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Compared to US firms, Canadian companies have lower productivity, and fewer grow into large businesses. At the same time, Canada has experienced a dearth of Initial Public Offerings (IPO) over the last 30 years and, correspondingly, owners of promising Canadian startups and young companies often "exit" by selling their stakes to large foreign companies rather than support their growth in Canada. In this context, it is natural to ask what source of capital (and associated expertise) could complement public equity in fostering firm growth in Canada. In this E-Brief, we show that private equity capital (venture capital and private equity) plays such a positive role, nurturing growth, jobs, investment, trade, and productivity in the Canadian economy. In turn, we recommend that governments shift their attention to mechanisms that can help firms grow or gain a more solid footing beyond the initial venture stage. This E-Brief examines the role of private equity in scaling up firms and the Canadian economy. It recommends steps that would increase quality investment opportunities and the depth of equity markets in Canada, and at the same time increase the chances that firms will remain in Canada, either through a sale to a Canadian buyer or eventually through an IPO. 1 Canadian firms generate just 73 percent as much Gross Domestic Product (GDP) per hours worked as their US peers, down from over 90 percent in the 1980s. See BDC (2016). Canada has a well-documented productivity gap with the United States. 1 Among the possible explanations for this gap is Canada's higher share of smaller, lower-productivity firms (Baldwin, Leung and Rispoli 2014). Indeed, a recent Business Development Bank of Canada (BDC) study found productivity among small and medium-sized firms in Canada is particularly poor and that

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