When Miles Schwartz launched Zūm Rails in Montreal in 2019, he says he pitched practically every Canadian VC and got shut out. By 2024, the payments company was building out in the US, Schwartz had moved to Miami, and Zūm Rails had raised C$10.5 million ($7.5 million) from US growth equity firm Arthur Ventures.
"We tried raising with Canadian VCs," said Schwartz, 35. "American VCs were hungrier, faster - between them reaching out to us, getting a term sheet was like literally one week."
He is clear on the scoreboard that matters. "Canada shouldn't measure success by how many companies stay inside its borders," he said. "It should measure success by how many Canadian companies become global leaders." Zūm Rails, for its part, is growing on both sides of the border.
Zūm Rails is not an outlier. Slack started in Vancouver, moved to San Francisco, and in 2020 Salesforce.com Inc. bought it for $27.7 billion.
Two frictions keep coming up at home: thin options for growth-stage capital and a scarcity of big domestic buyers. Aidan Gomez, co-founder and CEO of Cohere Inc., said Canada has lacked growth funding choices and that larger Canadian firms "haven't really supported and bought from the local ecosystem." Those two forces, he said, "really pull companies south."
Scale tilts the table, too. With a population around one eighth that of the US, there are fewer customers in Canada. And US investors are more inclined to keep backing what John Ruffolo of Maverix Private Equity described as "high-stage risk" companies. The investor mix shows it: in 2022, roughly one third of Canadian seed rounds had only Canadian investors, but for later financings that dropped to 9%, per the OECD.
The grind wears on founders. "There's been a turning of the back on the entrepreneur over the past 10 or 15 years," said Robert Janson, chief investment officer at Toronto-based Westcourt Capital Corp., pointing to capital, banking, talent, and taxes as nudges south. Ruffolo sees the talent mindset as the loudest warning: graduates increasingly think their odds of building a tech company are better in the US. "This, to me, is the real alarm bell," he said.
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Canada still has real strengths: a highly educated workforce, supportive incentives, and a venture scene that is still growing. Even so, with Shopify Inc. as a standout, the country has struggled to produce global-scale tech giants like Apple Inc. or Alphabet Inc.
This is as political as it is financial. Prime Minister Mark Carney is pushing to reduce Canada's reliance on the US as it contends with President Donald Trump's tariffs and threats. That push took center stage in Toronto this week at the Canada Investment Summit, a first-of-a-kind gathering of top global money managers that produced a wave of home-focused announcements.
One headline item: Toronto-based Radical Ventures unveiled a late-stage growth vehicle exceeding $1 billion after its initial close, and Bloomberg News reported that a large share came from Canadian pension plans and banks.
Retirement savings are the big lever. Canada's largest pension managers oversee more than C$2.8 trillion and rank among the world's heavyweight investors. John Ruffolo, who founded the venture arm at Ontario Municipal Employees Retirement System, said there has been an "implicit bias that the returns and companies are superior outside of Canada." Under pressure to do more at home, leaders of the so-called Maple Eight have said they are open to it. Quebec's Caisse de dépôt et placement du Québec already balances returns with a mandate to support the province's economy.
On Tuesday, Carney also moved on taxes. Canada is expanding a key investment write-off to include fiber-optic cables, computer equipment, software, and additional categories, enabling accelerated deductions domestically.
For investors, this is about where the next wave of winners sets up headquarters and where Canada's giant pension pools choose to place big, patient bets. If Radical's fund and the new tax treatment help more late-stage AI and enterprise contenders scale at home, expect more Canadian growth rounds, hiring, and exits to happen locally rather than drifting south. If not, Miami and San Francisco will keep collecting Canadian founders.
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