Canada's New Startup Visa Is Progressive By U.S. Standards, But For Them It Could Be A Step Backwards

from the not-all-businesses-need-funding-from-VCs... dept

Wed, Sep 12th 2012 8:16pm — Mike Masnick

For years now, I've talked about the importance of some sort of startup visa for immigrants starting companies in the US. Lots of people in the government agree with this idea, but they haven't passed it because it's about "immigration." And no politician wants to take on immigration as a whole, because then it turns into nationalism about how those crazy foreigners are taking our jobs -- even when that's empirically not true. Canada, however, has now put in place a new startup visa that is somewhat similar to the various proposals floated down here in the US: entrepreneurs can get a visa if they have funding from a venture capitalist.

While I think that such a law would be a step forward in the US, in Canada it seems like it might actually be a step backwards. That's because Canada already had very open borders to job-creating immigrants. Its old rules allowed an immigrant a visa if they opened a business that would hire one person for one year. But those visas are no longer being offered. And that seems like a problem. My big complaint over plans for a startup visa that require venture capitalist investment is that it assumes that entrepreneurs require venture capital. But that's not true. Yes, for certain types of business, including capital-intensive, high-growth businesses, it often (though not always) makes sense to raise venture capital, but for many other successful types of businesses there are alternative sources of funding -- including (these days) things like crowdfunding and (*gasp*) revenue funding.

Imagine a couple of entrepreneurs want to build some new gadget, so they put it up on Kickstarter and it raises $1 million. Does it then make sense to also require them to get a VC to "bless" them by giving them money... and taking a ton of equity and control? Or does it make sense to just say "hey, these guys are likely to have a legitimate business that will create jobs, let them in." My other fear with linking a startup visa to VC funding is that it gives that much more control and power to VCs in negotiations. They now know that their money and investment isn't just a ticket to funding the company, it's a ticket into the country where they want to live. They can extract much more favorable terms under those conditions. While I'm not in the camp that thinks VCs are "bad," there are some who clearly take advantage of entrepreneurs, and a startup visa linked to venture money only makes that more possible.

So, yes, we need a startup visa, and Canada should have one too. But it seems like Canada is going backwards with its efforts, taking away from a visa plan that works for all kinds of companies, and instead giving venture capitalists the ability to choose who gets into the country.

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Filed Under: canada, entrepreneurship, immigration, startup visa, venture capital

15 Comments

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Forest_GS (profile), 12 Sep 2012 @ 8:45pm

It is imperative that the US encourage as many new businesses to open as possible. That will 100% guarantee new jobs.
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- That One Guy (profile), 12 Sep 2012 @ 10:51pm
  
  Re:
  I would say that that is so obvious a statement as to put it into the same realm as 'a forest fire is hot, you shouldn't walk into one', but sadly, US politicians are still unable to grasp that insanely simple concept.
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  - Chosen Reject (profile), 13 Sep 2012 @ 10:14am
    
    Re: Re:
    'a forest fire is hot, you shouldn't walk into one', but sadly, US politicians are still unable to grasp that insanely simple concept.
    I got a really neat idea, and I laughed, and I was very happy, and I envisioned a bright future. And then my morals kicked in, and said, "Yes, but that means a forest must burn", and I was very sad.
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Anonymous Coward, 12 Sep 2012 @ 9:23pm

The issue is that the old investment scheme was often used as a way into the country, and not to actually move a business forward. Hiring relatives or friends in Canada was common practice.

Basically, the revision is to make the system more responsive to the needs of Canada, and not those of the immigrant.
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- Jason, 13 Sep 2012 @ 7:11am
  
  Re:
  Wait, so now you're saying the darned immigrants are stealing all the jobs they've created?
  
  I still don't see a net loss there.
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TtfnJohn (profile), 12 Sep 2012 @ 10:00pm

Even if I was to agree, totally, that the old scheme could be gamed to only provide relatives and friends already in Canada with employment, with the help of a trusty and friendly immigration consultant saying that the proposed business requires VC blessing won't stop that. It'll just add cost up front to legitimate business class immigrants who were always going to set up shop here anyway.

Incidentally there's nothing at all wrong with with employing friends and family particuarly if it keeps them off the dole and become tax paying, contributing members of society. It's long been the nature of immigrant communities that they "stick to thier own" for hiring and employment for at least the first generation particularly when places like Canada are so culturally different from where they came from. The same applies to the United States.

If we can get the needs of Canada and the immigrant to line up, which they often do, then both get properly served.

More likely we'll get unethical venture capitalists taking over from unethical immigration consultants who rob Canada and the migrant blind. And just as we get the immigration consultant scams under control we pull this one off.
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testcore (profile), 12 Sep 2012 @ 11:44pm

Sounds like a lockup or handout
From the article, this is particularly telling - "The idea is to unite Canadian money and foreign brains". Haven't yet seen a statement that says the VC must be Canadian, but the quote implies it. Seems to me that if you're a VC in Canada, you just got a massive handout in the cornering of the immigrant-founded startup market.
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Ninja (profile), 13 Sep 2012 @ 4:29am

All this irrational immigration fear is amusing.

You have to limit what a foreigner can own and do to a certain extent but if said person is bringing in money and jobs (assuming he'll keep most of the money generated inside and we can have rules for that) then why not?

Most of the resistance against initiatives like that is just plain old prejudice.
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John Doe, 13 Sep 2012 @ 4:39am

Just watch Shark Tank
All you have to do is watch Shark Tank to see how much those who have take advantage of those who have not. And these are all citizens of the US. Now throw in the whole immigration issue and I guarantee the sharks take controlling interest of every company.
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Anonymous Coward, 13 Sep 2012 @ 5:00am

How to make this work for Crowdfunding
step 1: Raise lots of money on Kickstarter
step 2: Raise $1 from a "Venture Capitalist"
step 3: Move to Canada
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- Chris Brand (profile), 13 Sep 2012 @ 9:15am
  
  Re: How to make this work for Crowdfunding
  Unfortunately, the VC will likely want 50% of your company at step 2.
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  - Chosen Reject (profile), 13 Sep 2012 @ 10:18am
    
    Re: Re: How to make this work for Crowdfunding
    Isn't this an opportunity for disrupting the venture capitalist market? I'll give a dollar for a 0.5% controlling interest in all sorts of startups. Who wants to move to Canada?
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nospacesorspecialcharacters (profile), 13 Sep 2012 @ 6:47am

Immigrants are people...
We're all born on the same planet, with rather unfortunate imaginary lines drawn up by those with a less informed, limited worldview that came before us.

Does being born inside of one set of imaginary lines mean that person should be denied the rights of someone inside another set of imaginary lines?

Ill sentiment towards immigration is simply a loophole for closet racism. It's not ok to treat Elbonians as inferior or deny them rights, but it is socially acceptible treat people from Elbonia as inferior or deny them rights.

Being born at a particular set of coordinates is impossible to change, unlike gender or (to a degree) skin colour. Why is it then treated with extreme prejudice?
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Jesse (profile), 13 Sep 2012 @ 10:29am

Our conservatives want to make Canada a vassal state to the US, so naturally they pick policies similar to US policy.

That might be a bit harsh but they are very pro-American (to the point of prioritizing American relationship over Canadian interests...eg. digital lock provisions).
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- Jesse (profile), 13 Sep 2012 @ 10:38am
  
  Re:
  BTW did you know that under NAFTA, in the event of a national shortage of oil we must provide the US with oil before taking care of our own citizens?
  http://www.canadians.org/publications/CP/2005/spring/NAFTA.html
  
  This is contentious and the Canadian government does not believe these clauses would cause the above:
  http://www.parl.gc.ca/content/LOP/ResearchPublications/prb0633-e.htm
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