6 reasons to open an IT startup in Canada
If you travel a lot and are a developer of sites, games, video effects or something like that, then you probably know that in many countries startups from this area are welcoming. There are even specially accepted venture programs in India, Malaysia, Singapore, Hong Kong, China and other countries.
But, it’s one thing to announce the program, and another thing to analyze what was done wrong at the very beginning and, then, to constantly improve the results. One of the countries that is constantly improving in the field of attracting startups is Canada.
Over the past 10 years, something has been constantly changing for the better.
Let's look at the 6 reasons that distinguish Canada from the background of other countries, from the point of view of the beginning of activity, obtaining financing and further development of almost any IT startup.
A large amount of start-up capital today, compared with 10 years earlier. In this regard, Toronto today seems no worse than San Francisco. The appearance of the Canadian venture capital fund OMERS Ventures in 2011 changed the rules of the game in the entire venture industry in this northern country. Its emergence stimulated the creation of new funds and the arrival of many investors from the United States with large assets for investment in Canadian startups.
The low value of the Canadian dollar has attracted many venture capitalists from the United States. For them, it turns out that you return your investment, plus an additional 40% as a bonus on the exchange rate (that is, you either immediately take them into account when investing, or then after exiting the project).
Companies selling their products and services to customers in the United States receive similar financial support. This is very beneficial, especially taking into account the fact that the low exchange rate of the Canadian dollar against the US dollar is the most stable in this currency pair. Fluctuations in the course over a long period of time are minimal.
Today there are several dozen foundations, business incubators and individual business angels. Many of them are authorized bodies of the Government of Canada, specially involved in the selection and further work with startups as part of a special immigration program called Startup Visa.
It was created specifically to attract foreign IT entrepreneurs to Canada.
The procedure for obtaining the status of permanent resident of Canada on a Startup visa consists, in fact, of 4 stages:
After that, you can safely study in the accelerator and / or develop your project with funds received at the stage of attracting seed investments. There are all the possibilities in Canada.
Government grants such as FedDev Ontario and the Industrial Research Assistance Program (IRAP) provide mentoring, enterprise support and funding to help new businesses succeed.
Moreover, there are many government orders that startups can receive. For example, for web development, various types of social research, and even simple development of a mobile application for the needs of housing and communal services or administration. There are grants and orders for environmental research in the field of environmental protection and purification.
In general, this is a whole market, which is often used by Canadian startups.
Companies registered in Canada receive significant tax benefits.
For example, if you carry out any research and development, then the state support that you receive from the SR & ED tax credit (research and experimental development) is much more than anywhere else in the world. For example, in the same California silicone valley there is nothing similar. Accordingly, all start-ups registered in Canada receive at the start a competitive advantage in the field of scientific research and experimental development. As a result, Canadian companies can receive more than 50% of the profit from investments in R&D.
In addition, social expenses for your adaptation and living in Canada can be deducted from corporate income tax. This means that you, as the founder of the company, can deduct the following costs from corporate profits:
Universities in Toronto and Waterloo are centers of top engineering schools in North America. Leading US technology companies, such as Google and Facebook, regularly hire graduates and employees from there.
Moreover, between these cities a huge infrastructure for the development of startups was built, similar to the silicon valley in California.
Technology centers for the development of many large companies in Canada and the USA have been created here. Here you can find both expertise and partners for your current or future projects. This is a very favorable environment for building a large IT-business. The Shopify unicorn company confirms this.
Yes, for Canadians there is always the opportunity to leave for the United States, because for this you will not need to receive any special permits or visas. But, many of the most talented Canadian experts do not want to do this and there are plenty of reasons for this.
For example, you can quickly and relatively cheaply fly from Toronto, Quebec or Vancouver to all the major cities of the USA, Europe, Asia, to conduct consultations, presentations, attract specialists or raise the next rounds of financing, as well as attend numerous conferences, forums and exhibitions that are relevant to you. After all, one of the main driving forces of any business project is the relationship that its founders and top managers can build.
Canada is a great place to found the corporate center of your future unicorn.
One of the main reasons mentors and talents do not move to California is the high cost of living. In Canada, this is much easier. In addition, there are tax benefits on accommodation, which should not be forgotten. In any case, living and building a new business in Canada is much easier and cheaper than in San Francisco.
And given the fact that Canada has huge ports on two oceans, the advantages associated with international trade, low cost of living and the southern neighbor with the most solvent and large population of the world are simply turning into a paradise for startups. In fact, this means only one thing - if you can’t develop your project here, then you do not have an entrepreneurial spirit, from the word - at all.
Canada is a country with a very high level of political and economic stability.
It has one of the highest levels of protection of property rights.
You can not be afraid that your company will experience raider seizure or unreasonable court decisions by law enforcement agencies.
You will not be imprisoned here for pseudo-entrepreneurial activity, an incorrect assessment when you exit the project or the sale of shares in a foreign company, as is the case in Russia.
There is no corruption at least at the level of an ordinary policeman, at least at the level of the prime minister. This does not happen in Canada. If you are used to breaking laws, rules and are used to “negotiating” with the authorities in fact, then you will be a little bored here, because this does not happen here. It will not be possible to “agree.” You will receive exactly what is required by law. This makes a lot of sense and there is no need to resist it if you want to live here and work on your own project. By law, living is much simpler and faster. In addition, you quickly get used to it, as to all good things.
Another feature of Canada is that there are practically no economic crises. All this happens in other countries. This is the special charm of this country. In Canada, it’s always good and calm.
Most of the population leads a healthy lifestyle and is engaged in all kinds of affordable sports. There is something to do here. From sea fishing for tuna to freeriding on glaciers. A lot of tourist opportunities for hunters and fishermen. It is no accident that tourism is one of the most developed areas of activity in Canada and annually attracts millions of visitors from all over the world.
Canada is a wonderful country to create and grow a business, children and a decent life in advanced years.
But, it’s one thing to announce the program, and another thing to analyze what was done wrong at the very beginning and, then, to constantly improve the results. One of the countries that is constantly improving in the field of attracting startups is Canada.
Over the past 10 years, something has been constantly changing for the better.
Let's look at the 6 reasons that distinguish Canada from the background of other countries, from the point of view of the beginning of activity, obtaining financing and further development of almost any IT startup.
1. An abundance of seed capital
A large amount of start-up capital today, compared with 10 years earlier. In this regard, Toronto today seems no worse than San Francisco. The appearance of the Canadian venture capital fund OMERS Ventures in 2011 changed the rules of the game in the entire venture industry in this northern country. Its emergence stimulated the creation of new funds and the arrival of many investors from the United States with large assets for investment in Canadian startups.
The low value of the Canadian dollar has attracted many venture capitalists from the United States. For them, it turns out that you return your investment, plus an additional 40% as a bonus on the exchange rate (that is, you either immediately take them into account when investing, or then after exiting the project).
Companies selling their products and services to customers in the United States receive similar financial support. This is very beneficial, especially taking into account the fact that the low exchange rate of the Canadian dollar against the US dollar is the most stable in this currency pair. Fluctuations in the course over a long period of time are minimal.
Today there are several dozen foundations, business incubators and individual business angels. Many of them are authorized bodies of the Government of Canada, specially involved in the selection and further work with startups as part of a special immigration program called Startup Visa.
It was created specifically to attract foreign IT entrepreneurs to Canada.
The procedure for obtaining the status of permanent resident of Canada on a Startup visa consists, in fact, of 4 stages:
- passing the English language according to IELTS tests with reaching a level above the average (more than 6 points out of 9),
- receiving a letter of support from one of the authorized funds, accelerators or business angels (which happens much less often),
- registration of a company in Canada for you and your partners (it is desirable that one of the partners has Canadian citizenship or permanent residence, but this is not necessary),
- filing and obtaining Startup visas for all foreign founders of the company with a share of more than 10%. In addition, under this program, all close family members can get visas (meaning: children, spouses or parents).
After that, you can safely study in the accelerator and / or develop your project with funds received at the stage of attracting seed investments. There are all the possibilities in Canada.
2. Access to government grants and tax credits
Government grants such as FedDev Ontario and the Industrial Research Assistance Program (IRAP) provide mentoring, enterprise support and funding to help new businesses succeed.
Moreover, there are many government orders that startups can receive. For example, for web development, various types of social research, and even simple development of a mobile application for the needs of housing and communal services or administration. There are grants and orders for environmental research in the field of environmental protection and purification.
In general, this is a whole market, which is often used by Canadian startups.
3. Tax incentives
Companies registered in Canada receive significant tax benefits.
For example, if you carry out any research and development, then the state support that you receive from the SR & ED tax credit (research and experimental development) is much more than anywhere else in the world. For example, in the same California silicone valley there is nothing similar. Accordingly, all start-ups registered in Canada receive at the start a competitive advantage in the field of scientific research and experimental development. As a result, Canadian companies can receive more than 50% of the profit from investments in R&D.
In addition, social expenses for your adaptation and living in Canada can be deducted from corporate income tax. This means that you, as the founder of the company, can deduct the following costs from corporate profits:
- your stay in Canada, as well as all non-working members of your family, as well as those who will work in your company (for example, your spouse). Accommodation includes the cost of food and housing (meaning either rent or mortgage payments, but not a net purchase of housing),
- on your education, as well as your non-working or minor children,
- for certain types of medical expenses. We are talking about medicines and services of private medicine. For example, spending on the services of dentists or plastic surgeons.
- The total amount of such expenses may not exceed 60 thousand CAD per person per year, which is approximately 2.7 million rubles or 225 thousand rubles per month. Not a bad social assistance for startups. I doubt that somewhere else there are the same corporate tax preferences for newly organized companies.
4. Access to a large expert base of specialists and technical talents
Universities in Toronto and Waterloo are centers of top engineering schools in North America. Leading US technology companies, such as Google and Facebook, regularly hire graduates and employees from there.
Moreover, between these cities a huge infrastructure for the development of startups was built, similar to the silicon valley in California.
Technology centers for the development of many large companies in Canada and the USA have been created here. Here you can find both expertise and partners for your current or future projects. This is a very favorable environment for building a large IT-business. The Shopify unicorn company confirms this.
Yes, for Canadians there is always the opportunity to leave for the United States, because for this you will not need to receive any special permits or visas. But, many of the most talented Canadian experts do not want to do this and there are plenty of reasons for this.
For example, you can quickly and relatively cheaply fly from Toronto, Quebec or Vancouver to all the major cities of the USA, Europe, Asia, to conduct consultations, presentations, attract specialists or raise the next rounds of financing, as well as attend numerous conferences, forums and exhibitions that are relevant to you. After all, one of the main driving forces of any business project is the relationship that its founders and top managers can build.
Canada is a great place to found the corporate center of your future unicorn.
5. Low cost of living
One of the main reasons mentors and talents do not move to California is the high cost of living. In Canada, this is much easier. In addition, there are tax benefits on accommodation, which should not be forgotten. In any case, living and building a new business in Canada is much easier and cheaper than in San Francisco.
And given the fact that Canada has huge ports on two oceans, the advantages associated with international trade, low cost of living and the southern neighbor with the most solvent and large population of the world are simply turning into a paradise for startups. In fact, this means only one thing - if you can’t develop your project here, then you do not have an entrepreneurial spirit, from the word - at all.
6. Stability, healthy lifestyle and entrepreneurial spirit
Canada is a country with a very high level of political and economic stability.
It has one of the highest levels of protection of property rights.
You can not be afraid that your company will experience raider seizure or unreasonable court decisions by law enforcement agencies.
You will not be imprisoned here for pseudo-entrepreneurial activity, an incorrect assessment when you exit the project or the sale of shares in a foreign company, as is the case in Russia.
There is no corruption at least at the level of an ordinary policeman, at least at the level of the prime minister. This does not happen in Canada. If you are used to breaking laws, rules and are used to “negotiating” with the authorities in fact, then you will be a little bored here, because this does not happen here. It will not be possible to “agree.” You will receive exactly what is required by law. This makes a lot of sense and there is no need to resist it if you want to live here and work on your own project. By law, living is much simpler and faster. In addition, you quickly get used to it, as to all good things.
Another feature of Canada is that there are practically no economic crises. All this happens in other countries. This is the special charm of this country. In Canada, it’s always good and calm.
Most of the population leads a healthy lifestyle and is engaged in all kinds of affordable sports. There is something to do here. From sea fishing for tuna to freeriding on glaciers. A lot of tourist opportunities for hunters and fishermen. It is no accident that tourism is one of the most developed areas of activity in Canada and annually attracts millions of visitors from all over the world.
- Everything is permeated with respect for entrepreneurs, taxpayers and citizens. You will never encounter a manifestation of nationalism or xenophobia here. And despite the fact that Canada almost all consists of immigrants.
- There is a very high degree of tolerance.
- You can be here, practically, by anyone, if you do not break the law and do not interfere with other citizens' lives.
Canada is a wonderful country to create and grow a business, children and a decent life in advanced years.
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