Suzie Dingwall Williams is a Guest Contributor and this post was published yesterday on Venture Law Lines.
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.
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We can only dream of brain drain. That at least presumes that these young entrepreneurs will be given a shot elsewhere that they didn't get here. Given the freedom to try elsewhere, there's a chance they could come back and repatriate their wealth, knowledge, and experience.
I am really hoping the message received here is that we need to compete for foreign skilled workers and etnreprenerus if we are going to build an innovaiton economy. Immigration reform in the US will make it harder for Canada to attract this group. If you want things to improve here, you've got to think at amacro level, and stop despairing about why you can't easily move south and get pots of gold from VCs lying about on Sand Hill Road with nothing to do.
Well, in 1998 I was a brain-drainer who went south to Silicon Valley, spent 3.5 years in California, and was involved in founding a startup that now, at the ripe old age of 10 years and a valuation topping $100M, has garnered a lot of kudos.
Visas exist already for relocating companies that have been in business 1 year to the US and providing for work status for that company's employees and spouses. That's not what we need, and that's not the American VC's point.
Drop-shipping Canadians into founder roles in US-backed companies will not instantly make them successful. Mentoring them in the environment, with seasoned (generally American) leadership, will.
I didn't wander across the border into a CEO role. I joined Cisco as a Product Manager, and then founded a startup at the Director level with a team of smart folks and eventually became VP.
I hate to say this but I'm starting to soften my disagreement with the strategy many Canadian VCs pursue in luring seasoned Americans to lead startups up here. The problem with that model, though, is that the quality of Americans we tend to be getting is not high. After all -- if you're successful and hyper-connected in the Valley (or wherever), why on earth would you come here?
The only answer I will accept at face value is because you're from here, and you are (like I was) uncomfortable with how Americans choose to model their society. I know a lot of Canadians who came back here to raise their children precisely for that reason.
We don't need to lure Americans to come North for senior roles, or even to lure overseas workers for junior roles. These people aren't hopping off the plane and founding companies right after they clear immigration on either side of the border.
We need to focus some effort on luring some of the nearly 1 Million Canadians who've moved to the US back to Canada. Making it easy to transfer 401Ks etc. into RSP's is one start... not taxing the hell out of them on all their cash and property is another.
why should our government give these expats a tax break to come back. That will encourage more to leave and only come back when they have little left to contribute to canadian society.
They SHOULD be encouraging people to leave and come back, precisely because they're less likely to get the knowledge and experience from working here that they would get elsewhere.
Once they get that experience they have a LOT to contribute to Canadian Society... much more than many of them do today.
I think it's an exaggeration to state that immigration-driven innovation has been Canada's exclusive domain to date. Last I checked, the US had 300M people versus only 30M in Canada - all those people came from somewhere.
I have to echo Ian's sentiment in response to 'canadian'. To get experience, you need to see how it's done, and there are few companies large enough to provide Canadians with the kind of experience required to hone their skills to a razor's edge. Canada is, like it or not, a branch town.
Unfortunately for us, it's easy to leave and equally easy to get into the US. The real threat isn't the H1B, it's the TN-1 which allows US employers to grab Canadian engineers quite easily: applying can be done in-person at the border and costs $50. The TN-1 visa is good for three years, infinitely renewable, and is not subject to any quotas.
So, if it's easy to leave, we need to figure out how to bring them back. Failure to do so effectively forfeits the investment Canadian tax-payers have already made in the education of Canadian emigrants. As the boomers retire and the labour pool shrinks, Canada will be fighting for talent along with everyone else - we'll need to use every bit of leverage we can muster to gain an advantage.
Brendan touched on something that I think is a big concern, and has been, on and off for many years. There's also the issue of losing the talent we need to materialize the vision, get these businesses off the ground and sustain them in the longer term (we call these "employees").
The taxation and pension issues have been a problem for as long as I can remember and while the industry should continue for lobby for change there, let's be realistic and accept that changes there will be slow in coming, if at all. We should instead look at what we have to offer here - our society and quality of life. Almost all of the brain drainers I have known have come home when they have families to raise. I also know a number of Americans who came to Canada for a defined period of time. They came for an adventure of youth, and many have stayed for the reasons Ian says he came back. These Americans are some of our best ambassadors - they have chosen to stay - do we understand why, and can we leverage that knowledge to market ourselves to other Americans (or other nationalities)?
For example, should we work harder at targeting the types of people we have a chance at attracting - young, bright, open-minded - for example, focus on the extreme climate and the opportunities it offers to the thrill-oriented (we need risk-takers up here).
As someone above said, people who obtain international experience return to Canada with LOTS to contribute - maybe our approach shouldn't be to "protect our people and stop them from leaving" but rather to embrace the concept of transfer and movement between countries, and recognize that while Canadians will bring more home one day, we can offer similar experiences to others, and the ebb and flow may eventually balance, and we'll have a true global economy (and the added plus is that more Americans will learn that we don't all drive dogsleds to work)
