Immigrate to Canada by launching a start-up

Canada is one of the G7 countries and is actively looking for new ways to improve the quality of life of its citizens and strengthen the economy through innovative business ideas. Therefore, generally, Canada has a significant interest in entrepreneurs from around the world, even willing to invest in their businesses and provide them with a permanent resident status to grow their businesses in the country of the maple leaf.

In April 2018, Immigration, Refugees and Citizenship Canada (IRCC) approved a program to bring-in and connect start-up entrepreneurs with designated investors. By doing so, the program helps the entrepreneurs to immigrate to Canada. If a startup is innovative and promises to become an economically independent business in Canada, then the Canadian Government is ready to support the entrepreneur and the startup. Note, "promises to become", that is, Canada is open to all sound new business ideas and does not insist for the start-up to be a financial darling or a jewel of the innovation world.

This immigration program is called, Start-up Visa program, which is managed directly by the IRCC from Sydney, Nova Scotia. Every year the program accepts up to 2750 applications from the start-up entrepreneurs from all over the world. Specifically, the program introduces the applicants to the designated private investors or special funds in Canada that specialize in investing in start-ups.

After designated investors approve a proposal by an applicant (who is also preparing an application for permanent residence), they issue a Certificate of Commitment to the Government of Canada (IRCC) and a Letter of Endorsement to the applicant. The Investors may also recommend that the Government issues a temporary work permit to the applicant, so that the latter may arrive in Canada early and open a startup under Canadian law and adapt to doing business according to Canadian standards.

The program involves three types of investors: 1) venture funds; 2) business angels; and 3) incubators. The Government of Canada sets certain conditions for them. For example, the venture funds need to invest at least $200,000CAN in a startup to be able to participate in the program, whereas the business-angels (individual investors) need to invest at least $75,000CAN. "Investing" in a business is described as the purchase of shares or other forms of equity in a qualifying business, which is formed by a mutual consent between an investor and an entrepreneur.

Designated Investors can consolidate their venture or angel funds to invest in a start-up, but in general they cannot own more than 50% of the shares in the company. The other 50% of the shares must belong to the start-up entrepreneur (i.e. inventor or founder). If the start-up has several founders, then, each founder can own 1/5 of all assets, that is, the company can have a maximum of 5 founders and each can own 10% of the shares.

Conversely, the incubators do not invest any funds, but they provide support, expertise and an experimental platform for the start-ups in the program to launch their products in Canada. Unfortunately, some incubators - contrary to the best business practices in Canada - can charge some start-up entrepreneurs $300,000CAN for their services, so it is important to choose the right investor who can act as a strategic partner for growing the young business.

Participating start-up entrepreneurs do not have to invest a penny of their personal funds in order to be accepted into the program.

In deciding on whether to finance a project, designated investors usually take into account the following:

•   Business plan;
•   Customers and suppliers, prices, materials and contracts with suppliers;
•   Marketing and distribution strategy;
•   Intellectual property, patents, etc;
•   Audited financial statements; capital and budgetary forecasts for the current and next financial year;
•   Personnel and personnel policy;
•   Assessment of competition and similar products;
•   Verification of the business concept, etc.

There are B2B companies that can help the entrepreneurs prepare business plans and meet with the investors with effective pitch presentations and proposals. They may work with immigration consulting firms in preparing all value-proposition documents.

So far, we have described different conditions for the investors and the start-ups, but have not discussed any requirements for the applicants themselves. Fortunately, there are not that many criteria, in particular:

1.   Language: knowledge of English at IELTS 5 level (all bands);
2.   Minimum funds: funds to live in Canada, not to invest in business. For a family of 4 (i.e. 1 applicant), the minimum amount as of 2020 is $24,600CAN;
3.   Intention: desire to live in any province except Quebec.

All applications are submitted to the IRCC for review. They are usually reviewed within 12-32 months. The program assesses the start-up applications on a "pass/fail" system. One can read more about the Start-up Visa program in the Immigration and Refugee Protection Regulations (IRPR), sections 98.01 (1) - 98.13 (8).

The Government of Canada strongly requires the start-up entrepreneurs to apply for the program for the purpose of pursuing a business activity rather than for the purpose of acquiring an immigration status by other means. Canada does not sell its immigration status, but allows the applicants to earn it fairly. In other words, propose a sound business idea and genuinely try to launch it in Canada.

Canada wants the start-up entrepreneurs in the program to sincerely try opening a business in Canada, not just "buy" the status. To prevent such "fraud", a reviewing immigration officer may ask an independent peer review panel that specializes in the assessment of business proposals to consider whether the designated investors have thoroughly checked accepted proposals and applied to them an appropriate procedural methodology.

However, a ruling by the Peer Review Panel is not binding on the reviewing immigration officer, who may substitute their findings with his/her own discretionary decision. According to a legal principle, delegatus non potest delegare (a delegate cannot delegate), the final decision regarding the immigration status is made by the reviewing immigration officer.

Collaboration between the investors and start-up inventors should be especially interesting for the IT programmers as opposed to the co-developers/co-owners, because they are working on projects without any stake in the product or start-up itself. Thus, such collaboration may catapult the programmers’ business ideas around the world and increase their income also.

In particular, the IT programmers should view Canada as the country where to start a business because, first of all, it will be protected there, and secondly, it offers new unlimited opportunities of the North American market and a backdoor to the United States, the largest economy and market for the consumption of new IT products and innovations.

In conclusion, it should be noted that the Start-up Visa program could be thought of as a social mobility program for the talented entrepreneurs who want to move up on the social ladder, but cannot attract the funding for their start-ups in their home countries.
And it is in this endeavor that Canada is becoming a partner and ready to share the risks with a start-up entrepreneur. Canada requires that the applicant make a sincere effort in opening and growing a business in Canada, but does not expect that the company would pull in astronomical profits or become a financial miracle.

Volodymyr Paslavskyi