Canada’s Start-up Visa (SUV) program is under new leadership as the federal government reviews “ongoing challenges” with the program, BetaKit has learned.
Immigration, Refugees and Citizenship Canada (IRCC), the federal department responsible for the SUV, has taken over administration of the program from the National Angel Capital Organization (NACO) and the Canadian Venture Capital and Private Equity Association (CVCA). Both NACO and the CVCA confirmed the decision with BetaKit, noting that they stopped vetting designated organizations earlier this year.
The SUV is a Canadian immigration program aimed to accelerate the entry of foreign entrepreneurs and their companies to Canada. The CVCA and NACO were previously responsible for managing the three streams of the SUV by designating venture capital firms, angel investor groups, and incubators or accelerators across Canada to participate in the program.
Claudio Rojas, CEO of NACO, told BetaKit the CVCA and NACO both received compensation from the government for their role in the SUV during their contract periods. IRCC has since confirmed to BetaKit those contracts, beginning in 2018, totalled $1.075 million.
For an SUV application to be accepted, the applicant must obtain a letter of support from one of these designated organizations, which were previously approved by NACO or the CVCA.
Rojas noted that a moratorium on new designated organizations was put in place by IRCC on April 30, however already designated organizations have still been able to process SUV applications since that time. On July 31, IRCC did not renew its contracting relationship with both NACO and CVCA, according to Rojas.
In an emailed statement, a spokesperson for the CVCA noted that IRCC paused its contracting relationship with both the CVCA and NACO as it looks to “address ongoing challenges in the program.”
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In a statement NACO shared with BetaKit, IRCC said the “current pause” on the designation of new incubators, angel investors, and venture capital funds has “temporarily eliminated one of the key functions previously supported by industry associations.”
A spokesperson for IRCC told BetaKit the contracts with CVCA and NACO will not be renewed “for the time being.” IRCC said it has paused its contracts with the CVCA and NACO to focus on reducing the backlog of applications for the SUV. As of the end of July, the government said there were “under 17,000” applications in its processing inventory.
“The department is also conducting a review of the program, which may impact the functions required of contracted organizations going forward. Consequently, the department has decided to operate the program without industry associations while we further evaluate our contracting needs,” IRCC’s statement in NACO’s press release reads.
The spokesperson said if IRCC determines a new contract is needed, the government will post a tender on CanadaBuys.
In addition to the CVCA and NACO, a comparison between the federal government’s current list of designated organizations and an archived version of the same page from Feb. 5, 2024, revealed that at least eight other organizations are no longer listed as designated organizations for the SUV.
BetaKit has reached out to those organizations to confirm whether they are still participating in the SUV. One organization, First Fund, told BetaKit its participation in the SUV program was tied to its membership with the CVCA, adding that First Fund chose to end that membership. IRCC has also confirmed that all eight organizations are no longer participating in the program, and in all cases, the organization requested to be de-designated.
Hard cap
The pause on new designated organizations for the SUV coincided with IRCC’s implementation of a hard cap on applications for the program to 10 applications per year, for each designated organization. IRCC told BetaKit the hard cap is a key part of its attempts to reduce the existing application backlog.
The decision was a total reversal of the government’s previous increased targets on program applications. According to reporting from the Toronto Star, last year, the federal government announced plans to scale up SUV application intake from 1,000 spots in 2022 to 3,500 in 2023, 5,000 in 2024, and 6,000 by 2025.
IRCC’s spokesperson noted the hard cap does not affect the number of applicants accepted as permanent residents each year, and in 2024, it expects to admit 5,000 individuals in the federal Business Class (which includes both the Start-up Visa program and the Self-Employed program).
The federal government implemented a hard cap on applications for the SUV in April, limiting each designated organization to process 10 applications per year.
The new hard cap meant that the government would accept no more than 840 applications annually at the time, given there were 84 designated support organizations under the SUV as of April 30. IRCC’s website currently lists 80 designated support organizations.
The SUV was launched in 2014 after the federal government ended the Federal Entrepreneurship Program, which aimed to attract experienced business people to Canada.
To qualify for the SUV, an incoming entrepreneur must have the committed support of either a designated venture capital fund through an investment of $200,000, an angel investor group through an investment of $75,000, or a business incubator, via acceptance into an incubation program.
Tough shoes
The government’s hard cap in April came some months after Stein Monteiro, senior research associate for the CERC Migration Program at Toronto Metropolitan University, penned a report with PhD student Bradley Bernard in The Conversation, noting that Canada’s SUV was “struggling to fill the shoes” of the Federal Entrepreneurship Program.
The report noted the SUV was only half the size the Federal Entrepreneur Program was in 2010, and was falling short at creating jobs and at assessing the long-term viability of businesses coming in through the program.
In December 2023 episode of The BetaKit Podcast, Yuri Navarro, the former CEO of NACO who was involved in creating the SUV, explained that the program was intended to take the decision-making process away from the bureaucrats in government and towards investors and incubators who could more expertly determine the viability of an innovative business, though immigration officers would still have the final say.
“The idea was to still have bureaucrats doing their part, but as a precursor to that, having incubators, angel investors, and VCs kind of [put] the first gate in place,” Navarro added.
The complexity, Navarro said on the podcast, arose in the organizations designated to make those decisions.
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“Whereas the angel stream and the VC stream had to put money up to support the companies … the incubators didn’t have to, but also were able to charge the companies for services,” he said, adding that this structure has created opportunities for some organizations to “use the program to their advantage,” he added.
When the SUV first launched, three organizations were responsible for approving participants: NACO for angel investor groups, the CVCA for venture capital investors, and the Canadian Acceleration and Business Incubation Association (CABI) for incubators.
In 2017, CABI and NACO formed a strategic partnership that saw NACO assume CABI’s responsibilities for managing the incubator and accelerator stream of the SUV. In a September 2023 report in the Toronto Star, Sunil Sharma, who formerly led CABI, said he was concerned that the SUV was being used as a “backdoor way” into Canada.
Multiple sources BetaKit spoke to, who were historically involved in the program, have noted concerns that some incubators classified as designated organizations charged high fees in return for letters of support for the SUV.
In its statement, NACO said it remains committed to supporting the SUV’s objectives and will continue to support member organizations who meet designation criteria.
NACO said this support includes “updating IRCC on the status of their membership with NACO, providing letters of support where appropriate, and reporting on key performance data relative to their participation in the program.”
“The Start-up Visa Program has been instrumental in positioning Canada as a global leader in entrepreneurship and innovation,” Rojas said in the statement. “We believe in the tremendous potential of this program to attract the best and brightest from across the world. NACO remains committed to ensuring the Start-up Visa program’s continued success.”
UPDATE (14/08/2024): This story was updated with additional information and commentary from IRCC.
With files from Alex Riehl.
Feature image courtesy of Pixabay.
