Canada’s Startup Visa Program was launched with much fanfare on April 1, 2013, by Jason Kenney, the former Citizenship and Immigration Minister. The program was started to attract top entrepreneurs from all over the world to Canada to start their own companies.
To be eligible for startup visas, entrepreneurs are required to acquire financial backing from a set of designated investors. The investment must be worth at least $200,000 if from a venture capital firm, or $75,000 if from an angel investor group. A third option is to get accepted by a designated accelerator or incubator program.
These requirements are in stark contrast to the previous entrepreneur visa program, which was halted in February of 2014. Its requirements were much simpler, with a foreign applicant needing to employ just one Canadian for one year to be eligible.
The new Startup Visa Program has been widely promoted in the US, with huge billboards especially in Silicon Valley, in a bid to attract bright student entrepreneurs to apply for one of the 2,750 startup visas made available every year.
And yet, 20 months after its launch, only two companies have been granted a total of five startup visas. As it was introduced as a five-year pilot scheme, the startup community is now skeptical whether the Canadian government will continue it after March 2018.
According to Betsy R. Kane, an immigration law practitioner from Ottawa, the government’s objective of attracting world-class entrepreneurs has failed completely. “This is not rocket science. They had a cap of 2,750 and in two years they’ve had five people. Why can’t there be more uptake?” she says.
Kane’s clients include Nat Cartwright, who along with her batch mate from Madrid’s highly regarded IE Business School, Jake Tyler, co-founded a new business relating to peer-to-peer mobile payments last year. The duo planned to set up their business, named Payso, in Vancouver, and expected it do well in the peer-to-peer mobile payments market, estimated to be worth a billion dollars in the next five years.
Cartwright and Tyler invested $20,000 in the company and hired an IBM employee to join them. However, Tyler, an Australian national, is unable to relocate permanently to Canada and his only option is to obtain a startup visa, which is not easily attainable. They have been advised by a law firm that the process may take two years to finalize but Cartwright feels it would be too late by then. “In one year, this is going to get out there whether it’s our company doing it or someone else’s. It seems like a great program but in terms of execution it doesn’t seem like it’s going to be that useful for us,” says Cartwright.
According to Kane, the startup visa program’s biggest drawback is that the designated third-party investors are not very keen on evaluating international business plans for Canada’s government. “I’m not sure what the CIC was expecting of these independent third-parties, but certainly they’re not, from what I see, going to spend a whole lot of resources in vetting all potential immigrants who are knocking on their door,” she said.
However, Chris Alexander, Canada’s Citizenship and Immigration Minister, while admitting that there is additional burden on designated investors, believes that the extra work comes with a comparative advantage. “Only the firms that wanted to participate were those selected,” he said.
Alexander is also not much perturbed by the small numbers of startup visas. He says that the program was not meant to be large-scale and reveals that about 20-30 companies with financial backing of one of the designated third-party investors have made formal applications for startup visas so far. “We are confident that the flow into the program will continue to grow but we want it to happen organically. We can’t force these things,” he says.
Critics of the program believe that there is not adequate awareness about the program globally, and that good startup companies can easily raise venture capital from an established firm without having to apply for startup visas.
Cartwright and Tyler do have the interest from several venture capital firms, however due to Tyler’s visa status, the company’s fate is unsure. “One of the first questions they ask is how long is your team available for. Since we don’t have a visa it works against us in terms of getting investment,” explains Cartwright.
Highline, an accelerator program based in Vancouver and Toronto, is also interested in Payso. It is one of the 11 designated programs eligible to facilitate a startup visa. Marcus Daniels, the chief executive of Highline, thinks that the problem is due to the fact that the incubator and accelerator programs designated by the Canadian government are not mandated to recruit foreign teams. “It’s never going to work if the entities don’t have an international mandate and a deal-hunting strategy for it,” he says.
Another obstacle is that less than half of the 11 designated accelerator or incubator programs are able to make a direct investment in the companies they select, with most of them only able to provide office space and mentorship. “No top-tier international founder is going to do this without getting proper funding,” says Daniels.