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Ottawa’s immigration program for startups is having a hard time attracting entrepreneurs

Investor Kevin O'Leary and then-immigration minister Jason Kenney are reflected in during a press conference to launch the Start-up Visa Program in April 2013.
Investor Kevin O'Leary and then-immigration minister Jason Kenney are reflected in during a press conference to launch the Start-up Visa Program in April 2013. Photo: Bernard Weil/Toronto Star
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When the Start-up Visa was announced in 2013 as a pilot to bring promising entrepreneurs and their companies to Canada, the then-Conservative government bought a billboard in California. The sign, on the highway between Silicon Valley and the San Francisco International Airport, read “H-1B Problems? Pivot to Canada,” a reference to the popular U.S. skilled-worker program.

Then-immigration minister Jason Kenney said the initiative, which allotted 2,750 spots per year for entrepreneurs and their dependents, would “help make Canada the destination of choice for the world’s best and brightest to launch their companies.”

While there’s been an uptick in the past two years, just 666 people between 2014 and 2018 have received permanent residence under the program—about a quarter of one year’s allocation, according to data provided to The Logic by Immigration, Refugees and Citizenship Canada (IRCC). British Columbia and Ontario are soaking up more than three-quarters, or 79.7 per cent, of the founders—and the promising businesses they’re creating.

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Talking Point

The Start-up Visa Program has brought in just 666 people in five years, compared to its original annual allotment of 2,750 slots. Eighty per cent went to Ontario and British Columbia.  

Between 2014 and 2018, 256 entrepreneurs moved 168 companies to Canada through the Start-Up Visa Program. More than half have come in the last two years, with the number of recipients increasing from 40 in both 2015 and 2016 to 86 in both 2017 and 2018.

“Two years ago, what happened?” asked Ray Walia, CEO of Vancouver-based incubator Launch Academy, rhetorically. “You got Trump, so people that started getting restricted needed to look at alternative options. As you’re Googling stuff, you’re reading more and more articles about why Canada is an option.”

To qualify for the Start-up Visa program, startups must get at least $200,000 in funding from a designated Canadian venture capital fund, or $75,000 from an angel investor group or be accepted into a domestic incubator. Walia said Launch Academy has received over 1,000 applicants since creating its Maple program in 2018; it has accepted 19 firms, out of which eight have moved to Canada. Four teams of founders have received permanent residence. The program has filled up quickly because the incubator doesn’t invest or take equity in its companies, which is attractive to bootstrapping firms, Walia said.

In July 2017, President Donald Trump’s administration delayed the introduction of a new U.S. startup visa that was similarly designed to bring in foreign entrepreneurs with venture funding, but on a temporary basis. The Department of Homeland Security said at the time that it wanted to eliminate the program. While the application process stayed open, just 10 people had applied by April 2018. The policy was originally approved by President Barack Obama, after years of lobbying from the tech sector.

The Trump administration’s immigration crackdown has also helped boost Canada’s tech talent pool in other ways—as The Logic reported in December 2018, Canada’s skilled foreign-worker program brought in thousands of immigrants from the U.S. in its first 15 months.

Boris Wertz, founder of Vancouver-based venture capital firm Version One Ventures, said the first wave of Start-up Visa enquiries was driven by immigration consultants, with many “stretching the definition of what is a tech startup.” The quality of applicants has improved in recent years, said Wertz, which he attributes both to founders feeling less welcome in the U.S. as well as a growing perception of Canada “as a tech destination, and [somewhere] you can build your startup.”

Version One has brought one company to Canada under the program: a Romanian web-development education platform called Talentbuddy in 2013. The firm was sold to online learning company Udemy in 2016, and two of its three founders moved to San Francisco. While talk of a Canadian tech talent “brain drain” continues, Wertz said the duo wasn’t necessarily looking to move south. “Ultimately, that was where the acquisition opportunity was,” he said. “The only thing we can do is build a better tech ecosystem.”

Wertz and others in the Vancouver tech ecosystem began lobbying the government for something like the Start-Up Visa in 2010, and his VC firm was consulted as the program was being set up. While he “would have loved to see it in the thousands by now,” Wertz said he feels it’s “gaining steam, both in terms of quantity and quality.”

Immigration Minister Ahmed Hussen did not directly answer questions from The Logic, including whether the government is satisfied with the number of entrepreneurs who have arrived through the program, or with the vast majority going to British Columbia and Ontario.

The Start-up Visa “is a small-scale program by design because of the high calibre of entrepreneurs that it attracts,” said Peter Liang, a communications adviser at IRCC. Despite the early pronouncements of the then-Conservative government, Liang said there has “never been a target of 2,750 applications per year,” citing that number instead as the legislated maximum for any economic-class immigration pilot program. Test programs launched over the last three years for Atlantic Canada, rural and northern communities and caregivers all had the same cap.

The Liberal government made the Start-up Visa program permanent in 2018, and allocated $4.6 million over five years for an electronic application-processing system.

More than three-quarters of Start-up Visa recipients have headed for just two provinces. Of the 256 entrepreneurs who have come to Canada through the program, 40.2 per cent picked British Columbia, while 39.5 per cent chose Ontario.

By comparison, the former received 17.3 per cent and the latter 41.3 per cent of all economic immigrants—not counting Quebec, which is not part of the Start-up Visa—in 2017, according to the government’s 2018 immigration report.

“The Start-up Visa only works for two cities in Canada,” said Kareem El-Assal, senior research associate for immigration at the Conference Board of Canada—Toronto and Vancouver. He attributed that to the strength of the tech sectors in those cities.

Most of the designated entities that can support a Start-up Visa application are based in Toronto or Vancouver. Twenty-three of the program’s 29 designated VC and angel organizations have offices in one or both cities, and 13 of the 30 designated incubators operate there, according to The Logic’s analysis.

Liang said the 59 organizations that can support applications under the program are “located across Canada,” and that entrepreneurs “tend to settle near” the one that brings them to the country. “In this way, Start-Up Visa helps to spread the benefits of immigration across different regions of Canada,” he said.

However, certain regions have attracted almost no startups under the program. Alberta has as many designated organizations as entrepreneurs who arrived there via the Start-up Visa: five. Neither Saskatchewan nor Manitoba received any.

Atlantic Canada has fared better. The four provinces attracted 18.4 per cent of the Start-up Visa program’s successful applicants. That’s higher than the region’s share of economic immigrants overall, which in 2017 was seven per cent of the total excluding Quebec.

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Despite the recent increase in arrivals under the Start-up Visa, some experts and participants see room for improvement in the program’s design. “The way that the program has been structured to date has been very investor-focused,” said Walia. But bringing foreign entrepreneurs to Canada isn’t the core business of venture capital firms, angels and incubators, so the number of Start-up Visa applicants they sponsor is likely to remain low, he said.  

The investors and incubators also act as de facto immigration application centres for the Start-up Visa, but they’re not paid for the work, and must sift through many unsuitable entrepreneurs to find promising startups, said El-Assal.

He suggested that the federal and provincial governments create new programs for founders who may not have the money or experience to qualify for existing ones. “Canada’s losing out on young, ambitious, innovative entrepreneurs who can come here and stimulate economic growth across our country for many decades to come,” said El-Assal.