To strengthen its fast-growing technology sectorthe Canadian government introduced the Tech Talent Strategy in June 2023 with the objective of attracting workers and entrepreneurs. As part of this strategy, the government announced improvements to Startup Visa Program.
Originally presented as a five-year pilot project in 2013it was created to replace the long-standing Federal Entrepreneur Program, which had been in effect since the 1970s.
However, the Start-Up Visa program has not proven to be a suitable substitute. Although the program has grown over the years, our analysis found that it is still only half the size of the Federal Entrepreneurs Program in 2010.
Start-Up Visibilityprogram fails in a number of key areas, including job creation, global business opportunities and long-term business viability.
The main concern of the Start-Up Visa program is its ability to create jobs. Unlike the Federal Entrepreneur Program, which required those coming to Canada create at least one new jobThe Start-Up Visa program does not have job creation requirements in its admission criteria.
Job creation is an important reason why Canada has expanded its pathways to permanent residency. Immigrants with a variety of professional experiences can contribute to the growth of the Canadian economy, and business immigration plays an important role in this growth.
A 2019 study from Statistics Canada found that immigrant-owned businesses had higher net employment growth per business than businesses owned by the Canadian-born. Although not all immigrant-owned businesses were founded by immigrants from the Federal Entrepreneur Program, they represented approximately 21 percent of all immigrant-owned businesses in 2010.
Innovation and internationalization
In addition to job creation, the Start-Up Visa program has additional objectives to stimulate innovation and internationalization. However, the Start-Up Visa program’s ability to attract innovative businesses remains unclear.
Before the startup visa program, immigrant-led businesses in Canada were found to be innovative, but not to the degree suggested. by Immigration, Refugees and Citizenship Canada (IRCC).
A Statistics Canada study Using data from 2011, 2014 and 2017 found that immigrant-led businesses operating in Canada for more than 20 years were more likely to implement innovations in processes, products or marketing and to use patents than similar Canadian companies. This suggests that Federal Entrepreneur Program companies were not necessarily underperforming.
Although it is expected that businesses entering the Start-Up Visa program will exceed these results, the lack of data makes it difficult to determine whether this is actually the case. Only a few candidates were backed by investors and most were backed by incubators., meaning the applicants are mostly early-stage startups. Although they are innovative, they will likely face challenges in terms of survival and longevity.
Although there is no concrete evidence to suggest that businesses participating in the Start-Up Visa program are more innovative, there is evidence to suggest that it has led to increased internationalization, another of the program’s objectives. Since the introduction of the Start-Up Visa, many immigrant entrepreneurs have left the United States to settle in Canada.
Financing constraints and debt obligations
Another area where the Start-Up Visa program fails is in foreign direct investment. While the ministerial instructions governing the program do not explicitly state that capital should come only from Canadian investors, a significant number of designated organizations are based in Canada. This suggests that the program aims to attract foreign entrepreneurs to Canada rather than foreign capital.
Without specific requirements, the Start-Up Visa program is unlikely to attract significant foreign capital into the country, as foreign entrepreneurs often need to obtain funding from Canadian investors.
On the other hand, foreign entrepreneurs who benefited from the Federal Entrepreneur Program ended up bringing their own foreign capital with them. The program required these entrepreneurs to have a net worth of at least $300,000. This approach led them to be 3.1 to 4.5 percentage points more likely to rely on personal finances and networks to start their business than their Canadian-born counterparts.
Business Startup Visa Applicants
Faced with these criticisms, to what extent exactly is the Start-Up Visa program necessary? Except in the cases of fraudulent applications to Start-Up Visathere are fundamental problems with the program.
One issue is whether the Start-Up Visa program draws potential applicants away from other programs. Another question is whether the project truly offers a path to permanent residency for those who are unlikely to succeed on other paths.
Foreign entrepreneurs who go through the Start-Up Visa are younger, more educated and with better knowledge of English or French than those who followed the Federal Entrepreneurs Program.
These characteristics are similar to those arriving by other routes, the crucial difference being that Start-Up Visa applicants bring entrepreneurial skills. But these candidates could easily use other routes like the Express Entry or Provincial Nominee programs.
In terms of individual quality of candidates, business start-up visa does not contribute significantly to Canada immigration skill mix. However, this presents an opportunity to invest in foreign startups: all these entrepreneurs need is an ecosystem that will help them thrive. But their prosperity depends largely on Canada’s startup ecosystem, which essentially makes the Start-Up Visa a vehicle for investing in risky foreign startups.
The effectiveness of a policy depends on its evaluation. The Federal Entrepreneur Program was eliminated because many foreign entrepreneurs launched small, poorly scalable businesses deemed unsuitable for Canada’s future economic landscape. Although few in number, these companies have attracted foreign direct investment and created jobs.
As many studies show, most startups fail. About half of all startups that receive angel investment fail within five years. At what point do we say the program may not be working?
Our policy recommendation is that IRCC should conduct a thorough evaluation of the Startup Visa Program to measure its performance against its stated objectives of job creation, innovation and internationalization, as well as provide achievable targets for these objectives.
When IRCC closes the path to permanent residency and opens a new one, Canadians should ask themselves not only whether this aligns with our goals, but also whether those goals are clear and measurable and can be evaluated over time.