The funding challenges in Canadian tech
On Sept. 29, tech reporters Sean silcoff and Joe Castaldo answered reader questions about their feature on the brain-drain problem in Canada’s tech industry and what the contry can do to keep its talent.
Brain drain has been a perennial problem in the country’s tech sector and a recent report found that tech leaders are leaving Canada at an accelerating rate.
Readers asked how Canadian tech talent can be enticed to stay, what policies are being created to keep founders and much more. Here are some highlights from the Q&A.
Risk aversion and lack of early-stage support is the biggest issue. Canadian institutions aren’t willing to invest untill a business is already obviously prosperous, which drives founders away to a more risk-friendly U.S.
Castaldo: I’ve heard this from Canadian startup founders, particularly when comparing the venture capital scene here to the United States. American VCs have more money to spend,of course,but the attitude is different. Some startup founders say Canadian VCs are much more cautious, drag out the process and emphasize the ways in which a company will fail. American VCs act fast,invest big and are more willing to take a flier. There’s a flip side,though. One founder told me that if a Canadian VC invests in your company, that means your idea is validated, as these VCs have really done their homework if they’re putting up money.
Silcoff: To add to Joe’s point,there are Canadian VCs that have made early bets on some of the biggest winners in the ecosystem when they looked like outliers. A couple that come to mind include Brightspark, an early backer of Hopper, Radical, Cohere and Waabi. And canadian investors have actually been well-represented backing some of the quantum computer developers that are now among the most promising companies in the emerging space globally. In fact, no less than three Maple 8 pension funds (OMERS, PSP and BCIM) have made direct investments into quantum computer companies.
Vancouver has a booming biotech scene, says technology reporter Sean Silcoff.
Whether in tech (Silicon Valley) or life sciences (Boston), the concentration of skilled and experienced
Silcoff: I haven’t seen good apples-to-apples numbers on this, but anecdotally I think the story hasn’t changed. There are just great opportunities south of the border for the best and brightest Canadian engineering grads.Fortunately,there are probably more opportunities in Canada than there were in the past,particularly among high-growth,high-potential startups and scaleups. I was speaking recently to an engineering student about job opportunities in Canada and had little trouble rhyming off the names of five top-drawer domestic companies that would be ideal places for him to work.
Retaining tech talent and the pull of the U.S.
AI was practically invented in Canada. we were a leader in this new area of science, yet many of the leading AI companies are in the U.S. Has that had any influence on tech founders leaving Canada?
Castaldo: Yes, Canada has played a huge role in the advancement of AI. The thing is, big U.S. tech companies were among the first to realize the potential of the technology and set about hiring Canadian experts: Google hired Geoffrey Hinton, Nvidia hired Sanja Fidler, etc. And it still happens.Elon Musks’s xAI recruited University of Toronto prof Jimmy Ba as one of its first hires. When a lot of the AI development today (and the big money) is in the U.S., its hard for Canadians to resist that pull. But there is work being done to reverse the trend.
stopping the brain drain: U of T professor aims to launch 50 AI companies with new venture studio Axl
To remain competitive and attract talent, countries are creating national entrepreneurship strategies that address issues such as tax policies and create sovereign wealth funds and economic zones. The government has a new AI task force – should there be an entrepreneurship and talent task force?
Castaldo: I’m of two minds when it comes to task forces.This country loves a task force. It’s important for government to listen to industry players, and they do a lot of that already.Companies and their lobbyists are also talking to government all the time. So I feel like there’s no shortage of ideas out there, and the cynical part of me wonders how much task forces are just for show. The challenge is to identify good policies and actually carry them out.
Silcoff: Further to Joe’s point: We tend to do a lot of task forces, round tables, advisory panels, royal commissions and so on and on and on in this country. We’re lucky if we get a few decent programs that result from them,luckier still if they work. More action, less talk, and more focus on outputs that actually move the needle than extraordinary-looking ribbon cuttings and press conferences would be a refreshing change.
That said, there seems to be a real push for this AI task force to hit the ground running and come back with some recommendations that can be quickly turned into action. We’ll be watching this file closely to see if that actually happens.
how much of this is attributable to/addressable with federal government policy versus just be
canada’s strategy to Attract Tech Talent and Boost Domestic Innovation
The Canadian government is increasingly focused on bolstering domestic industries, particularly in Artificial Intelligence (AI) and defence, through strategic procurement policies. together, it’s navigating opportunities presented by shifts in U.S. immigration policies to attract skilled tech workers and entrepreneurs. However, existing challenges with Canadian immigration programs need addressing to fully capitalize on these opportunities.
Government Procurement as Economic Driver
The federal government recognizes the potential of leveraging its purchasing power to support Canadian companies. The intention is to prioritize Canadian businesses, especially in high-growth sectors like AI and defence. this approach aims to not only foster domestic innovation but also to signal to international partners that Canada is a reliable and valuable collaborator. Entrepreneurs are optimistic about accessing government contracts, viewing them as a significant source of funding and validation.
Impact of U.S. H-1B Visa Changes
Recent changes to the U.S.’s H-1B visa program, including a new $100,000 fee for certain applications, could potentially benefit Canada. However, the impact is nuanced. Experts suggest that large U.S. tech companies are likely to absorb the increased cost and continue to attract top talent.
Canada launched its own H-1B equivalency program in 2023, aiming to attract skilled workers. While the program received 10,000 applications, only 1,200 individuals successfully immigrated to Canada in its first year. This suggests that Canada is often viewed as a secondary option for many tech workers. Immigration, Refugees and Citizenship Canada (IRCC) details the requirements for this program https://www.canada.ca/en/immigration-refugees-citizenship/services/immigrate-canada/work/temporary/skilled-workers/h1b-equivalency.html.
Experts recommend focusing on optimizing existing Canadian immigration pathways for tech workers and entrepreneurs before introducing new programs.Canada already has several programs designed to attract skilled immigrants, including those focused on tech occupations.
Revitalizing the Start-Up Visa Program
The Canadian Start-Up Visa program aims to attract immigrant entrepreneurs with innovative business ideas. However, the program is currently hampered by significant processing delays.Reports indicate wait times of up to three years for visa approval, causing potential entrepreneurs to choose other countries with faster processing times. Such as, one founder reportedly received a U.S. visa in 13 days while waiting three years for Canadian approval.
The Start-up Visa Program details are available on the Government of Canada website https://www.canada.ca/en/immigration-refugees-citizenship/services/immigrate-canada/start-visa.html.
Addressing these processing bottlenecks is crucial to ensure Canada remains competitive in attracting global entrepreneurial talent.Prioritizing efficiency and reducing wait times within existing programs is seen as a more effective strategy than launching new initiatives.