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Startups: Can Las Vegas work for Canada?

Startups: Can Las Vegas work for Canada?

Posted by PanamericanWorld on December 28, 2015

Las Vegas has worked for years to attract startups, in an effort to brand itself similar to Silicon Valley or Austin, Texas. It has been a slow process; Las Vegas has struggled to compete with the amenities available in more established tech cities. Recently, though, Canadian startups have started to discover that Las Vegas may offer more than other.

U.S. startup hubs. Unfortunately, though many Canadian startups want to move here and offer precisely the tech savvy and business enthusiasm Las Vegas has sought, U.S. immigration policies and red tape make it difficult for them to stay.

One of the first Canadian companies to recognize the advantages of Las Vegas was Zora, an Internet startup that helps property owners find tenants and manage rentals. Co-founders Milan Vrekic and Colin White moved temporarily in April from Halifax, Nova Scotia, to participate in a startup incubator program.

“We really like how close (Las Vegas) is to all the action,” said Vrekic, referring to Las Vegas’ proximity to Silicon Valley and Austin.

Also, compared with those cities, Las Vegas has a lower cost of living and a smaller, friendlier startup community, which made it easier to join in, meet venture capitalists and connect with important businesspeople, Vrekic said.

Zora, like many Canadian companies, wants to break into the U.S. market, and its owners recognize that it is easier to attract U.S. customers from inside the country. Zora already has started to work with local property owners. Vrekic and White found the size and condition of Las Vegas’ real estate market ideal for experimenting.

However, Zora has not yet charged its customers, in large part because the company’s owners must deal with immigration issues that could jeopardize their ability to stay in Las Vegas. Canadians without special visas may stay in the United States only for six months, and they may not earn money while they are here.

Typically, if a Canadian wants to work in the United States, he or she gets sponsored by an American employer, then is allowed move here permanently. However, Vrekic and White, like most startup founders, work for themselves and have no employer to sponsor them.

The primary alternative for startup founders is to get an E-2 Investor’s Visa, which requires investing a substantial amount of capital in a U.S. enterprise. What qualifies as a “substantial amount” isn’t fixed but instead depends on several factors, including cash flow, net income and the appraised value of any intellectual property or assets the company owns.

Local immigration attorney Margo Chernysheva has experience with the E-2 qualification process, which is so complex that many companies hire attorneys to guide them through it. She said that after fees and expenses, it’s not unusual for a company to spend $10,000 to get a visa, in addition to the required “substantial” investment.

Many small startups simply don’t have that much money early in their development, and the prohibition against working for profit while in the United States severely restricts their ability to earn it.

It is legal, however, to attend meetings, arrange deals and sign contracts. So it is possible for Canadian companies to make deals with U.S. companies, as long as the Canadian entrepreneurs don’t do paid work before receiving a visa.

Because the distinction between “make deals” and “do work” can be vague, Canadian entrepreneurs also must be careful when they answer immigration officials’ questions about the purpose of their visit, so they don’t give the impression they’re doing something they shouldn’t.

Interestingly, that’s less of an issue in Las Vegas. As most immigration officials assume travelers flying to Las Vegas are doing so for a vacation or convention, they tend to ask less detailed questions, which means Canadian businesspeople entering the country through Las Vegas run into fewer hassles.

Despite the issues, Vrekic was so impressed with Las Vegas, he encouraged other Halifax startups to move here. Two arrived in August. The first, Vendeve, run by co-founders Katelyn Bourgoin and Calee Blanchard, is a referral platform for female entrepreneurs. The second, Addo, run by Moses Robicheau and Raph Titsworth-Morin, creates game-like, employee-centered corporate wellness programs.

“We want to be the Slack of wellness,” Robicheau said.

Unlike most top-down corporate wellness programs, which are imposed by executives on reluctant employees, Addo aims to make wellness programs so fun that people sign up on their own, then persuade their employers to adopt the program.

Much like Vrekic and Zora, Robicheau was impressed by the low cost and high quality of living in Las Vegas, and happily surprised by the friendly locals. He had hoped to use the valley as a test market for Addo, but because of the cost of obtaining a visa and his inability to earn a paycheck, he doesn’t think it’s feasible. Unless Addo is able to secure a large investment from a U.S. backer, Robicheau expects to move his company to Vancouver, British Columbia.

There is a chance Addo may find an investor, because despite immigration hassles, Canadian companies offer advantages over their U.S. counterparts.

First, the strong U.S. dollar makes Canadian companies relatively cheaper for U.S. investors. In addition, the Canadian government provides generous subsidies to Canadian companies in the form of grants and loans. Some of the money subsidizes hiring, which keeps the cost of employees low. Others depend on companies finding outside investment, somewhat like matching funds, and magnifies the effect of additional investments.

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