TRUMP’S POLICIES ARE SENDING PRECIOUS STARTUP JOBS TO CANADA
RAYA BIDSHAHRI’S HANDS shook as she sat in her dorm room in February, reading the email that had been sent to all Boston University students.
“It was a warning letter,” she says, about a ban the Trump administration planned to institute against travelers and immigrants from seven predominantly Muslim countries, including Iran, where Bidshahri was born and where her family still lives.
Bidshahri had moved to the United States three years earlier to study neuroscience, and was just months away from graduation, after which she wanted to launch her online education startup in the Bay Area. She planned to take advantage of something called the International Entrepreneur Rule, which would give immigrant founders who raise at least $250,000 in funding temporary legal status in the United States while they build their businesses. For Bidshahri, the rule was perfectly timed. Finalized in the last days of President Obama's tenure in office, it was set to go into effect this July, just months after she received her diploma.
But that email from Boston University about the travel ban got Bidshahri thinking the United States might not be such a welcoming place for her or her company after all. And so, in June, she did what so many other foreign founders have done over the past year: set up shop in Toronto. Now she’s relieved she did.
Last week, the Department of Homeland Security delayedthe International Entrepreneur Rule to next March, and it is currently accepting comments on plans to rescind it altogether. The agency cited logistical challenges in vetting these new visas. The news has prompted backlash from immigrant entrepreneurs like PayPal cofounder Max Levchin and leadership at the National Venture Capital Association, who argue that rolling back the rule will drive would-be job creators to other, more welcoming nations. As Bidshahri’s story illustrates, it already is.
“We’re saying no to those new jobs and that new innovation at a time when there are many places in this country that want this,” says Jeff Farrah, vice president of government affairs at the National Venture Capital Association.
Politicians like to talk about small businesses being the lifeblood of the American economy. But the truth is that it’s not small businesses but young businesses that are creating the most jobs. According to the Kauffman Foundation, which studies and promotes entrepreneurship, young companiesaccount for almost all net new job creation and 20 percent of gross job creation in the US. The foundation has also foundthat roughly a quarter of tech and engineering firms are founded by immigrants, and employ an average of 21.37 people per company. It’s little wonder, then, that as the United States keeps these entrepreneurs in legal limbo, other countries, from France to Chile, are all too eager to take them in. In January, France launched its French Tech Visa, and in April Chile announced that its tech visa approval process would take just 15 days. But with its geographic proximity to well-heeled Silicon Valley investors, cultural similarities, and lack of a language barrier, Canada is emerging as an attractive option for foreign-born founders seeking a foothold in North America.
That’s not by accident. Canada began pitching itself to entrepreneurs back in 2013, when the United States Congress was in the throes of a bitter debate over a comprehensive immigration reform bill that included, among other things, a startup visa. That bill died in the House of Representatives, but America's neighbors up north took notice, piloting their own startup visa program that very year. It extends permanent residency visas to anyone who receives funding from a list of designated venture capitalists and angel investors or admission to Canadian business incubators. So far, 60 startups have launched in Canada using this visa. The pilot program ends in 2018, but the government may renew it before then.
In June, Canada also launched its Global Skills Strategy, which helps entrepreneurs secure work permits for highly skilled foreign workers within two weeks. This comes as the Trump administration vows to crack down on the use of H-1B visas for highly skilled foreign workers in the United States.
"We don't have a monopoly of good ideas. We recognize that companies need access to global talent and a global talent pool," says Navdeep Bains, Canada’s minister of innovation, science, and economic development. "We’re betting on people. We're betting on diversity."
These developments enticed German-born entrepreneur Chris Erhardt when he was looking for a home base for his company Tunedly, which helps studio musicians collaborate on music remotely. Having spent part of high school and college in Arkansas and Texas, the US was Erhardt’s first choice, not only because of its deep pool of investors but because it’s where the majority of Tunedly’s customers live. But the only visa options available to him and his French cofounder were either temporary or would have required him to hold another job to sponsor him on an H-1B visa.
“Running a startup is kind of a process,” Erhardt says. “You don’t want to have to worry if you can stay in the country where your investors and customers are too.”
So Erhardt applied to two incubators in Canada, was accepted to both, and entered one on Prince Edward Island last January. A little over a month ago, he and his cofounder became permanent residents and have since hired four people. Now, he says, they are not only secure in their visa status, they can visit their investors in the US whenever they want—and most of his investors are US-based.
That’s not altogether unusual for international entrepreneurs these days, says Farrah. Two decades ago, according to the NVCA, US companies received about 90 percent of all venture capital. Last year, they received 54 percent. Canadian companies, meanwhile, raised $3.2 billion in 2016, a 41 percent increase from 2015. The Canadian government has also set aside $400 million in its 2017 budget for investment in late-stage companies and $117.6 million to help research institutions attract international talent.
“You have other countries really rolling out the red carpet for entrepreneurs,” Farrah says. “Historically, the best founders did everything they could to come here.” Now he sees companies getting born outside the US that would once have set up shop here.
Another metric of Canada's success in recruiting overseas talent: Foreign applications to Canadian universities, including the University of Alberta, the University of Toronto, and Queen's University, have surged by more than 25 percent for the fall 2017 semester. In the US, meanwhile, a recent survey by the American Association of Collegiate Registrars and Admissions Officers found a 40 percent dropin international applications for the 2017 school year.
The International Entrepreneur Rule wouldn’t have been a perfect fit for all entrepreneurs. For starters, it only covered founders for 30 months, with the option to extend another 30 months if they met certain hiring and fund-raising criteria. Which is why some in the startup world won’t be completely dismayed should the rule disappear. “It’s simply an exemption, not a pathway to a green card,” says Manan Mehta, founding partner at Unshackled Ventures, a venture capital firm that supports foreign-born entrepreneurs. Mehta says starting from scratch could pave the way for “a true startup visa that enables these great graduates and strong workers to stay and build their companies that are already here.”
And yet, it’s hard to imagine such a thing coming out of this administration. That’s not for lack of bipartisan support. Among the voices advocating on behalf of the International Entrepreneur Rule were Republican Senators Orrin Hatch, Lindsey Graham, and John McCain. And yet, the ranks of the White House and United States Citizen and Immigration Services are stacked with political figures who seek not only to crack down on undocumented immigration, but on legal immigration as well.
Chief strategist Steve Bannon has lamented the number of Asian founders in Silicon Valley. Attorney General Jeff Sessions has accused Facebook and Microsoft of using H-1B visas to keep wages low. And Julie Kirchner, the new ombudsman for Citizenship and Immigration Services, formerly served as executive director to the group Federation for American Immigration Reform, or FAIR, which the Southern Poverty Law Center classifies as a hate group.
That’s not exactly comforting to Minnie Yuan, cofounder of Nastea, a Seattle-based coffee beverage startup that sells its product online. Yuan moved from Taiwan to the Bay Area for high school when she was 16 and lived with her 18-year-old brother, only seeing her parents sparingly over the years. On a student visa, she attended the University of Washington, where she met her three cofounders and launched Nastea during an entrepreneurship course her senior year. After graduating in May, Yuan was looking forward to focusing on the business full-time, but following last week’s news about the International Entrepreneur Rule, she and her cofounders are weighing their options.
Her cofounders could technically hire her and apply for an H-1B visa for her, but that’s no sure bet. Only 65,000 H-1B visas are issued via lottery every year, and large companies, including Silicon Valley giants and outsourcing firms, typically gobble up the majority of them. The other option: the Nastea troop could take a two-hour drive up the coast to Canada and grow their business there. “In the long run, we all want to stay here and create this company, and of course give back to the community,” Yuan says, “But we’re aware how hard it is.”
For now, she and her cofounders are still deciding. There is, of course, the ever-so-slight chance that the Trump administration could have a change of heart about the International Entrepreneur Rule during this comment period, before the new effective date rolls around next March. But some, like Bidshahri, aren't waiting around to see what the US decides. In the tech world, you've got to move fast. For more and more startup founders, that means starting up somewhere else.