Narwhals are the unicorns of the North—but we’ll get back to that in a moment.

First things first, we have a good news story: The first quarter of 2016 reveals record-breaking venture capital activity in Canada and encouraging signs of economic growth. Data from Pitchbook, a private equity and venture capital database, records that Canadian firms raised a record-breaking $881 million in venture capital, distributed across 103 rounds of funding in Q1.[1][2] In contrast, our southern neighbours experienced the lowest number of U.S. venture deals in four years during the first quarter of 2016.[3]

The increased VC investment in innovative Canadian firms will hopefully continue upward. Securing access to funding is the greatest challenge cited by Canadian firms, with nearly two-thirds of small to mid-sized firms reporting difficulties in securing financing in 2015, compared to one-third of their American counterparts.[4] If the last three quarters of 2016 follow along the same pathway as the first quarter, worries regarding accessible funding for Canadian firms will likely decrease.

And now, back to narwhals:

Once Canadian firms get the money, we aren’t necessarily the best at making more of it. Canada’s lacklustre ability to produce high-growth firms is concerning. This should be a foremost concern for policymakers, especially in light of recent gains in access to capital. An upsurge in start-up funding draws attention to Canada’s poor record of supporting high-growth firms and our struggles in boosting increasing productivity. As a country, we have difficulty moving beyond the start-up/early venture phase. While start-ups are important in any economy, they do not offer the sought-after productivity levels of larger firms. The biggest challenge for BC businesses is therefore not starting up, but scaling up.

At present, Canada is home to only three and a half tech “narwhals”: Hootsuite (Vancouver), Shopify (Ottawa), Kik Interactive (Waterloo) and Slack (considered “half-Canadian,” as it is split between partners in both Vancouver and San Francisco).[5] A Canadian narwhal[6]—also known as a unicorn in the American context—is a start-up that has a valuation of $1 billion or more. For perspective, there are 101 American unicorns.[7]

The influx of venture capital into Canada may result in more opportunities for Canadian firms to scale up. Largely due to the low Canadian dollar, some deep-pocketed investors with the means to achieve real scalability are looking to the north to grow their money—and our businesses.

Funding alone does not create a healthy habitat for raising B.C. narwhals; it also takes smart government policies tailored to support productivity, innovation and growth. Continued investments in both private and public R&D, and bringing innovative ideas and technologies to commercialization, are key pathways to growth. The same goes for risk-averse national and provincial government procurement programs: too often, local firms are overlooked and underinvested in, limiting the opportunity for BC-based companies to expand within their home country. Thirdly, the ability to attract talent from both local and international pools also helps ambitious BC firms become more competitive, and thus intelligent immigration policy has a part to play in the scale-up process. Lastly—and of utmost importance for accelerating business growth—policymakers should pay considerable attention to the existing business tax structure and its sometimes adverse effects on fostering high-growth firms. Steep statutory income tax rates as businesses expand create disincentives for some BC businesses to grow.

Unlike unicorns, narwhals are real; but BC is home to too few of them. Record-breaking venture capital crossing the northern border should encourage Canadian policymakers to re-assess our lacklustre performance in scaling-up the start-ups—and to ponder what sort of environment it would take to accelerate firm growth.