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In the globalised world, entrepreneurs are becoming highly sought-after assets by governments, which means that the race to secure the most exciting talent and attract the most promising start-ups is well and truly on.
Some studies have suggested that immigrants founded more than 40% of Fortune 500 companies, which just goes to illustrate their importance in growing an economy. Google co-founder Sergey Brin, a Russian emigrant, is one example. Steve Chen at YouTube and Jerry Yang at Yahoo, and Mike Krieger at Instagram are others; the first two coming from Taiwan and Krieger from Brazil.
In the past three years, France, Denmark, New Zealand, Italy, the Netherlands and the US have all launched new visas and put in place policies to make it easier for start-ups and entrepreneurs to start businesses within their national borders. They follow countries like Chile, the UK, Australia and Canada, who were among the earliest to introduce entrepreneur or start-up visas. Most of these visas were launched in the past seven years and offer varying benefits.
All of these need to be weighed up carefully. For example, an entrepreneur looking to gain citizenship regardless of whether their business succeeds or not should look to Canada, while entrepreneurs who don’t have money to invest should consider heading to Chile, France, Spain or the Netherlands.
Governments are still learning
Many of these programmes are being run by governments on a trial basis and the outcomes are being assessed to ensure that they are having the desired effect on the countries’ respective economies.
Lyal White, director: Centre of Dynamic Markets at the University of Pretoria’s Gordon Institute of Business Science (Gibs), says most governments don’t know how to run a business and have a very “shallow understanding” of what entrepreneurs are. And some factors that are very important to entrepreneurs are not important to governments.
“Entrepreneurs will go where it is cheap and easy to do business,” he states. Issues like transportation, energy, connectivity, office space and a skilled workforce can often play as much of a role in a decision as decreased red tape and tax cuts, White explains.
Despite these weaknesses, he says governments can’t afford to ignore entrepreneurs and start-ups as they play major roles in job creation. “The contribution of start-ups and entrepreneurs to the development of countries is going to be paramount. You have to break the rules as a policymaker. Open up the space for disruption.”
Start-Up Chile
Much of the research seems to suggest that visa schemes can support and boost a local start-up scene.
Start-Up Chile, an entrepreneur and start-up initiative launched in 2010, is a perfect example of what can be achieved through innovative policies. The programme picks promising young businesses and gives the founders equity-free grants and a year-long visa to work on their ideas in the country.
Chile is a fairly cheap place to live and work, and the selected businesses receive mentoring, training via workshops, office space and access to investors. The programme has assisted 1 300 small businesses in the last seven years, working with entrepreneurs from 79 countries. It was recently reported that the combined value of the businesses assisted by the programme is over $1.35bn.
In 2017, more than half of the applicants who were selected for the programme were Chilean and Latin American entrepreneurs – a major increase compared to when the programme launched seven years ago. This illustrates how an entrepreneurial spirit is being fostered in the country and the region through the programme.
Start-Up Chile’s success is now being replicated around the world and has resulted in the country being nicknamed “Chilecon Valley”.
The programme may still be overshadowed by America’s Silicon Valley, but the Chilean government has shown what can be achieved through innovative policies aimed at attracting entrepreneurs and start-ups. These tools have allowed Chile to punch far above its weight in the start-up space and will have positive knock-on effects for its economy and job creation going forward.
Australia
Australia is the country that currently accepts the highest number of entrepreneurs every year, followed by the UK. It established its business innovation and investment programme in 2012.
Visas are open to foreign entrepreneurs who have a business plan, AU$200 000 (about R1.97m at the time of writing on 15 May) in financial backing from a third party, and a minimum 30% equity shareholding in the proposed venture.
Applicants have to be under the age of 55, speak English and be nominated by a state or territory. Ten percent of the AU$200 000 has to be available within the first 12 months of operation.
The sectors of real estate and labour brokering are excluded and applicants can’t merely purchase an existing Australian business, or a franchise of a business that already exists. The visa does provide a pathway to attaining permanent resident status in the country.
United Kingdom
The UK offers a Tier 1 entrepreneur visa for individuals who want to set up or run a business in the UK, but do not originate from the European Economic Area.
This visa was launched in 2008 and entitles the holder to a maximum stay of three years and four months, which can be extended for a further two years. Once an individual has been in the UK for five years, they can apply for indefinite leave to remain.
The entrepreneur can settle permanently in the country after only three years, should they have created 10 jobs or have generated a turnover of £5m (about R85.3m) over this period. An individual can set up or take over an existing business and can be self-employed by that business, but can’t do any other work while in the UK. They also can’t apply for any public funding and investment in property is prohibited.
The requirements are access to £2m (about R34.1m) to invest, which can be third-party funding, and complying with healthcare requirements.
Breytenbachs Immigration Consultants’ JP Breytenbach says the entrepreneurial visas are very popular and his company processes a lot of these applications. He says there has been an increase in the last 12 months and sees it as many hedging their bets against what is happening in SA. Factors that make the UK an attractive destination for start-ups are similar time zones to SA and a low cost of doing business.
Canada
Canada is acknowledged as one of the most attractive countries for entrepreneurs, mostly due to its low cost of doing business, low tax rates and stable economy. It also provides research and development funding that can return up to 30% of these costs to the company.
The country has a proven track record with global brands such as Slack, Hootsuite and Shopify beginning as Canadian start-ups.
Canada’s start-up visa programme is aimed at pairing immigrant entrepreneurs with private sector players. To qualify, entrepreneurs need to secure a commitment from a Canadian angel investor group (of C$75 000 or roughly R727 435) or venture capital fund (C$200 000 or roughly R1.9m) or be accepted into a Canadian business incubator.
If they manage to secure this, they can apply for the visa. The applicant is not expected to invest any of their own money, but will need to prove that they have enough money to live off while they set up the business and need to be fluent in French or English. They will also have to meet health and security criteria.
A huge plus is that unlike with other programmes that tie the entrepreneur’s residential status to the success of the start-up or a period of time, successful applicants can become permanent Canadian residents with no strings attached, provided they meet certain health and security criteria.
United States
The US announced mid-2016 that it was considering a new rule, called the International Entrepreneur Rule, which would better accommodate foreign start-ups.
“The proposed rule, when finalised, will help our economy grow by expanding immigration options for foreign entrepreneurs who meet certain criteria for creating jobs, attracting investment and generating revenue in the US,” Leon Rodriguez, then director of the US Citizenship and Immigration Services, said at the time.
The start-ups need to have been founded in the past three years in the US and demonstrate a potential for growth and job creation. Such a venture would need more than $345 000 (about R4.56m) in investment from US investors to qualify, or have received more than $100 000 (about R1.32m) in federal grants, or a combination of the two.
Conditions for individuals applying include a minimum 15% shareholding in the start-up, with an active role in its operations. Individuals will be granted a two-year visa if successful, which can be extended for a further three years if the company is successful.
New Zealand
New Zealand, a popular immigration destination for South Africans, has an entrepreneurial work visa and an entrepreneurial residence visa, established in 2014.
Regarding the former, if the application is approved, the applicant will receive a one-year work visa, allowing them to enter the country and either start or purchase a business. Once this has happened, the applicant will be granted an additional two years on this visa.
The applicant needs a minimum capital investment of NZ$1m (about R9.1m), which is on top of working capital requirements, a business plan and a clean record in terms of bankruptcy and fraud. Being fluent in English is a must and there are health requirements too.
There are two ways to shift from a work visa to residence visa. One option is to apply after six months of setting up of your company, provided you’ve invested in excess of NZ$500 000 in your venture and have created three full-time jobs.
Alternatively, you can apply for a residence visa after two years, providing you’ve been employed by your own company on a full-time basis for that entire period. The applicant also has to prove that the company has significantly benefitted New Zealand.
Intergate Immigration’s New Zealand immigration adviser Sarah Hewitt says it is a complicated process and not an easy route to immigration, with very few applicants approved. “We do a few applications, but not many.”
She says success is often dependent on having a very innovative, high-growth business idea that has high export potential. She recommends that applicants work with someone who knows New Zealand’s economy intimately when drawing up the business plan.
See next week’s issue of finweek for more information on citizenship options through property investments abroad.
This article originally appeared in the 25 May edition of finweek. Buy and download the magazine here.
