Start-up Visas: The Difference Between Applying Through an Incubator, Angel Investor, or Venture Capital Firm
While most of Canada’s business immigration is offered through province-specific programs, the start-up visa is one of the few options available at the federal level. It is intended to entice skilled entrepreneurs who are pursuing innovative business ideas that will be able to compete on a global scale and create jobs for Canadians.
In addition to meeting certain financial and language requirements, the most difficult hurdle to gaining eligibility is obtaining a letter of support from a designated organization. Designated organizations are those approved by the government to invest in or support your start-up. They come in three forms: venture capital funds, angel investor groups, or business incubator programs.
If you plan to pursue the start-up visa, one of the first things you need to understand is how these designated organization types differ.
Minimum Investment – One key distinction between these types of organizations is the minimum investment requirements set by the government. Venture capitalists must invest a minimum of $200,000. Angel investors must invest a minimum of $75,000. In contrast, business incubators have no minimum investment requirement at all given the nature of their support to the business as discussed in more detail below.
Number of Designated Organizations – In theory, the more designated organizations in a group, the more likely your chances of success. Although the government does periodically add and drop organizations, at the time of this writing there were thirty-three designated business incubators, twenty-one designated venture capital funds, and just nine angel investment groups. This means you have many more options for business incubator programs or venture capital funds than angel investors. However, regardless which type(s) you choose to approach, you will need to do your research as individual organizations only support certain industries and have their own requirements.
Investment Stage – Another factor to consider when choosing what type(s) or organization(s) to pursue is the stage of your business. Venture capitalists, especially given their larger investment, tend to be more risk-averse than other types and therefore mostly work with later-stage businesses. Business incubators fall on the opposite end of the spectrum and work with businesses as early as the idea stage. Angel investors fall somewhere in the middle tending to focus on companies that at least have a minimum viable product (MVP) but may not yet be fully launched.
Operational Support – One other major distinction is the level of support that is provided. Venture capital groups tend to provide funds and nothing else. Angel investors may follow suit, while some have a slightly more hands-on approach or will want to be kept more apprised of developments and strategic plans. Incubators, however, offer a full range of support that may include training, mentorship, office space, or ongoing accounting and administrative services. This support is not standardized and what each incubator offers is unique.
Return on Investment & Additional Fees – Venture capital and angel investors typically invest in your business in exchange for an agreed upon share of preferred equity. However, incubators operate a bit differently. While some provide assistance in exchange for a stake in the business, others will require you to enter an incubator program for a fee, and others will require both. You should fully understand the terms of any investment but, as it appears incubators’ approach can vary the most, pay particular attention to what they expect in exchange for their support. All organizations are designated by the government but if you have any concerns, consult an immigration consultant or lawyer.
Venture Capital Firms
- Invest a minimum of $200,000
- 21 designated organizations
- Typically only applies to established, later-stage businesses
- No guaranteed operational support
- Most commonly invest in exchange for preferred equity
Angel Investor Groups
- Invest a minimum of $75,000
- 9 designated organizations (fewer options = fewer chances for support)
- No guaranteed operational support
- Typically applies to businesses with a minimum viable product
- Most commonly invest in exchange for equity
- No minimum investment/support amount
- 33 designated organizations (many options = more chances for support)
- Guaranteed operational support which may include office space, mentorship, and training
- May support businesses as early as idea stage
- Commonly invest in exchange for preferred equity and/or an incubator program fee
Regardless of the stage of your business or the type of support you are going to seek, you will need a Start-up Visa business plan. At Joorney we combine the experience of our advisory/start-up experts – many of whom have worked with these institutions – and that of our business plan writers. Collectively, we produce winning business plans or pitch decks that can help get a foot in the door with any venture capital firm, angel investor group, or business incubator program. We also provide startup advisory services to prepare financial modeling that can support the scenarios you will be presenting to potential investors.
We also have a truly collaborative approach to business immigration and value and respect the input of other immigration professionals. We can work with your immigration consultant or lawyer – or we can refer you to one within our network.