’s ability to retain ownership, decision-making and long-term value. This is now an economic sovereignty issue.”

BDC, which is Canada’s most active investor by deal count, said the country is “efficient” at creating startups, with Canadian-only investor groups accounting for 40 per cent to 60 per cent of investments in fundraising rounds valued at $1 million to $20 million.

But it struggles to provide cash for startups to grow. Investor groups with foreign investor participation contributed 80 per cent to 90 per cent of the capital in deals valued at $50 million and above, with Canadian-only participation now in the low double-digits.

The Crown corporation said the dependence on foreign capital means Canada risks losing its high-growth companies, talent, intellectual property and other economic benefits that accrue when a company grows and becomes more established at home.

“Growing companies are among the most powerful economic engines of innovation, jobs and wealth,” it said in the report. “They could play a role in tackling some of Canada’s most pressing challenges, including struggling productivity and … economic sovereignty.”

Venture-capital investment in Canada fell six per cent to $8 billion in 2025 and domestic fundraising dropped to its lowest level in years, according to BDC. The market also saw few exits, while Canadian venture capital returns lagged global peers such as the United States.

These conditions are creating pressure at critical moments for startups and entrepreneurs, BDC said. It said even though fewer Canadians are moving to the U.S. permanently, more are heading stateside via temporary entrepreneurship pathways, with entrepreneurship visas granted to Canadians growing to 3.4 per cent between 2015 and 2024 from 1.7 per cent in the previous decade.

Venture-capital activity in Canada last year was dominated by fewer, larger deals, with the top 10 disclosed deals accounting for 49 per cent of investments, but only 1.8 per cent of the total deal count, so investors are plowing money into a smaller number of companies and magnifying Canada’s reliance on foreign capital, BDC said.

Various industry groups are now jockeying for the $750 million reserved by the federal government for startup support in its last budget.