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STARTUP

The Best City for Startups Isn’t in the USA

Corporatist policies have created a USA business environment that’s deeply hostile to entrepreneurs.

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BY Geoffrey James - 27 Jan 2019

best city for startups

PHOTO CREDIT: Getty Images

Periodically, articles appear on the web ranking which cities and regions in America are best for starting a new business. Such articles fall into two categories: those that pick the obvious (Silicon Valley, Washington DC, New York City) and those that pick the counter-intuitive (anywhere in the flyover states).

Well, when it comes to high tech startups, it turns out that America, in general, isn't all that great place to start or grow a business. The sad truth is that the U.S. has been hostile to startups for some time and the situation has gotten immeasurably worse over the past two years and (especially) over the past two months.

What's the alternative? In North America, it's Canada, obviously. Here's a sobering fact for those who still believe that the USA is a hotbed of innovation: in 2017, the first year of the Trump administration, the city of Toronto added more tech jobs than Silicon Valley, Seattle, and Washington D.C. combined. High tech jobs accounted for fully of third of all demand for Toronto office space.

That metric isn't a statistical fluke. Over the past decade, the percentage of companies that are less than two years old has dropped from 13% to 8% of all companies, a relative decline of 38%. Similarly, the percentage of private sector workers inside companies are less than two years old has declined from 9% to 5%, a relative decline of 44%.

So what gives? Why is Canada's high tech sector doing so well?

Well, it turns out that the decline and fall of American innovation is the direct result of of a toxic combination of government policy and political demogogery. Here's where the USA, in general, and the supposedly business-friendly corporatist politicians are getting things horribly wrong:

1. Canada encourages immigration.

Immigrants start businesses at a much higher rate than native born citizens. A disporportionate number of those immigrants (especially from South Asia) start high businesses. Unfortunately, the US makes it very difficult for such immigrants to obtain green cards, much less achieve citizenship.

By contrast, Canada had launched a first-of-its-kind "start-up visa" specifically to attract entrepreneurs from around the world to come to Canada to start businesses. According to the official website, unlike programs elsewhere in the world "successful applicants to this program will be able to immigrate to Canada as permanent residents with no conditions attached to the success of their business."

2. Canada isn't as racist.

The USA has a long tradition of white supremacy, which has recently raised its ugly head in particularly repugnant situations. Certain parts of the USA have made it abundantly clear that brown-skinned people aren't welcome. Make no mistake about it; anybody from a country that's not majority caucasian knows exactly what "the wall" is all about.

By contrast, Canada never had slavery and managed to create a more multi-cultural society from the start. As Adam Gopnik pointed out in a recent issue of The Atlantic:

"Look north to Canada... and you will see different possibilities of peaceful evolution away from Britain, toward sane and whole, more equitable and less sanguinary countries. No revolution, and slavery might have ended, as it did elsewhere in the British Empire, more peacefully and sooner. No "peculiar institution," no hideous Civil War and appalling aftermath. Instead, an orderly development of the interior--less violent, and less inclined to celebrate the desperado over the peaceful peasant."

3. The USA lacks universal healthcare.

While the USA now has the hobbled remains of the ACA, the country is still a long way from universal healthcare. Plus the ACA is under constant right-wing attack. Millions of would-be USA entrepreneurs stay in their corporate jobs simply because they can't get (or afraid they won't be able to keep) adequate insurance.

While Canada's healthcare system isn't perfect, it's certainly more friendly to "quit and start your own business" than the current system in USA. What's worse, small businesses in the USA get hit harder with insurance costs if they grow much beyond a family business. Under the circumstances, the question isn't "why found your startup in Canada?" but "why would you want to a startup in the USA?"

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