How Canada’s immigration policy is failing high-tech startups

Complicated and sluggish immigration protocols are curbing access to foreign tech talent—just when companies need it most

Passport with spinning loading indicator for a visa stamp

(Illustration by Yarek Waszul)

While working a summer research job in nanotechnology at the University of New Brunswick, Kumaran Thillainadarajah created a pressure-sensing material. Originally envisioned as a “skin” for prosthetics, the technology would eventually prove suitable for other uses as varied as golf training and beer bottling. The discovery formed the basis of Smart Skin Technologies, a Fredericton-based firm Thillainadarajah started in 2009.

Like many startup founders, Thillainadarajah spent those early days pursuing clients, pitching investors and refining his technology. But the entrepreneur faced an additional, less common challenge. “By day I was starting a company, and by night I was figuring out how to stay in the country legally,” he recalls. Born in Sri Lanka, Thillainadarajah attended UNB on a study permit and then got a three-year Post-Graduate Work Permit. Once that expired, he needed a temporary work permit to remain in the country, which required him to obtain a Labour Market Opinion.

In a Kafka-esque turn of events, Thillainadarajah found himself filling out paperwork to assess the possibility of finding a Canadian qualified to be CEO of the company he’d founded. “I had to submit a letter, written by me and signed by me, saying that in my opinion I was the best person to do my job,” he recalls. “So it was all a bit ridiculous.”

While the specifics of Thillainadarajah’s story might be unique, his experience of trying to work here as an immigrant tech entrepreneur is all too common. Instead of welcoming foreign talent with open arms, Canada makes it exceedingly difficult for them to come to or stay in this country, even at a time when the thriving technology sector is in dire need of skilled knowledge workers. Hiring from abroad often means navigating Byzantine processes, paying costs fledgling companies can ill afford and enduring long delays—during which foreign competitors could easily snap up a promising candidate. Canada’s immigration system presents significant challenges to both aspiring entrepreneurs looking to build startups and early-stage companies seeking the best and brightest to fill their many job openings.

It’s a problem that belies the message spread by Canadian elected officials when they travel abroad. Touting this country’s high-tech sector and the job opportunities it’s creating has become a standard part of any speech during trade missions. Last month, the Ontario mayors of Toronto, Waterloo, Kitchener and Cambridge made a pilgrimage to Silicon Valley. “Come to help us build and scale our companies, and build your career in a truly great place to live,” suggested Hogtown’s John Tory in a keynote address to the CityAge conference. On the west coast, British Columbia Premier Christy Clark and Vancouver Mayor Gregor Robertson both emphasized tech in separate Asian trade missions in 2013. “So many political people have gone on trade missions to say, ‘Come do business here,’” says Stephen Green, a partner at Toronto immigration law firm Green and Spiegel. “And then people can’t get here.”

The Information and Communications Technology (ICT) Council estimates that by 2019, Canada will need an additional 182,000 skilled ICT workers. Various groups are labouring hard to fill those jobs domestically. The universities of Waterloo and Toronto have some of the world’s highest-rated engineering and computer science schools, but their success has made them fertile recruiting grounds for Silicon Valley giants. Advocacy groups such as Code NL are pushing for coding to be added to the high school curriculum, while organizations like Ladies Learning Code and Lighthouse Labs are building an alternate tech talent pipeline. But it won’t be enough. “Ginormous gaps are going to occur in this space over the next decade,” predicts Mike Galbraith, chief financial officer at Kitchener-based Thalmic Labs. “It’s going to be impossible for Canada to actually supply enough workers.” To ensure we’re not left behind, Canada will have to reform the immigration system with the needs of the tech sector in mind.

“H-1B Problems? Pivot to Canada” read the billboard on U.S. Highway 101. Located on the corridor connecting San Francisco and Silicon Valley, the ad taken out in 2013 by the Canadian government aimed to entice immigrants aggrieved by the United States’ cumbersome high-skilled worker visa to shift their attention north. On a trip to California that year, then Minister of Citizenship and Immigration Jason Kenney posed in front of the hoarding, flashing a thumbs-up. The billboard advertised the Start-up Visa Program, a five-year pilot to make the immigration process easier for foreign entrepreneurs.

That was the idea, anyway. In practice, the program is “a total failure,” according to Green. The government set aside 2,750 visas a year for the program. But as of May, only 51 entrepreneurs had become permanent residents and 26 startups have launched or will launch soon, according to Citizenship and Immigration Canada.

The Start-up Visa came two years after the federal government shuttered the Immigrant Investor and Entrepreneur programs over concerns that rich foreigners were simply buying their way into the country. Searching for another way to bring savvy young founders to Canada, the government saw an opportunity in Silicon Valley. “All those companies were lobbying the U.S. government for more visas, and [the Canadian government] said, ‘If they can’t get them, we’ll try to tap them,’” explains Betsy Kane, a certified specialist in citizenship and immigration law at Ottawa firm Capelle Kane. “I think it was just a reactionary program.”

As such, there were design flaws. To qualify for the Start-up Visa, entrepreneurs must be accepted into one of 14 incubators, or secure a minimum investment of $200,000 from one of 26 VC funds or $75,000 from one of six angel investor groups. But relatively few startups ever receive investor capital, regardless of where they’re located or who the founder is, notes Kane. Plus, it means a lot of extra paperwork for investors. “The VCs are not here to vet immigration applications for the Government of Canada free of charge,” says Kane.

A better model, Green suggests, is a Province of Ontario program that ended in June 2015. “If one of [the government’s] commercial officers abroad thought you had a great startup idea, they would issue you a letter, and you could get a work permit for two years,” he explains. The idea of a bureaucrat ruling on a startup’s potential would no doubt cause many entrepreneurs and VCs to bristle. But embassy and provincial officials specializing in economic development are better placed to meet with entrepreneurs and understand their local context than investors half a world away.

It’s unclear whether major reforms are coming, but the immigration minister’s office told CBC in January that the Start-up Visa program will be reviewed this year. That’s welcome news. “These are great young, entrepreneurially spirited people, and we can’t offer anything to them,” says Green.

In 2014, Vancouver’s Mobify wanted to hire an intermediate engineer. The company, which provides mobile commerce and engagement tools and services, was able to identify a promising candidate in the fierce war for talent. The problem? The prospective hire wasn’t Canadian.

To bring in a foreign national on a work permit, an employer must typically obtain a Labour Market Impact Assessment (LMIA), which was introduced in 2014. (Tech startups often bring in workers on temporary three-year work permits with the intention of sponsoring them for permanent residence; each application usually requires an LMIA.) The government’s review is supposed to take about two weeks, but experts and applicants say the process is significantly more painstaking and time-consuming than advertised. The need to apply for an LMIA can sometimes mean the difference between making a hire and leaving a position empty.

To prove they can’t find a qualified Canadian candidate for the job, companies must typically advertise the position for four weeks with the Government of Canada or provincial job bank, and in two additional spaces, such as recruitment sites. The Job Bank doesn’t provide the flexibility of a, however, and bases position titles on National Occupation Classification (NOC) codes, a system used by the federal government to categorize jobs. That’s where Mobify ran into trouble: The authorities decided the company had used the wrong NOC code. The “correct” occupation classification required much the same skill set but a significantly higher wage. “We had to withdraw the application, and we lost that employee,” explains Candace Bajgoric, the company’s manager of people operations. Mobify might have been willing to compromise on the salary question, but it couldn’t modify the application. It would have had to start over again. “To ask that employee to wait an additional three to four months after they’ve already waited four months—they’re not going to do that,” says Bajgoric.

Navigating this complex system often requires companies to hire immigration lawyers and deputize staff members to fill out forms and keep track of paperwork for extended periods. And in a competitive market for tech talent, time matters. If your candidate is from a country whose citizens require visas to enter Canada, you’re looking at waiting six months or more. Inga Wehrmann, human resources manager at Kitchener-based Clearpath Robotics, endured the LMIA process when hiring a robotics specialist from abroad. The instructions on the immigration department’s website are vague, she says. “We discovered that if you just complete the form based on the questions that are on it, there’s absolutely no way you’re going to be approved,” she says. “They’re looking for a lot of extra information, but that isn’t clearly explained anywhere.” The LMIA form gives companies a maximum of one paragraph to summarize their recruitment needs and efforts, says Wehrmann; Clearpath had to attach at least 10 pages of documentation to its recent application to make sure its bases were covered.

Compensation is also a point of contention. To hire a temporary foreign worker, employers must pay the “prevailing wage” for the position, an amount determined by postings on the Job Bank. That median wage is based in part on the salaries paid by established tech giants, such as Google Canada. Startups with no revenue typically can’t afford to pay those wages, which means they’re forced to shell out big dollars to hire foreign talent or to not bother at all. With domestic workers, startups provide stock options to compensate for lacklustre salaries; the LMIA, however, doesn’t allow for that option when tabulating wages.

These issues show the system simply isn’t suitable for tech startups. That’s why Waterloo-based startup support and advocacy organization Communitech has been calling for a “scale-up visa” specifically for tech companies. The proposed program would deliver a verdict within three weeks, accept applications online and allow them to be tracked. It would also eliminate the LMIA or replace it with a document that recognizes the particular skill requirements, compensation practices and job titles within the industry. Creating a dedicated program for a specific industry isn’t unprecedented—film and TV crews have recently been exempted from the LMIA requirement. Kane points out that a shortage of ski instructors and service workers prompted the federal government to ease restrictions for Banff, Alta., and Whistler, B.C., earlier this year. The idea is gaining traction. In a January report (PDF download), the Canadian Chamber of Commerce proposed a similar program, and also suggested the creation of a quasi-judicial body to oversee compliance and an appeal process for employers.

Fail to fix the system, and Canadian startups will be at a significant disadvantage to their competition abroad—particularly those in Silicon Valley, which have a nasty habit of poaching top Canadian talent. Galbraith at Thalmic Labs says if the process is too onerous, some companies may opt to hire a foreign worker but keep that person overseas and establish an office abroad. “It’s not about losing one job,” Galbraith says. “It’s about losing 15, 20 or 50 jobs you’d eventually create.” The concern is not unfounded. Figure 1, a Toronto company that provides a photo-sharing app for health-care professionals, did just that. After an immigration application was rejected, Figure 1 hired a business development lead in New York and staffed up around that employee, wrote CEO Gregory Levey in an opinion piece last year.

Canada’s immigration regime is among the most progressive in the world, and even those inconvenienced by it have positive things to say. But current policies are impeding growth for startups that have few financial and human resources. And while plenty of old-economy industries might object to any special treatment for the tech sector, it may be unavoidable if politicians actually want highly skilled workers and entrepreneurs to come to Canada. Immigration is a “raw requirement” for the tech industry, says Galbraith. “[High-tech] is where most or many of the high-paying jobs are going to be—it’s where business is going—and if we want to be part of the knowledge economy, it’s just an absolute imperative,” he says. “I don’t know if other industries could honestly say those same things.”