Canadian Tech Entrepreneurs Seek Fortune in the U.S.: A Shift in the Startup Landscape

In recent years, Canada has seen a notable trend: promising tech startups, led by young talent, are relocating to the United States in pursuit of better opportunities. This shift highlights critical flaws in Canada’s venture capital ecosystem, raising questions about its effectiveness in fostering entrepreneurial growth.

The Journey of Mai Trinh and Gabriel Ravacci

Mai Trinh, a graduate from Simon Fraser University, and Gabriel Ravacci, originally from Brazil, co-founded Internet Backyard, a tech startup aimed at enhancing the computer economy through innovative financial infrastructure. However, Trinh pointed out two significant challenges they faced: cumbersome visa processes and insufficient funding.

As international students and founders, they encountered a lengthy ten-year wait for Canada’s Startup Visa, which delayed their path to permanent residency. The points-based Comprehensive Ranking System required them to secure employment elsewhere while working on their startup, a strategy that proved unsustainable (CTV News).

The Financial Gap: Canada vs. The U.S.

Trinh remarked that American investors generally possess more substantial financial resources, making it far easier for startups to secure funding. After incorporating in Delaware, known for its favorable business conditions, Internet Backyard swiftly raised $4.5 million (C$6.1 million) within a week, while being valued at $25 million (C$34 million). In stark contrast, the founders managed to raise only $3 million (C$4 million) across Western Canada during the first quarter of 2025.

“You wake up one day, you realize your worth, and then you get out,” Trinh stated, reflecting the growing sentiment among Canadian tech founders (Leaders Fund).

Decline of Canadian Startups

The trend of Canadian startups relocating to the U.S. raises critical questions about the competitiveness of Canada’s entrepreneurial environment. Data from Leaders Fund shows a clear decline in Canadian startups, with the percentage of companies raising over $1 million dropping from 70% in 2015 to just over 32% in 2024 (Leaders Fund).

With the lucrative U.S. venture capital landscape pulling Canadian startups southward, securing funding is becoming increasingly challenging within the nation. Estimates from the Business Development Bank of Canada reveal that U.S. investors account for about 40% of all venture capital funding in Canada and offer larger deals on average (BDC).

The Impact of Investors and Accelerators

Compounding these challenges, the respected startup accelerator Y Combinator has indicated it will only fund U.S.-incorporated companies, further incentivizing Canadian startups to reestablish themselves in the U.S. Although the accelerator later allowed Canadian startups to apply, the initial message resonates with many founders who feel pressure to relocate for success (The Logic).

Revitalizing Canadian Entrepreneurship

While Canada remains an important hub for startups, immediate action is necessary to retain entrepreneurial talent. Initiatives to improve conditions include:

1. Creating Favorable Tax Conditions

The Canadian government previously proposed increasing the capital gains tax, discouraging founders from selling their businesses. Experts recommend adopting the U.S.’s Qualified Small Business Stock system to allow pioneering Canadian startups to sell shares without capital gains taxes (Prime Minister of Canada).

2. Generating National Sentiment

Encouraging a “buy Canadian” movement could facilitate local investments. Tax-deductible purchases of Canadian tech companies would expedite access to capital, lowering reliance on foreign funds (Leaders Fund).

3. Improving Canada’s Visa Program

Streamlining Canada’s visa application process is crucial for fostering quick scalability opportunities for startups. Policymakers should look into more competitive visa infrastructure to attract and retain global talent (American Immigrant Council).

The Future of Canadian Startups

As Canada aims to remain competitive, it must address the hurdles that deter founders like Trinh and Ravacci. Without strategic changes, the nation risks losing out on groundbreaking entrepreneurs and innovations, potentially resulting in future tech giants emerging from U.S. soil rather than Canadian roots.

Canada has a storied history of producing successful companies, but the time for change is now. Enhanced funding access, streamlined visations, and improved tax structures could lead to a more favorable environment for startups, ensuring that the next Shopify could flourish right here in Canada instead of crossing the border.

For more insights on startups and venture capital trends, visit the Leaders Fund and BDC.