India-Canada Crisis: Cause of trouble for Indian start-ups

India-Canada Row: The deepening diplomatic tensions between Canada and India could become a matter of concern for Indian entrepreneurs, who see Canada as a strategic entry point into North American markets.

Canada’s Start-up Visa program is gaining global attention as it successfully attracts high-potential entrepreneurs to start businesses in the country. The program offers a straightforward immigration process in addition to attractive incentives for immigrant entrepreneurs aiming to expand their companies globally.

“The visa ban will definitely impact trade and business and will definitely impact start-ups that were looking at Canada as a gateway to North America,” said Anil Joshi, managing partner at Unicorn India Ventures.

Joshi said, “However, considering the current situation and the image of the country, Indian start-ups may choose to deal with this situation and focus directly on the US market, given that the US How strong are India’s relations with India?

“This situation is likely to impact Canada more than India and they have more to lose,” he said. “It will also encourage start-ups to explore alternative markets beyond Canada.”

Mayuresh Raut, managing partner, Seafund VC, said the new situation may prompt start-ups to explore alternative nearshore destinations around the US.

He said, “We see the impact on many Indian start-ups who, both in the past and now, have continued their business operations in Canada to get closer to the US market. Canada’s start-up visa scheme has helped many Indian start-ups set up shop there, but now companies may look to other nearby destinations to the US, perhaps Mexico or some other Lat Am countries. yes.”

Raut further said that Canada’s Permanent Residency (PR) program, which was earlier considered a viable option for H1B visa holders facing possible non-extension of their visas, now faces uncertainty. Indians living in the US with H1B visa can choose to return to India instead of going to Canada if their H1B extension is denied.

The Canada–United States–Mexico Trade Agreement (CUSMA), also known as the USMCA, promotes cross-border trade and economic cooperation between these North American countries. In addition to the United States, Canada offers favorable market access through 15 free trade agreements covering 51 different countries. For start-ups, CUSMA offers lower trade barriers, increased market access and a stable regulatory environment within this important economic bloc, providing opportunities for easy expansion and growth across borders. This, along with several other collaborative initiatives, provides Canada-based start-ups an accelerated immigration path to expand into the lucrative US market.

Anirudh A Damani – Managing Partner – Artha Venture Fund said Canada’s apparent leniency towards extremist groups targeting India jeopardizes not only India-Canadian relations, but also the economic bond established through avenues such as education Puts you in danger. He said the fact that India sent more than 220,000 students to Canada in 2022, accounting for 41 per cent of the country’s international student community, symbolizes the depth of inter-country ties.

He said, “On the entrepreneurship front, Indian start-ups previously looked at Canada as an attractive bridge to North America. However, given the current circumstances and perceived tacit support for extremist elements, alternative locations such as GIFT City, Dubai or even Delaware seem more promising. “These centers provide the sense of security and policy stability that businesses crave.”

Shaurya Bhutani, co-founder, Capital Connect Advisors, emphasized that de-escalating the crisis is the preferred solution for both parties.

“India has the third largest start-up ecosystem in the world and is perhaps the only advanced growth market in Asia to deploy large checks to global technology investors because China is not a viable alternative and other markets are relatively new. Canada is a great source of capital for VC and PE due to its sovereign wealth and pension fund pool. We don’t think this capital is at risk at this level, but any increase beyond that creates uncertainty, which is not good for the ecosystem. There are no winners on either side.”

Bhaskar Majumdar, managing partner of Unicorn India Ventures, said data from his portfolio indicates a possible slowdown in the number of students going to Canada. “Given the ban, we expect Canada to be increasingly replaced by other competitive markets such as Australia and the UK. Another reason the ban may not be long-term is that many Canadian pension funds have been investing for some time and they cannot play a role in India’s growth story.