Ingenious Motivator for Tech Investments

Had a pleasure to meet Harry Jaako, the Honorary Consul of Estonia in Vancouver, but also the Co-CEO of Discovery Capital, a venture capital firm operating in British Columbia.

He shared a very interesting and bold incentive concept that the British Columbia (not even the whole Canada) government has introduced to motivate private investments in small technology startups. Per every dollar invested, the government will pay you 30% back at once. The conditions include holding your investment(s) for five years minimum and a yearly cap of 200,000 CAD total.

So in other words, when you invest 10,000 CAD in a software startup, you get a 10,000 CAD share of equity for the price of 7,000. Or, as an alternative scenario, a private investor can keep investing their capital gained from a previous exit at a rate of 200,000 CAD per year, taking an annual cashback of 60,000 CAD out for their own living expenses as opposed to paying themselves salary.

This scheme is applicable to both direct investments and private investors participating in VC funds, such as the ones Discovery builds.

The results? The district of 4 million people that has been heavy on mining and forestry industries now hosts 70,000 people in tech sector (that’s almost 10x more than Estonia, half the size; comparable to Czech Republic – but their total population is 10M), 8 locally focussed VC funds (larger ones with 500M CAD funds), 8000 mostly small and medium tech companies…

I just love the simplicity as well as braveness of this lever and can only imagine the type of political opposition introducing it could have caused.

I wish Estonian government would spend some time seeking out similar ideas from the world… and implementing the best ones fast.


  • Another advantage (for Canadians) of participating in VC funds like the ones Discovery has is that you have the option of investing via your Registered Retirement Savings Plan (RRSP) which means that any profits you make are tax free until you retire (at which point you’ll most likely be in a lower tax bracket). The downside to that is you can’t spend the profits until retirement though.

  • “I wish Estonian government would spend some time seeking out similar ideas from the world… and implementing the best ones fast.”
    Do we all…