Ask HN: Why is Canada startup unfriendly? | Hacker News Reader

Ask HN: Why is Canada startup unfriendly?

16 pointsmartinshen18 comments

I've always wondered why Toronto, Vancouver and Montreal were so start up unfriendly. I know that there are tax limits to outside VC investment and that there are hardly any seed/startup funds in the country. However, with SR&ED as well as other innovation related tax benefits, I thought it'd get a little more love from start ups. Additionally, Vancouver, Montreal and especially Toronto are all hip tech-friendly cities...

The only major start ups I've seen come from America's hat are: Kontagent, FreshBooks, "RIM" and a few others.

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The problem is not with "startups". The problem is with scaling - there is TONS of startup activity going on in the Toronto, Waterloo, Montreal, and Vancouver areas. If you look for it you'll see that it's thriving as more and more people consider startups to be viable career options.

Very few of these companies manage to break out and go big - when the dotcom bubble burst, all of our former giants like Nortel and Corel imploded, leaving only RIM to pick up the pieces in the tech sector.

There are reams of tech companies in the $1MM-$300MM space, a few in the $300MM-1B space, and basically one (RIM) in the $10B+ space.

Getting capital to scale aggressively is a huge problem - it's just not as easy or as free-flowing as in the USA. However, foreign financiers are starting to notice that they can get better returns on Canadian companies because of a paucity of funding, so I'm hoping that will improve things over time.

Otherwise, Canada is a fucking awesome place to start companies. We just need more people with the balls, the drive, and the unwillingness to accept no for an answer when it comes to raising money.

Canadian cities have the same problem most cities in the US have: lack of angels.

That's part of the story. There are also no "anchor" companies. The massive companies that go for a big sale in the Tech Industry are very rare in these Canadian Cities.

There is money, but there are relatively little opportunities for companies to source these funds.

I suppose but I mean... I feel like Canada is a near perfect location for the start up.... furthermore, it's not as if Anchor companies are far away (like the US for example).

As a Canadian now in the US... I really wish that Canada would step its game up and get a group of angels together or a proper incubator program. My family friends have started a pseudo incubator at http://www.thenext36.ca/

I don't think an incubator program would be enough. There's something to be said to living in close proximity to hundreds of different angel groups and investors, which is why most of the successful start ups come out of Silicon Valley and why SV is the best place to be. There are start ups that can become successful despite the distance from SV, but it's just going to be another hurtle to overcome in a fragile start up's early life.

There are notable exceptions though, GroupOn from Chicago, and for a Canadian example - Shopify from Ottawa, Ontario.

Canadian cities have the same problem most cities in the US have: lack of angels.

I agree, but how do you account for it? Why do these places lack angels?

Angels (mostly) come from startups. Each really successful startup yields a new batch of them. So by default a city's status as startup hub, or not, is self-perpetuating.

New York may be somewhat of an exception. There may be enough investors in NYC who are comfortable with risk that they're willing to invest in startups even though they don't come from the startup world themselves.

New York is also an attractive enough city that there may be a decent amount of successful startup founders moving there out of preference for the city.

I'm in Saskatchewan. Around here, it seems that there is a fair bit of startup investment but it's not quite the same as a lot of the programs in the States. Looking at things like TechStars or YCombinator startups, many of these startups are Great Ideas. Investment around here isn't nearly as focused on Great Ideas, but rather much more focused on Great Technical Secret Sauce. This shifts the types of startups that get funded; around here, there seems to be quite a bit of Biotech, Renewable Energy, some "hard" Computer Science-type problems, etc.

Would Twitter have been funded here? Not likely. Freshbooks? Not likely. RIM? Possibly.

That's not to say that there isn't startup activity though. In Saskatoon, there's definitely a push to try to make it easier for freshly-started companies. Some examples:

* A new "affordable small office space": http://www.facebook.com/pages/Centro-Office-Lounge/170719902...

* Coworking space with advisors (lawyers, accountants, business consultants, etc) for low cost: http://www.saskatoonideas.com/

* Lots of startups have offices at http://www.innovationplace.com/index-main.html - This is more for companies that have already established an income stream, but is a good common place for companies to grow.

I am originally from Regina, SK and it seems like there is a lot of CS research in the Gaming space, but the startup community there is almost non existent. The majority of the programmer talent goes to the government IT shops and the consulting firms that help the government IT shops.

I've always thought the biggest limitation for the start-up environment in Canada is the risk-averse nature of Canadians and particularly Canadian investors.

In the US, angel investors and VCs are more apt to take risks and aim for the huge rewards. In Canada, it seems the investors are looking for singles, and even then, they expect you to already have market traction.

Check-out Basil Peters stuff to get an idea of what I'm referring to. Early Exits, not going for the home-runs.

At the same time, there is a large Canadian contingent in Silicon Valley doing great things. So I don't think its the entrepreneurs, it's the investment market.

Take the example of Waterloo,

There is enough passion and help for startups like Communitech (http://communitech.ca) and Velocity (http://velocity.uwaterloo.ca), there just isn't enough people willing to take the financial risk that an early stage startup needs to expand. Inevitably, once a certain maturity is reached, startups move to the Valley.

I think that it isn't necessarily that Canada is unfriendly, but it's more that Canada isn't as easy to get over the certain bump (as others mention, that bump is funding). If you're boot strapping a startup then Toronto seems to be perfect - vocal community, good geography, lots of talent, and affordable businesses (also OK corporate taxes >$500k)

The virtuous circle of startups that has occured in the Valley has yet to happen in Canada. The virtuous circle being Startups that make it big or have large exits, helping bring money to more up and coming startups. There are no Kevin Rose's that have startups ( arguably successful ) that are now funding other startups.

Because in Canada, milk comes in bags. http://www.myconfinedspace.com/wp-content/uploads/2006/09/ca...

Fundamentally Canada is conservative (risk averse).

Don't forget Rypple.

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