Good morning. Promising Canadian entrepreneurs and startups are leaving the country in droves, and a recent study suggests the brain drain has accelerated. We take a close look into where they are going, and why. Plus news on ostriches and Blue Jays. But first:
Today’s headlines
- Canada’s population saw near-zero growth between April 1 and July 1
- An OB/GYN shortage in B.C. threatens collapse in maternity care as local hospitals send patients far away to give birth
- Ukrainian President Volodymyr Zelensky urges world leaders to help stop Russia, after Donald Trump’s about-face on the conflict
Gideon Hayden is a co-founder and managing partner of Leaders Fund, which recently conducted a study on the brain drain affecting Canadian startups.EDUARDO LIMA/The Globe and Mail
Labour
Finding the founders
Gideon Hayden and the rest of the team at Toronto’s Leaders Fund started to notice they were investing in far fewer Canadian startups and a lot more from the United States and Israel. That shift prompted the firm to do a study on whether that indicated a wider trend.
What they found was that just 32.4 per cent of high-potential startups launched last year that were led by Canadian teams were actually based in Canada; that was down from more than 67 per cent in the late 2010s. (“High-potential” is defined here as those that raised more than US$1-million in venture capital.) Much of the decline has occurred since the COVID-19 pandemic began, and most of that movement has been to the U.S.
That means Canada is producing – and keeping – relatively fewer of the world’s most promising startups. Joe Castaldo and I dug into this, interviewing many tech-sector leaders in Canada.
The relative decline may not be obvious as several Canadian venture-capital firms say deal flows have picked up and their pipelines look robust. Several tech hubs seem to be thriving. Many are adamant about staying here. And yet the data show promising Canadian entrepreneurs are leaving in droves.
“I’m dealing with a lot of young founders that are just picking up and moving because it makes more sense for them,” Chad Bayne, co-chair of law firm Osler, Hoskin & Harcourt LLP’s technology practice, told us. “If too many of our best and brightest move to the U.S. early on, it will be harder to bring them back, and you’ll have a lost generation.”
That’s the kind of thing that gross domestic product, which tracks economic output, cannot measure. Nor does it account for the lost potential of companies that moved or were never started here. “This should be a priority of the government,” Bayne said. “I don’t think we’re in a crisis yet. But if we leave it too long, it will become one.”
Last week, the Trump administration said that it is imposing a US$100,000 fee on companies, typically tech giants, for each new worker they bring in from abroad on H-1B visas. This could represent an opportunity for Ottawa, Joe writes alongside economics reporter Nojoud Al Mallees.
Canada has in the past tried to go after talented workers destined for the U.S., and this might be a good chance to try again. But others are more cautious, and see a risk in the visa changes.
Canadian Senator Colin Deacon said he’s concerned that American businesses may now choose to hire even more of Canada’s top talent, given that Canadian workers are eligible for a work permit under the United States-Mexico-Canada Agreement.
Donald Trump's administration said last week it is imposing a US$100,000 fee on companies for each new worker they bring in from abroad on H-1B visas.Andrew Harnik/Getty Images
It’s worth remembering that Canada’s tech ecosystem still has many strengths. There are 70-plus private tech companies here generating US$100-million or more in revenue.
Plus, efforts are under way to re-energize Canadian tech hubs. One such initiative is Simple Ventures, launched by Rachel Zimmer and Wealthsimple founder Michael Katchen, which has raised $15-million from several founders as well as Toronto-Dominion Bank, Sun Life and Sobeys to create and fund 10 companies. “We co-founded Simple because we’re deeply worried about the future of our country,” Zimmer said.
Shopify, meanwhile, hosts weekly “Builder Sunday” events at its Montreal and Toronto offices that draw hundreds of entrepreneurs. “All of them are planning to build their companies in Canada,” said Shopify president Harley Finkelstein.
But there is more work ahead, and the timing is more important than ever.
Lucy Hargreaves, CEO of Build Canada, says the country needs to improve its competitiveness, as with the other red tape that Ottawa is focused on.
“We should be treating startups the way we treat our natural resources. They are a strategic asset that underpins our future economy.”
The Shot
‘The virus here is not airborne.’
Karen Espersen, co-owner of Universal Ostrich Farms in Edgewood, B.C., celebrates with her family after learning that an interim stay order was granted by the Supreme Court of Canada.AARON HEMENS/The Canadian Press
The Supreme Court of Canada has temporarily stopped a plan to cull 400 ostriches once infected with bird flu. Justice Michelle O’Bonsawin ordered the Canadian Food Inspection Agency to maintain custody of the ostriches on a B.C. farm while the high court decides on whether to hear an appeal to save the fowl.
The Wrap
What else we’re following
At home: Ontario colleges are grappling with the financial fallout from the foreign-student cap, according to reports prepared for the provincial government.
In court: Nova Scotia is set to expand rules for bar bouncers, nearly three years after the death of a patron whose parents pleaded for the introduction of new laws.
Abroad: Spain and Italy are sending warships to protect an international flotilla seeking to deliver aid to Gaza after it was attacked by drones off Greece.
Storm: Super Typhoon Ragasa moves across southern China toward Vietnam after leaving a trail of destruction in the Philippines, Taiwan and Hong Kong.
Sting: A former RBC employee is facing criminal charges after allegedly accessing Prime Minister Mark Carney’s banking profile and committing fraud.
Score: Looking for Blue Jays playoff tickets? Here’s what you need to know as they go on sale this morning.