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Posted in: Articles | Founder Issues

Nov 24, 2016

What Does the Trump Presidency Mean for Silicon Valley North?

By Timothy Jones

By Rebecca Kacaba, Mathew Goldstein, and Timothy Jones

When Donald Trump was announced as President-elect, some founders and funders of major Silicon Valley startups reacted with "heartbreak and horror," with one well-known Valley executive making headlines by promising to "fund a legitimate campaign for California to become its own nation."

The calls for a "Calexit" seem to have died down, but the shock and disruption remains palpable. Some predict serious impacts north of the border, with one prominent CEO (Mark Organ of Influitive) suggesting in the Globe and Mail that "a Trump presidency may usher in a golden age of Canadian technology."

So what does a Trump presidency mean for Canadian startups?

North American Mobility and Canada's Skills Strategy

Historically, Silicon Valley has been regarded as having an advantage for attracting and retaining both companies and labour talent. If the post-election backlash from the tech sector is any indication, this advantage may be weakening.

Hootsuite founder Ryan Holmes tweeted about a call he received from a U.S. tech company, whose 60-person staff unanimously voted in favour of relocating to Canada, asking "is this the reversal of the talent diaspora that Canada has typically seen [and the] beginning of the U.S. brain drain?"

Capitalizing on a "U.S. brain drain" would certainly help add to the already-strong pool of Canadian talent. The relocation of foreign workers to Canada will hopefully be bolstered by the federal government's recent announcement of a fast-track Global Skills Strategy for certain "low-risk, high-skilled" talent, which John Ruffalo, CEO of OMERS Ventures, describes as a "game-changer" for the Canadian tech sector. Canada's startup visa program may also see an uptick on the demand side, although as covered previously in StartupSource, its capacity to be a major factor in the domestic labour market on its own is uncertain.

Canadian-born talent currently working for U.S. companies could also help increase the depth of the already-remarkable domestic talent pool. Many of these workers now face uncertainty over their continued ability to work in the U.S. Donald Trump's campaign promise to "rip up NAFTA" threatens the TN visa category, a very popular option for developers and engineers. Similarly, the appointment of Jeff Sessions, a long-time critic of the H1B skilled-worker visa, to Attorney-General may signal danger to a program that major tech and research firms rely heavily on.

One consideration is what impact an influx of talent into the local labour pool would have on startup salaries. Would developers attracted to Canada expect the same wages that they made in their last position?

Capitalizing on the Mobility of Innovation

Repatriating Canadian-born talent and hiring short-term foreign workers would help the Canadian sector perform better, but if there is indeed a new competitive opportunity for intellectual capital in the wake of a Trump presidency, will the Canadian government see and capitalize on this opportunity? Canada isn't the only country with preferential immigration programs: many jurisdictions are jockeying to be the new global hub for verticals like FinTech (as the New York Times recently chronicled). How will Canada position its market advantage?

Canada's suite of tax incentives and government funding programs assist in harnessing and maximizing new intellectual capital, as do the recently announced injections of research capital into major university centres, but there's much more that the country can do to carve out a leadership position.

We've recently seen the City of Toronto take an activist role in recruiting Canadian startups with their recent pitch of Slack, resulting in the well-known tech company opening a Toronto hub and creating over 150 jobs for locals.

The post-election flurry of disruption would be the perfect time to double down on this effort. This could result in an increase in domestic activity impacting areas like startup salaries, resources, funding opportunities: in short, bolstering the whole Canadian ecosystem.

Implications for Business Planning

While the Trump administration's policies on trade, economic regulation and other issues are not necessarily settled, there is no doubt that the changing administration will have an impact on business planning for Canadian startups who do business or operate branch offices/sister corporations in the United States.

    1. Speculation is already flying about a more employer-friendly labour regime, achieved both through legislation and courts. "Sharing economy" companies may benefit from a government - and, if Trump appoints hard-line conservative judges, a Supreme Court - that is less ideologically supportive of the reclassification of purported independent contractors as employees.
    2. Trump's tough talk about deregulating the financial services sector may be music to the ears of FinTech startups, and could ensure least four more years of operating in a relatively unregulated space. On the other hand, U.S. Fintech startups are already struggling through a patchwork of state-by-state regulation in the absence of strong federal direction, and a non-interventionist philosophy could simply prolong this pain.
    3. On the campaign trail, Trump signalled a lack of support for global emissions targets and clean energy stimulus. A Trumpian administration might be bad for CleanTech, as well as startups making software or hardware for autonomous vehicles.
    4. Confusion over Trump's stance on drug pricing and health care policy leaves the biotech and pharma sectors in a state of uncertainty.
    5.  

       

       

      CEOs and CFOs north of the border will need to monitor these conditions closely as they develop their business and expansion plans.

      But it's not only startup executives who will be forecasting the implications of a Trumpian administration on the outlook of various verticals - VCs, lenders and other investors may be re-evaluating their market assumptions for the next four years. The fundraising climate can change quickly, particularly when investors perceive uncertainty.

      As such, startup executives, particularly those planning upcoming fundraising rounds, should keep a close eye on Q4 2016 and Q1 2017 reports from entities like the National Venture Capital Association, the Canadian Venture Capital Association and our partners at Maple Leaf Angels to see how domestic and international funders are reacting to the new geopolitical normal.

      A Positive Outlook for Canada

      Generally speaking, we've observed that the pace of innovation speeds up in a climate of openness, where diverse skill sets and methodologies are embraced, and where human and intellectual capital is agile and mobile. In the wake of the U.S. election, Canada's brand advantage may become even more attractive.

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