Private investors will stand ahead of Ottawa in the payout line under Canada’s newly issued terms for a $700 million venture-capital program. Under the proposed distribution structure, they would recover their contributions and reach a 7% internal-rate-of-return hurdle before the government recovers its own capital and a 2% hurdle, a feature of the $1.75 billion plan unveiled by Industry Minister Mélanie Joly.
The rules appear in the federal call for fund-of-funds managers, which opened alongside the announcement. After private investors reach their hurdle, the public investor receives its capital and targeted return. Fund managers then receive any earned carried-interest catch-up, followed by distributions in proportion to capital commitments.
The government requires managers to raise $3 privately for every $1 of public capital. Yet capital calls will be split evenly between the two sides, allowing Ottawa’s committed funding to be drawn down before all private commitments are called. At least 60% of fund investments must go to qualifying Canadian venture funds.
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The preferential structure has precedents, but the latest terms sharpen it. A federal consultation released in March proposed a 7% private hurdle with either a 3% or 5% public hurdle. The October document sets the government’s figure at 2%.
An OECD review of earlier Canadian venture programs found preferential distributions for private investors, with a 3% public hurdle used in previous Venture and Growth Capital Catalyst Initiative arrangements.
The $1.75 billion itself is not a fresh budget commitment. Budget 2025 already proposed $1 billion for the Venture and Growth Capital Catalyst Initiative and $750 million for a separate early- and growth-stage strategy.
Thursday’s announcement instead disclosed program allocations, opened the first manager competition, and launched consultations on another investment stream.
Of the $1 billion initiative, $700 million is reserved for the fund-of-funds program, $200 million for life-sciences-focused managers, and $100 million for emerging managers.
The separate $750 million strategy allocates $675 million to later-stage and growth investments, compared with $75 million to pre-seed and seed investing. The Business Development Bank of Canada will administer investments under that strategy.
In a May report, BDC said Canadian venture investment declined 6% to approximately $8 billion in 2025, while financing became more concentrated. A federal discussion paper cites BDC estimates that foreign investors supply 80% to 90% of capital in Canadian venture rounds exceeding $50 million.
Ottawa projects at least $3.8 billion in additional private capital across the initiatives, bringing combined potential investment above $5.5 billion.
Applications for the $700 million program close January 21, 2027, while feedback on the $675 million growth stream is due November 23, 2026.
