A Handy Tool Kit for Choosing Your Startup Destinationby@msharonov

A Handy Tool Kit for Choosing Your Startup Destination

by Mikhail SharonovSeptember 12th, 2023
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Starting a business in a new country is a bold move, but it's essential to plan it wisely. This guide explores the landscape of startup immigration programs, providing insights into factors like visa requirements, economic environments, and quality of life. It emphasizes the importance of considering multiple sources and personal preferences when making this life-changing decision.
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Starting your own business is always a challenge. Moving to another country is often a leap of faith. Doing both at the same time is a warp jump that deserves admiration, and respect – but also requires a lot of careful planning. As the world got more and more disrupted with pandemics, war, and consequent economic turmoil, more people started to consider moving abroad to start a new business and a new life. Choosing the best destination has become a hot topic in the startup community. There are many approaches to untying this knot, let me share mine with you.

Welcome to the fair

Entrepreneur visas are probably the oldest type there is. But as the tech industry grew in importance on labor markets and tax revenues, the governments had to adjust their immigration policies with tech in mind. Historically, an entrepreneur visa eligibility was more about the wallet size of a founder, rather than anything else, as most countries required hundreds of thousands of [insert currency] in “investment”.

However, as immigration officials were becoming savvier in tech entrepreneurship, they finally started to realize the damage such a barrier of entry does to a national startup environment. If you make the visa program money-only, you miss out on all soon-to-be-discovered innovative ideas - you attract exclusively well-established companies looking to expand, but not founders looking to build from scratch. It is idea & team first, money second. Thus, dedicated startup immigration programs finally commenced around 2010, pioneered by Chile, Ireland and the UK. Building a tech startup hub promises great returns noticeable at the national economy scale, as proven by the US in Silicon Valley.

Consider Estonia for instance, a relatively small economy with vastly developed digital and startup infrastructure and a favorable tax environment. The country introduced startup visas in 2019. In 2022 alone, startups that used this type of visa for relocating or hiring talent generated 1.6 bln euros, equal to 4.4% of the country’s GDP (36.2 bln euros). During the same year, they contributed 136.4 mln euros in government taxes and a further 131.6 mln euros in employment taxes. These combined make up about 2% of the central government budget (13.9 bln euro), almost as much as the government’s property income for 2022 (282 mln euros). Moreover, the average gross salary in those startups totaled 3,240 euros, 2.1 times the Estonian average salary.

In other words, talent seeks new places, but countries also seek talent. Startups bring innovation, jobs, and tax revenues to the places they choose as their new base. Governments, in turn, offer and adjust their infrastructure, legal and tax environments. This is not charity and ideally, it should be a fair trade for both sides. So let’s take this as a foundation for our research. You know what you have to offer and now you need to choose from the opportunities you can have in different countries. Think of it in familiar terms. For instance, the process may be similar to looking for a property to buy or rent. Let’s get on!

Step 1: Study the offers

When you look for a property, you would naturally want to study the neighborhood and the building quality, and know more about the construction company and maybe the architect who designed the project. It is the same with countries. Each of them (being different in so many ways) offers a different set of visa requirements, economic environment, and living conditions. Finding the right combination may be tricky. The demand for advice brings a plethora of articles, reviews, and ratings. Sources differ vastly, from insurance providers to specialized expat resources, and so do their methodologies. Here is a small selection of examples just to give you an idea of some approaches to selecting the top-5 best countries for foreign startups:

Expatica, an expat info hub

StartupBlink, a startup research centre

William Russel, an international insurance provider

New Zealand Singapore Hong Kong UK Denmark

USA UK Israel Canada Sweden

Ireland Switzerland UAE Singapore USA

Data sources:
World Bank’s Ease of Doing Business Index; the U.S. News Quality of Life ranking; WEF global competitiveness report; OECD Better Life Index

Data sources:
The Global Startup Ecosystem Index, a proprietary methodology mostly focusing on innovation, investment, R&D, and startup infrastructure

Data sources:
Data Commons, PwC, StartupBlink

Of course, there are many more of those top-fives and top-tens of all sorts. With all due respect to their authors, most of such rankings share at least one (or more) of the following flaws:

First, many of them are a compilation of data from different sources. Most often, authors just select top countries from different rankings (one best country for doing business, one best for quality of living, etc.) without directly comparing them. Also, data on one given criterion across several countries can be patchworked from different sources, making them hardly comparable. Thus, there can be little to no clear comparison and ranking methodology.

Second, popular media not dedicated to research on this specific topic may use startup destination rankings as clickbait and SEO tools without really caring much about fair comparisons.

Third and most important, there is simply no ranking that’s good for everyone. Some startup founders have families, others do not. Some might have health issues, others don’t. All these factors may drastically affect the choice.

Don’t get me wrong. I fully understand that sometimes country choice may be pre-determined by factors like having your family, friends, or investors there to support you. Or it could be just a matter of being in love with a particular place on Earth. If you are already settled with your destination, a proper search prompt can probably fetch you a rating that will list your country of choice somewhere comfortably high. But if you are still in doubt, I would advise you to look at sources based on solid research and a clear methodology. Choosing with your heart is a great idea for a holiday destination. But it is unlikely to be just as good for choosing a home for yourself, your business, and possibly your family.

Recently I spotted a research paper by the Organisation for Economic Co-operation and Development (OECD). Of course, their study is limited to 38 OECD member states. On one hand, it narrows the country's long list. But on the other hand, you will have a chance to visit more exotic destinations as a tourist as you succeed with your main goal. Besides, OECD is represented in both Americas, Europe, Southeast Asia, and Oceania, an area wide and diverse enough to satisfy most preferences. The research is based on the OECD Indicators of Talent Attractiveness, developed by the organization with support from the Bertelsmann Stiftung think tank. The paper itself is a comprehensive analysis of immigration policies in 22 OECD countries offering startup-specific visa programs and provides the following 5 best destinations for startup talent:

  • Canada
  • USA
  • France
  • UK
  • Ireland

The good thing about this rating is its multidimensionality. It is based on eight factors, each supported by a number of parameters __(__38 in total!). Finally, OECD designed a handy tool that allows adjusting the rating to your personal preferences of all the major dimensions. It is worth noting that tweaking these parameters mostly affects the bottom part of the rating, while the leaders mostly remain the same. Try playing with it and build your own country shortlist.

Step 2: Study the feedback

What is the second most important thing you want to know when you are going to buy something expensive and important, be it a house, a car, or just a rare and pricey gadget? That’s right: you want to know what other people say about the seller and the property or item you are after. So the next thing you need to do is find a platform where you could crowdsource some more information. One of the best-known resources for this is Nomad List, a platform with almost a decade of history. It claimsa 5+ million user base and 10K+ active community members and has a myriad of city rankings from air quality and cost of living to internet speed and LBGTQ+ friendliness.

You are absolutely free to play with these but do not get too carried away. When it comes to big statistics, Nomad List mostly relies on the same data from the United Nations, World Bank, etc. as everyone else. In some cases, data flaws are obvious, especially when it comes to parameters related to hazards. For instance, this blood-chilling rankinghas quite a few Syrian cities on top, reflecting gaps in official statistics rather than tranquillity and happiness in that particular country. In my opinion, Nomad List’s most valuable asset is the data reported by people. Of course, you have to be careful with places that get suspiciously high or low scores based on just a handful of reviews. Just stick to common sense and the rules of thumb you would use at any online marketplace and you will be fine.

There may be countless more personal factors that you might consider. Just do your best to maintain awareness and be rational, as this decision will certainly affect a significant part of your life. Good luck and thanks for reading!