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Trump's ban on immigration has an unexpected beneficiary: Canadian start-ups
President Trump 's executive order on " merit-based immigration " could have an unexpected beneficiary: Canadian start-ups.
Venture capitalists and angel investors in Canada said his executive order could cause highly educated immigrants — an important talent pool for fast-growing technology companies who need engineers, developers and salespeople — to seek work in hubs across the border, like Toronto and Vancouver, rather than in Silicon Valley.
The executive order, which Trump signed in January, prevents Syrian refugees from entering the United States for an indefinite period, suspended all refugees' admissions for 120 days and prevented citizens of seven majority-Muslim countries from entering the United States for 90 days. On Wednesday, administration officials said Trump will drop Iraq from the list in a new immigration order he is expected to sign this month. The Pentagon and State Department had urged the administration to reconsider, because Iraq has played an essential role in fighting the Islamic State Group.
Drawing on links with cities farther south — like Seattle and San Francisco — Vancouver, Canada's third-largest city, has pulled in thousands of skilled workers and entrepreneurs in recent years. Now U.S. tech companies are increasingly sending inquiries to Canadian economic development authorities to see how they can shift workers north of the border. Vancouver Mayor Gregor Robertson has been reported to say these requests have risen sharply.
Many of the world's largest tech groups already operate in Vancouver. They include Amazon (NASDAQ: AMZN), which is looking to add to its staff of 700 in Vancouver.
"There is a real shortage of talented people who can do the jobs that are needed," said Janet Bannister, a general partner in Toronto- and Montreal-based Real Ventures, which bills itself as Canada's largest and most active early-stage venture capital firm. "There are many very qualified, ambitious, hardworking people who will no longer be able to go to the U.S. Many of those people will come to Canada, as Canada embraces diversity. The Canadian business community will benefit as a result."
Cost is also an important consideration. A skilled worker in British Columbia earns around $1,222 a week, compared to $3,400 in California, according to BC Stats, a government agency.
Protectionism unfurled
Trump is moving full speed ahead on his immigration policies, despite many protests against them. In his speech to Congress on Tuesday night, Trump said the country is taking "strong measures to protect our nation from radical Islamic terrorism."
"According to data provided by the Department of Justice, the vast majority of individuals convicted for terrorism-related offenses since 9/11 came here from outside of our country," he said. "We have seen the attacks at home — from Boston to San Bernardino to the Pentagon and, yes, even the World Trade Center."
Trump also mentioned that his administration has been working on "improving vetting procedures."
"[W]e will shortly be taking new steps to keep our nation safe — and to keep out those who would do us harm," he said.
More than 50 lawsuits have reportedly been filed against the order.
Many in Canada's tech community opposed the original executive order. In response to it, more than 150 entrepreneurs, investors and others signed an open letter embracing diversity in Betakit, a publication that covers Canadian start-up news and tech innovation. The technology community in Canada includes a large number of transplants from other countries. In Toronto, one important hub, 49 percent of the population is made up of immigrants, of whom 31 percent arrived between 2000 and 2011, according to the city of Toronto.
The letter calls on the Canadian federal government to institute "an immediate and targeted visa providing those currently displaced by the U.S. executive order with temporary residency in Canada."
"This visa would allow these residents to live and work in Canada with access to benefits until such time as they can complete the application process for permanent residency if they so choose," the letter says. "We encourage provincial and municipal governments across Canada to lend support as they can."
A call to action
Among the signers was Boris Wertz, founder and general partner at seed-stage investor Version One Ventures in Vancouver.
"It's a message to our own country, as much as to the U.S., that we think diversity is a strength to the entrepreneurial ecosystem," says Wertz, who himself emigrated from Germany 15 years ago.
As he and several other Canada-based investors pointed out, more than half of the billion-dollar companies in technology were created by immigrants. Research by the National Foundation for Immigration Policy, a nonpartisan think tank in Arlington, Virginia, found that immigrants started 44 of 87 U.S. start-up companies valued at $1 billion or more as of Jan. 1, 2016, with each company creating an average of 760 jobs. These 44 companies are valued at $168 billion, according to the study.
Sid Paquette also signed the open letter. He is managing director at OMERS Ventures, the venture capital arm of OMERS, one of Canada's largest pension funds. "I believe the influx of talented immigrants to Canada will increase due to Trump's archaic policies," says Paquette. "We'll gladly keep our country open to everyone."
The talent chase
Will there be a brain drain from the United States to Canada? Kevin Kimsa, general partner at ScaleUP Ventures, a venture fund in Toronto, thought a mass exodus is unlikely. But he did expect overseas talent to reconsider coming to the United States.
"The recent Trump order on closing the borders down furthers an additional message of uncertainty in terms of U.S. policy," said Kimsa, commenting on the original executive order.
For people who have a choice on where to emigrate, "it may sway the vote in terms of coming to Canada vs. Silicon Valley," he said. "I would not be surprised if you had some individuals that elected to come to Canada because of the continuing messages coming out of the U.S. government."
There could also be more of a push by investors to base technology development resources in Canada, Kimsa said. "Development resources cost a lot less in Canada," he said. "That is an effect of the Canadian dollar. You now have this situation where there may be more resources."
Wertz, who received calls from a few friends in the United States who wanted to move to Canada after Trump's election, said these calls have started to pick up again since the executive order.
"It has certainly changed the discussion and has damaged the brand of the U.S.," said Wertz. "If you are a green-card holder and suddenly are not allowed to enter the country where you have a home, a family, where you paid your taxes and were a welcome resident for a very long time, a lot of people will ask themselves how much they can trust this country going forward. It broadens their perspective on where they think about building their career."
According to Karamdeep Nijjar, a venture capitalist at iNovia Capital in Toronto, Trump's first executive order is an early warning sign, creating "a cloud of uncertainty hanging over what a path to full citizenship looks like."
It could have a ripple effect and help "Canada move up the ranks in terms of being a more attractive destination and magnet for highly skilled entrepreneurs who ordinarily would have had the U.S. at the top of their list," he said.
— By Elaine Pofeldt, special to CNBC.com
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