Canada unveils tax incentives and new fund to curb startup exodus to the U.S.

At the Canada Investment Summit in Toronto, the government introduced a sweeping investment tax write-off that adds equipment, software and fiber-optic assets to accelerated depreciation, cutting the marginal effective tax rate on new investments to 6.4%. The same summit saw Radical Ventures announce a new AI growth fund exceeding $1 billion, largely financed by the Canada Pension Plan Investment Board, PSP Investments and Ontario’s healthcare employees plan.

These initiatives aim to reverse the migration of Canadian tech companies to the United States, a pattern highlighted by founders like Miles Schwartz of Zūm Rails, who raised C$10.5 million from U.S. investors after Canadian VCs declined. Industry voices such as Aidan Gomez of Cohere and John Ruffolo of Maverix cited limited domestic growth capital and a tax environment that favors U.S. risk-taking as key drivers of the drift.

The reforms also target pension fund investment habits, encouraging more domestic allocations. Together, the policy and funding moves seek to foster home-grown, globally competitive tech firms.