Are Startup Visas the Only Way for Global Cities to Lure Foreign Talent?
When it comes to startups, cofounders place a particular premium on who they hire to execute their vision. From an investment standpoint, too, the team who is behind the venture is everything.
From a grander perspective, especially as a city or country’s ecosystem matures, it becomes critical not only to prevent companies from leaving but also to find creative ways to lure talented startups and entrepreneurs from elsewhere in. How are they doing this? What does it take for a startup city or nation to become a magnet for talent? Throughout the Challenge Cup, with competitions all over the world, I’ve examined this quest.
Adopting an entrepreneur visa to compete with Silicon Valley’s talent pool
Tel Aviv wants to emulate—and eventually beat out—Silicon Valley in becoming the world’s foremost startup hub in both reputation and quality of startups.
This isn’t a unique desire. To an extent, it is the goal of every aspiring startup city around the world. But Tel Aviv’s aim is more focused and perhaps more doable. Startup Genome has ranked Israel’s most forward-thinking city the No. 2 startup hub globally, behind only the Valley. Israeli leaders have boiled down Silicon Valley’s lead in the rivalry down to a single reason: foreign talent.
The fact that Israel has mandatory military service has caused an incredible number of former soldiers to join the startup community. The Army, in particular, has created a risk-friendly culture and equipped young people with technological and product-building skills ideal for entrepreneurship, says Mira Marcus, the international press director for the Tel Aviv-Yafo Municipality.
This benefit, though, has only helped draw domestic startup talent.
What the Bay Area does better is to serve as a magnet for talent from everywhere, so much so that the split of Americans to foreigners there is almost 50-50, Marcus says. Israel—where 98 percent of the startup community is Israeli—wants to get closer to that breakdown.
The primary strategy to do that is to ease immigration requirements, allowing international entrepreneurs, designers and programmers to relocate via a specialized entrepreneurship visa. For the last three years the country’s Ministry of the Economy and Ministry of Interior have grappled with specifics of such a visa.
In a letter to Minister of the Economy Naftali Bennett from December, tourism group Tel Aviv Global and other supporters of the idea explain the value of an entrepreneur visa as both defensive and offensive:
“Solidifying Israel’s standing and that of Tel Aviv, in particular, as an international hub that draws entrepreneurs can serve as a response to global competition and encourage the growth and establishment of Israeli multinational companies, as opposed to the current ‘exit’ strategy. It will also facilitate the creation of more jobs for many Israelis. We believe the need to enable foreign entrepreneurs and hi-tech professionals to legally work in Israel is critical not only to the further development of the Israeli hi-tech industry, but also to its very existence.”
A visa that gives incubators leeway to pick companies
Israel is far from the only country in the world either intent on creating a visa geared toward startup development or promoting an already adopted one. Canada—which the Challenge Cup visited by way of Toronto—has had a program in place since 2013.
Right now the program supports visas for individuals who have started companies outside of Canada and are accepted into one of the country’s approved incubators or accelerators. A distinguishing feature of the visa is that startup founders who make the cut get a permanent visa, rather than a temporary one like those granted in equivalent programs around the world.
Canada’s visa program is run by the immigration office, but the Canadian Association of Business Incubation, of which Gail Gillian-Bain is president, plays a key role. The agency oversees startup accelerators and incubators, making sure that they adhere to certain best practice guidelines and selecting which ones are allowed to accept foreign entrepreneurs.
Gillian-Bain says the approved incubators and accelerators get leeway for the criteria around which they select foreign entrepreneurs. Some require a certain amount of investor funding to be accepted or require that startups fall into a certain sector or have a solid revenue plan to enter their space; they can decide. CABI’s position overseeing the nation’s entire business incubation network means that it also keeps an eye on where startup visas are being doled out so that they can spread international startups across Canada, Gillian-Bain said.
“The criteria and due diligence is done by the accelerator. After they’ve done their due diligence we will go to the government and say, ‘I support this,’” she says. “They’ll usually look at the financial means and the viability of the business itself, not just locally but internationally…We also look to see that all provinces and territories are represented.”
Canada’s startup visa program is in its third year of a five-year pilot, after which time the government will assess its effectiveness in injecting foreign entrepreneurial talent into the country’s budding startup community.
Gillian-Bain says she doesn’t know exactly how many global startups have participated so far. However, she said that between 20 and 30 new entrepreneurs are immigrating to Canada in the next few months thanks to startup visas. They represent a wide range of home countries—from Korea to France and even the United States—and the companies are focused on solutions in cleantech, gaming, information communication and everything in between.
“We’ve been successful so far,” Gillian-Bain says. “And we’re trying to be really strategic going forward.”
Social equity, rather than financial equity to change an ecosystem
Before Canada enacted its startup visa program, Startup Chile was the first national effort of this kind. Chile, though not a Challenge Cup stop this year, is widely considered a global leader in attracting foreign talent.
Sebastian Vidal, Startup Chile’s current executive director, said via a Skype conversation, that it all started five years ago. The startup scene in Chile was nonexistent. Universities, VCs and other players in the startup community “were doing separate things, not coordinating their innovation work.” Geographically, the country has barriers like water and deserts that cut it off from other nations. As a result, startups’ solutions were local in scope, not global.
The man who established Startup Chile, Nicholas Shea, was brought on as an innovation consultant by the government to change this limited mindset and accelerate entrepreneurship. Shea’s idea was to attract talent from outside of Chile and, in doing so, to change the thinking of Chilean entrepreneurs and the Chilean public about the potential of startups.
Because Chile lacked name recognition as a startup hub, Vidal said, the idea of a specialized visa to lure startups was born.
“There were two clear benefits so that it was easy to explain: we’d offer them money and a one-year working visa,” Vidal said. “We wanted the entrepreneurs to say, ‘If I go to Chile i have everything I need to keep going as a business.’”
The money came to $40,000. Startups selected for a visa also were given a Chilean ID, a bank account and a physical space in an incubator. Even though the program technically runs for six months, the visa is good for a full year, Vidal says.
Getting the initial 22-member international cohort took a dedicated marketing effort. Yet, since then, interest has “exploded,” Vidal says. Overall, 1,000 startups from 75 countries have come through the startup visa program so far. Competition for the coveted spots is increasing each year. For instance the most recent selection round saw a whopping 2,500 applications.
“The quality of the projects has grown,” the executive director says. “We’re receiving much more related with high technologies now, like biotech, hardware companies, sustainability, life sciences, clean energy … Before, you could have a great idea and want to develop it. Now, you have to have a great team and be able to validate your model. You have to be a little bit older in terms of development.”
In terms of impact on Chile’s startup ecosystem, Vidal points to several positives. Companies that are part of the program have a good chance of getting a visa extension, as long as they can keep demonstrating progress. As a result, at least 15 percent of companies stay after the program.
Startup Chile doesn’t take any equity in exchange for accepting foreign startups into its program. Instead, its asks for what Vidal calls social equity. Founders sign an agreement to take part in a certain number of public events promoting and discussing startup culture. There’s a point system to ensure that they keep this promise.
“We say, ‘Keep your company to yourself; the only thing we’ll ask you is to spread the word of entrepreneurship throughout Chile,’” he says.
Entrepreneurs, so far, have been happy to oblige and participate in this way, according to Vidal. It has gone a long way in promoting the startup community.
“It has had an amazing result in terms of transforming the ecosystem,” he says.
Retrofitting work visas for startups when there is no startup visa
Susan Cohen, founder and chair of immigration practice for law firm Mintz Levin, has visited Chile and says she’s impressed by the effect the visa is having on both the country’s talent pool and the culture around startups.
In stark contrast, the United States doesn’t have anything specifically geared to startups, something she’s looking to change. There have been several attempts to pass a startup visa; the bill has stalled in Congress each time.
Without a specialized visa, many foreign entrepreneurs are applying for one of the available work visas and trying to tweak it to fit their needs. An H-1B, a temporary visa for professionals usually fulfilling a role within an established U.S. company, is the most popular choice.
The problem, though, is that this in-demand visa is subject to an annual quota, meaning they run out quickly, and there are also revenue requirements.
For a foreign entrepreneur, “the deck is stacked against you from the beginning,” Cohen says. “It takes a huge amount of work and time to navigate the system.”
The closest thing to a startup visa in the U.S. is a new program in Massachusetts that makes it easier for international entrepreneurs who have been educated at U.S. universities to get H-1B visas.
The Global Entrepreneur in Residence Program is administered by an independent state agency called the Massachusetts Tech Collaborative, which places entrepreneurs at participating universities in the state, where they work part-time and apply for visas that will be sponsored by their new employers. Institutions of higher learning are exempt from the H-1B visa cap and can apply for visas for these entrepreneurs at any point throughout the year. As a result, these foreign graduates have a much better chance of securing a visa than they would if they applied as part of the private sector.
Being a magnet for talent without trying
The issue of attracting talent is top-of-mind issue for several other Challenge Cup host cities and countries, even if they haven’t yet figured out how what to do about it.
Of the Challenge Cup host cities, Sydney’s startup ecosystem is one of the youngest. Even though it’s growing steadily, the shortage of technically skilled workers is one of the biggest obstacles. Australia has few entrepreneurial programs to begin with that would produce a high number of engineers and developers. On top of that, tech stars are often gobbled up by big-name corporations, such as Google or Facebook, or end up leaving to go to the United States.
Meanwhile, Bangalore, India’s IT nexus, is not short on engineers and developers. An emerging worry, however, is the amount of bureaucracy that startups face. To incorporate a company requires a great deal of paperwork. Same with going public and closing a business. As a result, leaders in the startup community are working with the government to change these processes in order to prevent startups from going elsewhere.
In other startup hubs, getting skilled workers is something that comes more naturally.
New York City has long been a magnet for intelligent and ambitious professionals who hustle to make it big. Within the past few years, the city has gained a more robust support network for startups, which is pushing skilled workers toward startup companies and away from established industries. The larger obstacle is convincing these professionals to leave often lucrative salaries in favor of a riskier future.
General Assembly’s New York City General Manager Anna Lindow says what’s unique and cool about New York is that it always has drawn the best and brightest in fields like fashion, finance, media and advertising. Now these minds are channeling their industry know-how into new businesses.
“Startups are generally extensions of these [fields],” she says. “You have Warby Parker in the fashion space. In media there are publisher tools like NewsCred …They’re very reflective of New York fields.”
In the MENA region, Jordan—specifically Amman—has benefitted from its Arab neighbors’ less progressive entrepreneurship climates. At Oasis500, the leading startup hub in Jordan, 20 percent of the entrepreneurs hail from outside of Jordan.
Robert Carroll, a member of Oasis 500’s investment team, says some Arab nations, such as Saudi Arabia, don’t allow companies to establish themselves there if they have accepted foreign funds. Saudi businesses must be owned, run and funded exclusively by Saudis. In Jordan, however, there are no rules based around foreign ownership, which sends entrepreneurs from restrictive countries running their way. “This is a major advantage compared to the (rest of the) region,” he says.