by Chris Arsenault, iNovia Capital
No entrepreneur wants to start a business if he runs the risk of being expelled from thevery country in which it has been launched. This is the situation facing two Romanian citizens after embarking on a social network business in Vancouver. The two businessmen were participants in Vancouver’s Bootup Lab Seed Accelerator program last year, where they raised half a million dollars in venture capital for their company. They have already hired one employee and are now looking to hire a second one.
But despite their best efforts, the two men were unable to obtain an entrepreneur visa and will be forced to leave the country by the end of the year. One is in Canada on a business visa, which has already been extended twice, and the other has a work permit from another employer that lasts only until December.
“These guys were engineering interns at Google and Microsoft before they came to Vancouver,” says Boris Wertz, founder of W Media Ventures and one of their investors. “They could have gotten a job in California, but preferred to stay here and launch their own business. Instead, they have spent a third of their time trying to regularize their situation, without success.”
Current Canadian immigration rules require a foreign entrepreneur to own at least $300,000 in personal fixed assets and have no less than two years experience heading a company in order to qualify for an entrepreneur visa.
These rules do not reflect the new reality of startups launched by bright young entrepreneurs straight out of university, with little money in their pocket, like Mark Zuckerberg when he founded Facebook, says Wertz.
A new visa
That is why Wertz, along with Danny Robinson and Maura Rodgers from Bootup Entrepeneurial Society, issued a proposal to establish a new visa in Canada for foreign entrepreneurs in the knowledge-based sector.
Called Startup Visa Canada, the new scheme would require a foreign entrepreneur to raise seed capital of $150,000 from qualified venture capitalists in place of the $300,000 current personal assets requirement.
The entrepreneur would also need to get a one-third equity position in the company, be actively involved in its management and create at least three full-time equivalent jobs over the course of a two-year program period.
“There is so much talent out there, in Asia, in Europe, in Australia, (people) who might not have $300,000 in their pocket,” says Wertz. “We need to be able to attract these bright people so they can start their business here and generate wealth for Canada.”
The group began a petition and now has 400 signatures supporting the Startup Visa proposition. Signatories include more than 50 venture capital funds, such as iNovia Capital, Real Ventures and W Media Ventures, Canadian tech organizations, such as the Canadian Innovation Exchange, as well as leading Canadian entrepreneurs. A letter was also sent to Minister of Industry Tony Clement, calling on him to start a pilot-project with the new rules.
CVCA- Canada’s Venture Capital and Private Equity Association is behind the initiative as well. “We believe startups to be the driving force behind job creation and prosperity,” says executive director Richard Rémillard. “We need to be more attractive to foreign entrepreneurs.”
“We will run out of engineers, mathematicians, physicists and other knowledge industry people needed to spur innovation,” adds Jean-Sebastien Cournoyer, partner at Real Ventures,
a new $46-million seed fund created last year and backed by angels, entrepreneurs and the government of Quebec. “Innovation is global, and so is the talent. If we want to be a competitive hub for Internet companies, we must remove barriers such as this one.”
Canadian immigration rules do not reflect the new reality of startups launched by bright young entrepreneurs straight out of university, with little money in their pocket
Around the globe
Rémillard says Canada has to move quickly because aggressive legislation is being introduced elsewhere in the world to attract and retain the world’s brightest. On March 16, for instance, the British parliament approved changes to the immigration rules that came into effect on April 6.
Under the new rules, the standard investment threshold for an entrepreneur will remain at £200,000, but the government will allow high-potential businesses to come to the U.K. with £50,000 in funding from a reputable organization. As well, entrepreneurs will be allowed to enter the U.K. with their business partners so long as they have access to joint funds.
In addition, a new type of visitor visa will be created for prospective entrepreneurs coming into the U.K. They will be permitted to enter the country so that they can secure funding and make arrangements for starting their business before they transfer to an entrepreneur visa while there.
There will also be 1,000 visas per year available for “exceptional talent,” i.e. people who will be let in for three years and four months without requiring sponsorship by an employer.
Furthermore, the new rules give more flexibility to investors: they will be able to spend up to 180 days per year, rather than 90, outside the U.K. without affecting their right to settle there.
In Singapore, entrepreneurs can obtain their visas in only five weeks – compared to a year or two here in Canada – with a minimum US$50,000 investment.
In Chile, a new program lures entrepreneurs with a one-year visa and an investment of just US$40,000.
Closer to home, a Startup Visa Act was introduced in the U.S. in February 2010 by senators John Kerry and Richard Lugar. In the latest version of the bill, entrepreneurs living outside the country will get a visa if a qualified U.S. investor agrees to financially sponsor their entrepreneurial venture with a minimum investment of $100,000. Two years later, the startup must have created five new American jobs and have raised over $500,000 in financing or be generating more than $500,000 in yearly revenue.
The bill also addresses the situation surrounding workers on an H-1B visa, or graduates from U.S. universities in science, technology, engineering, mathematics or computer science. If these graduates have an annual income of at least $30,000 or assets of at least $60,000, and have had a U.S. investor commit investment of at least $20,000 in their venture, they get a visa. Two years on, the startup must have created three new American jobs and have either raised over $100,000 in financing or generate more than $100,000 in yearly revenue.
What’s more, foreign entrepreneurs whose business has generated at least $100,000 in sales from the U.S. can get a visa. Two years later, the startup must have created three new American jobs and either have raised over $100,000 in financing or generate more than $100,000 in yearly revenue.
With rules like these, one can easily think of a situation where a bright Canadian student would prefer to launch his company in California instead of in Canada.
Many well known investors and startup promoters are behind these changes, including Brad Feld (Foundry Group), Eric Ries (IMVU), Paul Graham (Y Combinator) and even Canadian Paul Kedrosky (Kauffman Foundation). They are launching a campaign to gain political support for the bill, using social-lobbying tools to gather tweets, Facebook posts and SMS messages and hand-deliver them to Congress.
Where will Canada be when the bill gets passed?
Check out the full Summer Magazine Edition of Private Capital Privé at http://www.cvca.ca