Why You Should Invest In Canada's Tech Sector
March 8, 2024
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Investing in Canada's tech sector presents a compelling opportunity for seasoned foreign investors and newcomers. From AI and fintech to CleanTech and beyond, the country offers various investment opportunities across various sectors. Canada has a stable economy, supportive government policies, and a conducive environment for tech investment to flourish.
Join us to understand better the many opportunities awaiting investors in Canada's dynamic tech sector, where innovation, talent, and government support drive growth and success.
Canada’s Tech Sector
Despite having a smaller population than tech giants like the US and China, Canada ranks 3rd globally in the number of public technology companies and 5th for total venture capital funding in the tech sector, according to the Bank for Canadian Entrepreneurs (BDC). Canada's strong immigration policies and focus on education have made it a magnet for skilled tech talent. According to the Brookfield Institute for Innovation and Entrepreneurship, 20% of Canada's tech workforce is foreign-born, contributing significantly to innovation and growth.
As of 2024, there are about 20 Canadian unicorns valued at 67.1 billion CAD, demonstrating the potential for explosive growth in the sector. While Toronto is a major tech hub, other cities like Montreal, Vancouver, and Waterloo are also seeing significant growth. This decentralization presents opportunities for diverse perspectives and fosters a competitive landscape across the country.
Why You Should Invest In Canada's Tech Sector?
Here's a deeper exploration of why you should consider investing in Canada’s dynamic tech market:
Canada’s Thriving Tech Ecosystem
Canada boasts a highly concentrated and efficient tech ecosystem. Despite its smaller population than tech giants like the US and China, Canada ranks 2nd globally in terms of competitiveness according to the Canadian government and 3rd among the group of seven (G7) countries regarding the ease of starting a business. According to the United Nations Conference on Trade and Development, Canada had the second-largest foreign direct investment (FDI) to gross domestic product ratio among the group of twenty (G20).
This concentration of talent and capital creates a supportive environment where startups can flourish and established players can access resources for continued innovation.
Canada’s Strong Socio-Economic Foundations
Canada enjoys strong socio-economic fundamentals that provide a fertile ground for tech companies to thrive. The country boasts political stability, with a democratic system that fosters predictability and long-term planning. Canada also has a highly educated population, ranking 1st in the Organization for Economic Cooperation and Development (OECD) for the percentage of adults with a tertiary degree.
According to the World Population Review, Canada is ranked as the second most educated country globally, with 66% of its adult population completing an undergraduate postsecondary education. This readily available pool of skilled talent is crucial in attracting skilled foreign tech investors seeking to develop and implement cutting-edge solutions.
Global Recognition of Canada’s Tech Sector
Canadian tech companies are no longer confined to the domestic market. They are increasingly gaining global recognition for their disruptive innovations and cutting-edge solutions.
Examples include Shopify, a leading e-commerce platform, and Blackberry, a pioneer in cybersecurity solutions. This international recognition enhances the value proposition for investors, as it indicates Canadian tech companies' global potential and ability to compete in the international marketplace.
Canada’s Diverse Tech Landscape
Unlike some tech hubs dominated by a single industry, Canada's tech sector boasts a rich and diverse landscape. Leading companies are making significant strides in various sub-sectors, including:
- E-commerce,
- Artificial intelligence (AI),
- Clean technology,
- Cybersecurity, and
- Healthcare IT.
This diversification mitigates risk for investors, as they are not solely reliant on the success of one specific area. It also presents a wider range of investment opportunities, allowing investors to tailor their portfolios to their specific risk tolerance and investment goals.
Canadian Government Tech Support and Incentives
The Canadian government actively supports the tech sector through various initiatives to stimulate growth and innovation. These include:
Tax Breaks
The government offers various tax breaks, such as the Clean Technology Investment Tax Credit, Clean Hydrogen Investment Tax Credit, Clean Electricity Investment Tax Credit, and Scientific Research and Experimental Development (SR&ED), for research and development (R&D) activities, which are crucial for tech companies to develop new technologies and stay ahead of the curve.
Research Grants
Government grants are available to support specific research projects and initiatives, providing financial resources for companies to pursue groundbreaking advancements. Prominent tech research grants and funds include:
- Canadian International Innovation Program (CIIP),
- Innovative Solutions Canada (ISC),
- Canada Foundation for Innovation Fund, and
- Image, Text, Sound and Technology (ITST).
Fostering Partnerships
The government actively encourages partnerships between academia and industry, facilitating knowledge transfer and fostering collaboration on innovative projects. The Natural Sciences and Engineering Research Council (NSERC) is important in promoting partnerships between industry stakeholders in Canada’s tech sector.
Canada’s Access to the US Market
Canada's geographic proximity and strong trade ties with the massive US market offer significant growth potential for Canadian tech companies. The North American Free Trade Agreement (NAFTA), now replaced by the Canada-United States–Mexico–Agreement (CUSMA), eliminates most tariffs and trade barriers between the three countries, allowing Canadian companies to access the vast US tech market, valued at 13.1 trillion CAD according to Simplt Wall Street, seamlessly.
Undervalued Potential of Canada’s Tech Sector
Canada's tech sector is still undervalued Compared to other major tech hubs like Silicon Valley. This presents attractive entry points for investors seeking high growth potential at a relatively low cost. As the sector gains global recognition and unlocks its full potential, investors who enter early stand to benefit from significant returns.
Learn more about untapped tech potential via the emerging tech cities in Canada.
How Can I Invest in Canada’s Tech Sector?
Here are the various Immigration, Refugees, and Citizenship Canada (IRCC) visa pathways you can use to move to Canada and invest in its tech sector.
Start-up Visa Program
The Start-up Visa Program allows foreign entrepreneurs to obtain permanent resident status in Canada by establishing a qualifying business. While not directly an investment program, obtaining permanent residency through this program could open opportunities to invest in the Canadian tech sector by starting your own company or participating in existing ventures.
Learn how to immigrate to Canada as an entrepreneur with a Start-up Visa program.
Provincial Nominee Programs For Foreign Tech Investors
Each Canadian province offers a Provincial Nominee Program (PNP) with specific eligibility requirements and application processes. Some provinces have programs targeting entrepreneurs in specific sectors. Obtaining a provincial nomination can facilitate your application for permanent residency in Canada, potentially opening doors to future investment activities.
Here are the Provincial Nominee Programs you can use as a prospective foreign investor in Canada.
| Canadian Provinces or Territories | PNP Investor Streams, Pathways and Categories |
|---|---|
| Alberta | Alberta Accelerated Tech Pathway |
| British Columbia | British Columbia Tech Pilot |
| Manitoba | Business Investor Stream |
| Northwest Territories | Business Stream |
| Ontario | Ontario Tech Pilot |
| Prince Edward Island | Business Start-up and Entrepreneurship |
| Quebec | Investor Program |
Business Visitor Visa
A Business Visitor Visa allows you to temporarily enter Canada for business purposes, including exploring investment opportunities in Canada’s tech sector. However, conducting investment activities like buying stocks or starting a business is prohibited on a business visitor visa. You must obtain the appropriate authorization for such activities, which might involve applying for a Canadian work permit or using any prior work experience to get a Canadian permanent resident (PR) by investment.
Find out how to get a Business Visitor Visa for Canada in 5 easy steps.
FAQs
What Are The Risks Associated With Investing in Canada's Tech Sector?
Investing in Canada's tech sector carries inherent risks, including market volatility, technological disruptions, regulatory changes, and intense competition. Investors must conduct thorough research, diversify their portfolios, and stay informed about industry trends to navigate these potential challenges effectively.
What Are The Opportunities For Scaling a Tech Business in Canada?
Scaling a tech business in Canada presents abundant opportunities due to the country's supportive ecosystem, access to skilled talent, and a growing market. Leveraging government incentives, such as tax credits and grants, and tapping into global competitiveness can facilitate the expansion of tech businesses in Canada.
What is The Future Outlook For Canada's Tech Sector?
The future outlook for Canada's tech sector is highly optimistic, driven by ongoing innovation, a commitment to sustainability, and global competitiveness. With advancements in Artificial Investment (AI), Fintech, CleanTech, and other key domains, the sector is poised for continued growth, attracting domestic and international investors seeking long-term opportunities in the evolving technology landscape.