A sudden change to United States (US) immigration policy by the Trump administration has the Canadian technology sector eager to lure more skilled foreign workers north of the border. But a renewed talent pipeline won’t solve slowing tech salary growth, declining entrepreneurship, and fleeing tech founders.
“I’m very concerned. We’re losing a lot of ambitious founders to the US.”
The US H-1B visa allows American tech companies to temporarily hire and retain highly skilled foreign workers for difficult-to-fill jobs. Late last week, US President Donald Trump signed a proclamation imposing a one-time, $100,000 USD fee on H-1B visa applications.
The surprise announcement created confusion and chaos for US tech firms as H-1B visa holders scrambled to return to the US amid uncertainty about whether the fee would apply to existing employees and effectively block them at the border. The White House tried to tamp down the panic over the weekend by clarifying that these fees were one-time and would only apply to new applicants.
Critics of the H-1B program have long argued that it undercuts US workers by bringing in employees from abroad at lower wages. Supporters believe it attracts sought-after global talent and have questioned the policy on social media.
As US closes doors, Canada’s “doors are open”
Y Combinator president and CEO Garry Tan, who is also Canadian, asserted on LinkedIn that the US decision would “kneecap startups” incapable of managing the new fee at early stages. That sentiment was echoed by Mantle co-founder and CEO Amar Varma, who has also worked in the US through an H-1B visa. Varma told BetaKit that smaller companies will feel the pain more acutely, but that the new cost is little more than “a rounding error” for deep-pocketed US tech firms.
Tan argued that the policy shift is a “massive gift to every overseas tech hub,” identifying Vancouver and Toronto as two cities that could thrive as a result. Several Canadian tech leaders whom BetaKit has spoken with agree, and see the moment as a chance to advertise that Canada is open for business.
“Our doors are open,” Simple Ventures co-founder and CEO Rachel Zimmer told BetaKit. “We want to build with you. With this door closing, I think it’s important to amplify that.”
Martin Basiri, co-founder of international student and immigrant-focused tech startups ApplyBoard and Passage, argued in a LinkedIn post that this is “a once-in-a-lifetime opportunity” for Canada. He penned a Build Canada memo arguing Canada should respond with a work permit to allow current and prospective US H-1B visa holders to live in Canada while working for US employers. He suggested creating a global Top 100 university express track that makes it easier for graduates of the world’s leading schools to come study and work in Canada.
Council of Canadian Innovators president Ben Bergen called for a similar approach, pointing to the 2023 targeted immigration stream as an example. However, he argued that Canada needs to use the moment to “reinforce a talent strategy that supports Canadian companies first” so it can avoid becoming more of a branch plant economy.
“If implemented, [this fee] could trigger a wave of highly skilled professionals looking for alternatives,” Bergen said in a statement. “Many will look north. But without a clear plan, the majority will end up working at the Canadian offices of foreign firms.”
Daniel Wigdor has previously worked for US tech giants like Meta (which acquired his company, Chatham Labs) and Microsoft. He is now working to launch new Canadian artificial intelligence (AI) startups with venture studio Axl. He sees an opportunity for Canada to attract more AI researchers and founders by positioning itself as a more stable destination than the US.
But Wigdor argued that there needs to be an emphasis on creating long-term commercialization pathways, not just short-term gains. The country otherwise risks serving as a “holding pen for talent rather than a launchpad for globally competitive companies,” he said.
“We have largely climbed our way out of this, but it’s often American firms opening bigger offices here, even if they are offering longer-term jobs for Canadians,” Wigdor told BetaKit. “The right way to really capitalize on the present opportunity is to take advantage of our lead in applied computing to found new companies, and staff them with everyone we can get our hands on—Canadian or H-1B-equivalent.”
Canadian entrepreneurship in decline
Meanwhile, Canada faces its own tech talent issues. While a recent CBRE report found the country outpaced the US in terms of tech talent growth last year, salary growth has hit a three-year low. Canadian tech workers already tend to earn much less than their American counterparts: research from Toronto Metropolitan University think tank Dais has found that US tech workers are paid 46 percent more on average.
Worse still, new data shows that Canadian tech entrepreneurs are fleeing the country at an alarming rate. Toronto VC firm Leaders Fund determined that Canada’s startup pipeline has been shrinking, and that the country is falling behind its peers.
Leaders Fund’s survey of nearly 3,000 Canadian-founded, venture-backed startups over the past decade found that only 32.4 percent of Canadian-led “high-potential” startups (companies that had raised more than $1 million USD) were headquartered in Canada, while almost half were located in the US. This is a sharp decline compared to the 67 percent or more of the startups in this group that were based in Canada between 2015 and 2019.
Most of the decline has been happening since the COVID-19 pandemic, and most of the movement has been to the US, where entrepreneurs have been able to raise more capital faster.
“Many will look north. But without a clear plan, the majority will end up working at the Canadian offices of foreign firms.”
Ben Bergen, Council of Canadian Innovators
This data reflects a broader, continued decline in Canadian entrepreneurship, as illustrated by a BDC report that found Canada had 100,000 fewer entrepreneurs than in 2000, despite the country’s population growing by more than 10 million in that time.
“I’m very concerned,” Leaders Fund co-founder and managing partner Gideon Hayden told BetaKit. “We’re losing a lot of ambitious founders to the US.”
Roadmunk co-founder and former CEO Latif Nanji is one of the Canadian tech entrepreneurs who left the country during the pandemic. In an interview with BetaKit earlier this year, Nanji cited the country’s strict COVID-19 restrictions, high cost of living, weather, and proposed but since scrapped capital gains tax inclusion rate hike as a few of the factors that led him to move elsewhere.
“You’ve made an established position which says, we don’t want innovators, and so to rebuild that trust is not going to be a 12-month process … The bridge is broken,” Nanji said. “And the problem is that most of the people that already left, they’re not going to come back.”
Hayden likened the message the US is sending with its H-1B visa fee to what Canada communicated to entrepreneurs with capital gains, but also expressed some skepticism that this will be a net positive for Canada.
This US H-1B visa snafu is an opportunity for Canada to attract more foreign tech talent, Hayden said. Even so, he noted that it also creates the risk that Canada will lose more entrepreneurs and workers to the US as more tech companies south of the border explore pathways to dodge the fee, like TN visas obtained through the Canada-US-Mexico Agreement.
“A situation I wouldn’t want is that we’re able to recruit incredible people from abroad, but at the same time, we’re losing really talented people who are already here,” Hayden said. “We have to take the right action on both fronts.”
With files from Douglas Soltys.
Feature image courtesy Pexels. Photo by Brian Forsyth.