Start-Up Brain Drain: The Next Threat To Canadian Venture Capital?
When US VCs grow introspective, it’s almost never good for Canada. Which is why we should all be concerned about the self-reflection now taking place south of the border.
In recent months, US VCs have cottoned on to the importance of immigrant entrepreneurs to an innovation economy. This used to be Canada’s exclusive domain; thanks to historical inclination and demographics, we’ve long known we need foreign innovators in order to grow our economy.
Now, US venture capital is catching up. Their zeal is fueled by a recently released study by the NVCA, which notes that (a) immigrants have started more than 25% of U.S. public companies that were formerly venture backed, and (b) more than 50% of the employment generated by U.S. public venture-backed companies has come from immigrant-founded companies like Intel, eBay, Yahoo!, and Sun.
The New York Times has also taken note, citing Harvard Law professor Vivek Wadhwa’s claim that 52.4% of today’s Silicon Valley startups have at least one foreign founder. US VCs are figuring that, to expand domestic deal flow, they need to expand the immigrant entrepreneur base.
As a result, US VCs are now actively lobbying the Obama administration to increase the number of specialty worker visas (referred to longingly by Canadians with dreams of a Silicon Valley life as H1B Visa).
This is not the best of news for Canada, unless you are a young entrepreneur who believes his business would get more and better financial backing if only he could relocate to California. The limited number of H1B Visas in the US has driven high tech growth in Canada, in some respects; in several cases, American businesses who cannot attract or sponsor adequate numbers of high tech professionals have near shored that work to Canada.
In a larger sense, there is an active competition heating up for innovators from outside of North America, one which Canada can ill afford to lose. Canada has some immigration programs for entrepreneurs which are laudable, but not spectacularly effective. There is a need to think and plan for how to capture this desirable talent pool, before new market entrants steal our thunder.
In recent months, US VCs have cottoned on to the importance of immigrant entrepreneurs to an innovation economy. This used to be Canada’s exclusive domain; thanks to historical inclination and demographics, we’ve long known we need foreign innovators in order to grow our economy.
Now, US venture capital is catching up. Their zeal is fueled by a recently released study by the NVCA, which notes that (a) immigrants have started more than 25% of U.S. public companies that were formerly venture backed, and (b) more than 50% of the employment generated by U.S. public venture-backed companies has come from immigrant-founded companies like Intel, eBay, Yahoo!, and Sun.
The New York Times has also taken note, citing Harvard Law professor Vivek Wadhwa’s claim that 52.4% of today’s Silicon Valley startups have at least one foreign founder. US VCs are figuring that, to expand domestic deal flow, they need to expand the immigrant entrepreneur base.
As a result, US VCs are now actively lobbying the Obama administration to increase the number of specialty worker visas (referred to longingly by Canadians with dreams of a Silicon Valley life as H1B Visa).
This is not the best of news for Canada, unless you are a young entrepreneur who believes his business would get more and better financial backing if only he could relocate to California. The limited number of H1B Visas in the US has driven high tech growth in Canada, in some respects; in several cases, American businesses who cannot attract or sponsor adequate numbers of high tech professionals have near shored that work to Canada.
In a larger sense, there is an active competition heating up for innovators from outside of North America, one which Canada can ill afford to lose. Canada has some immigration programs for entrepreneurs which are laudable, but not spectacularly effective. There is a need to think and plan for how to capture this desirable talent pool, before new market entrants steal our thunder.
posted by Suzanne Dingwall Williams at
7:23 PM
5 Comments:
You are right, immigration policies are killing American businesses. Nobody wants to invest in their companies from oversees because it just means so much trouble even to get there. I'm glad Canada's market is smart about this and lets foreign investors and businessmen set up their businesses here. Especially in these times, it really helps to pick up the economy. By the way, check out my article about Realtors being optimistic about the market. Finally we're getting out of this mess :) Great article, thanks for posting it.
Take care, Julie
Julie,
Thanks for a great post, again.
I put my thoughts together on this into my own blog post, offering my own experience as an immigrant entrepreneur (to both the US and Canada):
http://www.growthtimes.com/2009/10/how-does-canada-compete-with-the-u-s-for-immigrant-tech-entrepreneurs/
I'm worried that Canadian VCs are stuck in the middle (between our angels and US VCs) and that the success and expansion of our public and semi-public commercialization networks in the recent years is introducing some market distortions into our ecosystem for entrepreneurs by offering private-sector services. Ultimately, if the U.S. reduces its immigration policy gap with Canada, I'm arguing there will be few reasons for entrepreneurs to stay here.
As a Canadian who began working in the U.S. on an H1-B I can tell you that these visas are of little use to would-be founders. The H1-B program lets U.S. employers fill positions with capable foreign applicants when no suitable U.S. resident can be found. This more or less disqualifies any potential entrepreneurs since, by definition, the "position" that they would create doesn't exist yet.
H1-B workers can be of help to later-stage start-ups, but only those that have the backing and patience to hire an immigration attorney and get through the sponsorship process.
The real issue is that today's H1-B workers are tomorrow's permanent residents, and are the next decade's high-tech entrepreneurs.
Correct, this would be more about E visas and green cards, as I alluded to in my post. Is there anything happening on that end? Making it easier to get an E visa would strike me as the right thing to do, although I don't know how broken it is: the main criteria currently is the ability to invest over $50K in a company and create jobs. That seems quite fair to me. Anyone with practical experience of E visas mind commenting?
Hi, just found your blog and read some of your posts, and found out it is enjoyable and give me more insight. Only small question for you about this statement "Canada has some immigration programs for entrepreneurs which are laudable, but not spectacularly effective." My question is in your opinion, if the programs is not spectacularly effective, how to make it effective? Thanks in advance. | bankruptcy forms
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