Innovation Support in a Changing World
Global Insights for Canadian Accelerators and Incubators
Funded by Innovation, Science and Economic Development Canada (ISED) under the Small Business and Entrepreneurship Development Platform (SBEDP)
About This Research
This study examines how Canadian BAIs can better enable national innovation competitiveness. Led by CAIN and funded by ISED, it combines secondary research with 27 expert interviews across 7 countries to identify system-level insights and practical recommendations.
This is a preview of findings. The full report is being finalized for publication.
Three Patterns of Weakness
Canada's innovation system exhibits three structural weaknesses that BAIs must confront
Converting Startups to Scale-ups
Canada performs well on innovation inputs but underperforms on outputs. The Global Innovation Index ranks Canada 13th on inputs but 20th on outputs. The Conference Board awards a "B" in capacity but "D-" in results.
- Only 32.4% of high-potential startups remain HQ'd in Canada (down from 70% in 2019)
- Target was 28,000 high-growth firms by 2025 — actual count: 10,700
- 2/3 of Canadian tech entrepreneurs expect to be acquired, only 6% plan an IPO
- More patents are now invented in Canada than owned in Canada
- Canada's advanced industry output is 42% below the size-adjusted global average
Canadian Adoption of Canadian Innovation
Canada excels at generating technologies but struggles to embed them in its own economy. Only 12.2% of Canadian businesses use AI despite Canada's foundational role in AI research.
- Only 12.2% of Canadian businesses use AI (up from 6.1% previous year)
- 2/3 of businesses report no plans to adopt AI in the coming year
- Investment per worker in 2022 was nearly 20% below 2014 levels
- Canada ranks 101st in labour productivity growth globally
- Canada produces 3% of global AI publications but converts only 0.6% to patents (US: 14-15%)
Fragmented Innovation Support System
The dispersion of responsibilities across federal, provincial, and municipal jurisdictions limits the system's collective effectiveness. Programs are scattered across ISED, NRC-IRAP, 7 regional development agencies, provincial ministries, and dozens of other bodies.
- Of 21 Advisory Panel recommendations, only 1 completed, 8 in progress, 12 unresolved
- Council of Canadian Academies: "without coordinated overhaul, Canada will continue to underperform"
- Canada's strong input performance not translating to output — consistent with poor integration
- BAIs navigate overlapping funding sources, competing programs, and siloed mandates daily
Seven Themes for Action
Emergent themes from 27 interviews identifying how Canadian BAIs must evolve
The Ambition Deficit
Cultivating a Culture of Bold, Global Aspiration
Canadian founders consistently default to modest growth ambitions rather than pursuing globally dominant scale — a cultural disposition identified by 18 of 27 interviewees.
Every other ecosystem intervention underperforms when applied to ventures that aren't aiming high enough. BAIs sit at the earliest inflection point in a founder's journey.
“I'm perfectly happy building a $30-$40 million business. I don't need to be a billionaire.
“We're a country that wants big companies, but we're slightly allergic to wealth generation.
“Why are we not challenging folks to think globally at the start? There's a playbook here... Whatever idea you have, do it 100x, or it's lemonade-stand thinking.
Practical Recommendations for BAIs
- 1Challenge founders on market size at intake
- 2Make "go global" the default playbook, not the advanced track
- 3Connect founders directly with people who have built at scale
Ginserv (Bangalore)
Conducts "fundability mapping" in the first week — investors lead workshops forcing founders to confront the gap between their ambitions and what scale-up requires, often resetting ambition upward.
The Gravitational Pull
Navigating Structural Market Disadvantages
Canadian ventures face structural disadvantages: a domestic market 1/10th the size of the US, persistent talent/capital/customer pull southward, and geographic dispersal across 5,000 km.
Programming that assumes a domestic-first scaling path works against economic reality. BAIs must design support around international markets while creating enough value to anchor ventures in Canada.
“When you've got that big of a gravity well of capital, people and market right next to you, to try to move past that is just hard.
“We give all the training, we help them build something solid, and then the minute that we would be benefiting from that, they move away.
“We're this tiny little strip, this long 5,000-km strip of people. And that's hard to bring together.
Practical Recommendations for BAIs
- 1Build structured market-entry support for target jurisdictions
- 2Help founders design structures that keep companies anchored in Canada
- 3Facilitate connectivity between adjacent Canadian regions to "manufacture" density
Basel Area Business & Innovation (Switzerland)
Requires companies to incorporate in Switzerland as a condition of participation. Leverages the density of pharma HQs to attract ventures inward rather than defending against departure.
The Capital Chasm
Confronting Canada's Risk-Averse Investment Ecosystem
Canada's VC ecosystem is systemically misaligned with scaling needs — characterized by investor risk aversion, early-stage underfunding, and insufficient growth-stage capital.
Early-stage underfunding triggers a cascade: founders lose equity, lose control, relocate to where capital resides. Without a domestic continuum from seed to growth, Canada invests in formation but captures returns elsewhere.
“We approached 40 Canadian VCs and nobody would touch us. Then we went to the US market and got funded within two months.
“We don't have a robust ecosystem in Canada to have a continuum of capital. The flywheel is getting broken as the companies mature.
“The underfunding at the startup phase is significant compared to almost any other jurisdiction. That's how you lose control of your company.
Practical Recommendations for BAIs
- 1Prioritize customer traction even over fundraising
- 2Build direct, curated relationships with investors
- 3Use collective data to advocate loudly for capital ecosystem reform
Silicon Valley (historical)
Early VCs syndicated out of necessity — couldn't fund companies alone, so they leaned on each other. This created a stage-based flywheel where successful exits increased capital pools and investor count organically.
From Innovation Supply to Market Demand
Anchoring Support in Authentic Market Demand
Canada's core challenge is not innovation supply but adoption. Domestic corporations and government are unwilling or unable to adopt Canadian innovations. BAIs must shift from supply-side supporters to demand-side brokers.
Without authentic customer adoption, ventures lack traction for capital, talent, and scale. BAIs that focus only on supply produce ventures that are pitch-ready but market-orphaned.
“Canada doesn't have an innovation problem. We've got a lot of innovative entrepreneurs. What we have is an adoption problem.
“The wave and the time of accelerator to find them a mentor or a VC is over. Now is a time of finding customers for the companies.
“BAIs have to look at themselves as brokers in a two-sided market. They've only been playing to the innovation push. They need to be hunting for the innovation adopters.
Practical Recommendations for BAIs
- 1Run more industry problem-led innovation challenges
- 2Facilitate structured paid pilot programs with corporate partners
Plug and Play (Silicon Valley)
"We see 30,000 startups a year. We don't touch their cap table. We let 500+ large global companies decide which startup offerings make sense. A funnel of 3,000 gets big traction. We invest in 200-300."
The Missing Middle
Closing the Commercial Talent and Growth Capability Gap
Canada's innovation conversation is dominated by technical talent while systematically undervaluing commercial, operational, and financial talent needed to convert innovation into scaled businesses.
Without commercial talent, technically excellent ventures plateau. When ventures recruit senior talent from abroad, it triggers a relocation chain that pulls the entire company out of Canada.
“We spend a lot of time talking about engineering talent and PhDs. But what we don't talk about is that we don't have leaders of growth.
“It's really hard to attract those business-focused, growth-oriented people to Canada. They pay higher taxes, the stock options are treated poorly.
“You put a new CEO in from Dallas. Next thing you know, you're hiring a CRO who is their friend from Dallas. Then all executives are in Dallas.
Practical Recommendations for BAIs
- 1Build dedicated commercial capability programming with the same rigour as technical programming
- 2Recruit mentors and advisors who have scaled companies commercially, not just technically
- 3Advocate for policy changes to incentivize global talent to come to Canada
IIM Bangalore (India)
Carefully screens mentors for significant scaling experience. The IIM-B brand carries such weight that prospective buyers are more likely to meet with portfolio companies because a mentor is associated with the institute.
Beyond Generic
Redesigning BAI Operations for Specialization & Quality
BAIs require operational redesign — moving from fragmented generalist hubs toward specialized nodes with clear identities, outcome-driven accountability, and modern technology infrastructure. BAIs have dramatically underinvested in their own AI adoption.
Without distinctiveness, BAIs duplicate effort and compete for funding rather than collaborating. Without outcome metrics, they lack feedback loops. Without a technology backbone, their claims are "a bucket of hearsay."
“The hub-and-spoke approach is done. Be a node. What are you a node of? Everyone in our ecosystem should know what they're the node of.
“BAIs get their funding from similar programs. What that created was BAIs trying to out-compete each other and become more generalist, more conforming.
“Without a foundational automation technology backbone, our ability to be reliable and repeatable is hearsay.
Practical Recommendations for BAIs
- 1Declare what your BAI is a "node of"
- 2Replace activity metrics with market-driven outcome measures
- 3Invest in a technology and data backbone as foundational infrastructure
BioInnovation Institute (Denmark)
Consolidated from 7 programs to 2, housed in a single facility with 500 seats and 3 floors of labs. "Instead of creating disparate things, make one that's substantial and do it excellently."
BAIs have dramatically underinvested in their own AI technology infrastructure
Only 12% of BAIs have integrated AI into programs or services
93% of business leaders use or pilot AI, but only 2% see measurable returns
Canada ranks 42nd of 47 countries in AI trust and literacy
Four domains for AI integration
Rooted Locally, Reaching Globally
Anchoring in Regional Strengths & International Networks
Canada's innovation ecosystem lacks relational density both domestically and internationally. BAIs are more interested in collaborating with international colleagues than with each other.
Without intentional connectivity, founders navigate alone. Canada's geography will never produce density organically — it must be manufactured deliberately.
“Every time I go to an event, I talk to folks who say they don't get outside enough. We are, as a nation, more isolated than is healthy for us.
“Canadian BAIs are much more interested in collaborating with colleagues outside the country than they are internally.
“If there was one thing we could provide that would have the biggest impact, it's creating an intentional community for those who want to grow rapidly.
Practical Recommendations for BAIs
- 1Create intentional peer communities for growth-oriented founders
- 2Establish structured international market pipelines with specific partners
- 3Convene sector-specific multistakeholder coalitions around genuine regional strengths
Ginserv (Bangalore)
Routes startups to specific international partner organizations based on target markets: Toronto Business Development Center for Canadian markets, Tech Ireland for Irish markets. Collaborates with embassies for bilateral exchanges.
International Benchmarks
Five models that offer lessons for Canada's innovation ecosystem
South Korea TIPS
Operator-led model where private accelerators select and mentor startups with government co-investment.
What Canada can learn: Trust operators. Let BAIs select winners and back them with automatic co-investment rather than bureaucratic adjudication.
Germany SPRIND
Statutorily independent federal agency for breakthrough innovation. Can fund in days, not months.
What Canada can learn: Speed kills bureaucracy. An independent agency free from Treasury Board rules could fund frontier innovation at the pace the market demands.
France: Integrated Ecosystem
Station F + La French Tech + Bpifrance create a seamless pipeline from incubation to scale-up with unified branding.
What Canada can learn: Integration matters. A unified national brand and coordinated pipeline from incubation through scale-up beats fragmented regional programs.
US SBIR Program
Mandatory 3.2% set-aside from federal R&D budgets for small business innovation. Every agency participates.
What Canada can learn: Mandatory set-asides work. A Canadian SBIR-equivalent with required agency participation would dwarf the current discretionary approach.
Israel Innovation Authority
16 technology incubators on 8-year licenses with government co-investment. Highest R&D intensity globally.
What Canada can learn: Long-term operator licenses with performance accountability create stability. 8-year cycles let incubators build real expertise and networks.
Research Team
Jennifer Davis
Project Lead / Strategic Director
Dr. Matt Mayer
Research Lead
Dan Herman, PhD
Strategic Advisor
Johanna Lau
Administrative Support & Research Assistant
Savina Caporalli
Webinar & Engagement Coordination
Explore the Evidence Base
This research draws on 24 publications from leading institutions.
Browse the Policy & Research LibraryThis research was produced by CAIN with funding from ISED. The full report will be published soon. For inquiries, contact hello@cainetwork.ca