Canada: Introducing A New Visa Stream To Lure Immigrant Entrepreneurs – The Start Up "Business Incubator" Class

Last Updated: October 30 2013
Article by Ruba El-Sayegh

In an effort to attract promising foreign entrepreneurs to Canada and to stay ahead of competitors, the federal government created an innovative visa program called the Start-up Business Class, which was launched in April of 2013. The program aims to link immigrant entrepreneurs with government approved Canadian private sector organizations that have expertise in working with start-up companies. The Start-up visa program fast-tracks permanent residency applications for immigrant entrepreneurs who are able to secure funding or support from a designated angel investor group or venture capital fund.

Purpose of the start-up visa

The Start-up visa program is especially useful for foreign entrepreneurs who are completely unfamiliar with Canadian business laws and networks and who lack credit history and real access to the resources necessary to grow a start-up company into a sustainable and profitable business. In addition to addressing the many challenges historically faced by immigrant entrepreneurs, Citizenship and Immigration Canada ("CIC") hopes the Start-up visa program will attract Silicon-valley hopefuls who have a difficult time securing a green card in the United States.

Eligibility requirements

In order for business persons to be eligible for a Start-up visa, they must:

  1. Meet the minimum language requirements in either English or French;
  2. Meet the minimum education requirement by providing proof of at least one year of post-secondary education with good standing;
  3. Have sufficient settlement funds, which amount is determined by the size of the applicant's family;
  4. Have their business idea funded or supported by either:
  5. a. an angel investor group;
    b. a venture capital fund; or
    c. a business incubator.

As part of the Start-up visa program, business persons must first convince a designated angel investor group, or venture capital fund, or business incubator to invest or support their business idea. If the investment comes from a designated Canadian angel investor group, applicants must secure a minimum investment of $75,000. If the investment comes from a designated Canadian venture capital fund, applicants must secure a minimum investment of $200,000.

The new "business incubator" stream comes into effect today

The "business incubator" stream was announced this past Monday to complement the existing venture capital and angel investor streams. The government will partner with the Canadian Association of Business Incubation to designate eligible business incubator and accelerator programs. The business incubators are supposed to provide start-up funding and mentorship in order to help these start-ups attract investors and grow into sustainable businesses. The business incubators will sometimes receive equity or a stake in the company in return. Some of the most common incubator services include:

  • Training on business programs and business etiquette;
  • Providing access to venture capitalists, angel investors, advisory boards and mentors;
  • Assisting with marketing and networking;
  • Assisting with tax/accounting/financial management;
  • Providing access to bank loans, loan funds and guarantee programs;
  • Assisting with regulatory compliance;
  • Assisting with intellectual property management.

Under the new business incubator stream which comes into effect today (October 25, 2013), foreign entrepreneurs would apply directly to incubator and accelerator programs which will evaluate proposals and provide recommendations to CIC on whether to approve their immigration applications. If the applicant is accepted, the business incubator would forward a letter of commitment to CIC, who will make the final determination on residency. Applicants under the business incubator stream can immigrate to Canada in teams of up to five partners, however, each applicant must submit his or her own permanent residence application with supporting documents.

New start-up visa program compared to older business categories

Unlike the older Entrepreneur and Investor categories that require a substantial financial investment or proof of substantial financial funds/assets on the part of applicants, the Start-up visa is specifically designed to help immigrants with entrepreneurial ideas reach that sort of financial stability in Canada while also boosting the Canadian economy and creating employment opportunities for Canadian citizens and permanent residents. While no financial investment is required under the Start-up visa, the government expects that business incubators and accelerators would review funding as part of their due diligence process. Furthermore, the new scheme places the evaluation of the legitimacy and sustainability of the business directly in the hands of expert business organizations instead of CIC. Also, processing times are expected to be a lot shorter, with turnaround times of 3-6 months as opposed to over 4 years under the heavily backlogged Entrepreneur category.

An innovative visa program

The Start-Up visa program is the first of its kind in the world and for all intents and purposes is designed to jump start Canada's high tech sector in search of the next "big thing". It is mandated under section 14.1 of the Immigration and Refugee Protection Act, which allows the Minister to issue instructions to create economic immigration programs for a five-year period. Under this authority, the Start-up visa program is limited to 2,750 applications a year. If the program proves successful during the five-year trial period and CIC wishes to maintain it, CIC will formally introduce the new economic class in the Immigration and Refugee Protection Regulations.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2013 McMillan LLP

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