Canada’s vanishing tech sector

This is indicative of Dutch disease, the process by which a country's natural sources drain investment from its human capital, producing a structural competitive disadvantage in the latter.

It usually manifests through resources firms pushing the exchange rate too high for manufacturing et al to compete. In a country with restricted and/or irregularly risk-averse capital supply, however, it could also arise as such, i.e. with limited capital seeking low-risk resources assets. This would imply regulatory constraints on Canada's capital markets.

What worries me most is an inability to set Nortel aside in the ongoing historical narrative of tech in this country. The seemingly inevitable decline of RIM may well put us over a tipping point in this regard, putting us in a situation where we're so paralyzed as a nation by what's happened in the past that we can't bring ourselves to look to the now, much less to the future. We can't get over Nortel in the same way that we continue to look back at the Summit Series year after year after increasingly annoying year; adding RIM onto the pile of failed Canadian tech stories is going to make a mountain that will take decades for us to come to terms with, all the while distracting us from getting shit done.

As a country, if we continue to look to the past for lessons about how to build success, we're going to be building a country that is cribbing off the skeletons of failure. Sadly, looking towards the lessons of the past and staying in the shallow waters that result are very much a part of the Canadian way. I worry that we'll be spending so much time wringing our hands over Nortel and RIM (especially outside the sector, which is where most of the money comes from) that we'll be unable to spot the next big thing.

Lack of critical mass in any of these "tech hubs", overall aversion to risk, lower paying jobs, and ease of moving to the valley are all cards stacked against you before you even start.

Many smart people realize that and they leave - critical mass is incredibly difficult to achieve when you're still bleeding all that talent. This is why having anchor tenants - large companies that draw talent in is so important. We can just never seem to have more than one at at time, and then they're mis-managed into oblivion.

Overwhelmingly, programmers are below average. Management are textbook gantt charts and timesheets. It's pretty much the problem that you see throughout the industry, except it's every single company. If shopify is an exception, it's a recent one.

Ottawa is particularly bad because it's a government town. 9-5 is a rule. Lot's of consulting companies. Lot's of certified managers. There's a huge sense of entitlement. The city is geographically large with bad transportation, so you have long commutes (Toronto's no different).

There is a startup festival next week in Montreal: http://startupfestival.com/

The problem is that all this occurs in the French-speaking part of Canada (Quebec), NOT in Ontario. There is a strong push against anything that would actually help Quebec become stronger financially, as this might trigger a greater willingness for independence.

That is why the Globe&Mail did not mention Quebec at all in their article.

Sad, but not unexpected.

In Ottawa I worked for the federal government. It paid off my student debt but professionally was a dead end (although that's mostly true of any government town). I then worked for a branch office of an American company in Toronto (although FWIW most of the developers were Romanian) before moving to Vancouver where the startup I worked for folded in the aftermath of the dot-com bust.

I loved living in California but hated the restrictions of the H1B work visa so moved to Australia (my wife is Aussie) largely so I create my own startup, which I've done (https://www.SlickDNS.com). The weather in particular in California is fantastic.

The fact of the matter is that compared to the US the high-tech economy in Canada is very small. There are really only a handful of cities with a high-tech sector (Montreal, Toronto, Ottawa, Calgary?, Vancouver) whereas the US has at least as many regions with sizeable high-tech sectors (Seattle, Silicon Valley, SoCal, Texas, Research Triangle, Boston, NYC).

In all of the cities in Canada, the weather is worse, salaries are lower, taxes are higher, and houses cost more than pretty much any of the US regions I mentioned barring perhaps SF or NYC. (Vancouver's real estate is notably expensive, largely because it's an easy way for nominal immigrants from Hong Kong to park their money.) So financially the US is unbeatable, but the price you pay is having to put up with the Kafkaesque US immigration system and work visa restrictions.

Australia's economy is actually quite similar to Canada's in that it's dominated by the natural resources sector. House prices are also similarly in a bubble (e.g., try comparing prices for 3 bedroom houses in Melbourne vs. Austin), but on the plus side the weather down here is better. I do miss Tim Hortons though.

It does seem to be the reality, though, that beyond a certain stage the only way to get a good valuation is to work with American VCs.

That being said, complaining about it won't get it fixed. Growlab is doing yeoman's work to get the SV money pipe flowing north, they just need help. They need better companies with bigger ideas, more aggressive founders, and one decent exit. All it will take to lure some money out of the mining and oil sector is a couple big returns, and I see a few that aren't far off.

Tough as hell trying to raise out here, but it only makes you stronger.

I'd most certainly be in line to apply.

These discussions--largely theoretical--have centered around three problems:

1. Where?

2. The route to funding/profitability; and

3. Visa/residency issues.

(3) of course depends on (1) and the nationalities and residencies of the respective founders. As a UK citizen I luckily have the right to reside anywhere in the EU. For the US unfortunately I need a visa but Australians have access to the E3 visa, which has a lower bar to issuance than even the H1B (there is no need for the employer to "prove" they can't find someone local, which is essentially a legal circus) but there are issues in using work visas to found companies.

There are I believe many foreign engineers in the US in the same boat as me.

I've looked into the possibility of either situating in Canada or at least using it as a stepping stone. It could have a lot going for it, for example:

- Vancouver is relatively speaking close to Seattle and the Bay area;

- No health insurance problems (comparatively);

- Relatively low cost (compared to, say, San Francisco);

- English-speaking;

- Cultural similarities.

And here's where Canada really has an opportunity to attract fledgling companies: software patents. If Canada were to invalidate software patents then they'd essentially be providing a safe haven for small companies until they're large enough to defend themselves. Of course, trolls can still go after US operations (if, say, you hosted in the US) but you would be at least partially protected.

Sadly, the Canadian government seems to be just an inept when it comes to IP issues as other Western governments (and, worse, it seems to take its lead from the US).

But if you go look at the Canadian immigration sites you find out that:

- getting residency is relatively difficult; and

- engineers aren't even on the list of high-demand occupations (whereas restaurant managers are, for example).

Now Canadians could be concerned that if such a program existed people would use it until they could get to the US and I suspect that would happen a lot but I think that's fine because a certain percentage would stay. Some would employ Canadians, at least for a time. Some of those would go when the startup move. Some wouldn't.

That's how ecosystems form. It's not an exercise in being better than say Silicon Valley. Like so much else in life, it's simply an exercise in persistence and ultimately a numbers game.

Beyond those options I'm not sure where next someone in my shoes might otherwise go. London and Germany (I lived in Cologne for a time and loved it) are obvious choices.

In a bootstrapping scenario or even at a seed-funding level it would be ideal to keep costs low. Costs in the Bay Area for talent and even housing, etc are bordering nightmarish and I say this as someone who lives in Manhattan. Finding and retaining talent in SF/SV must be torture for new companies.

Personally I prefer New York but hey YMMV.

Anyway, back to Canada, it seems to have the same problem Australia does in a way: it's too focused in ripping stuff out of the ground and selling it than it is on tech. Oh well, their loss.

I'm Canadian and moving back to Victoria next month from NY. The current plan is to push hard on a small service business for the airline industry (so I'm not in a hurry to find a new job). Even so, I've been away for over a decade and the place is likely to have changed a lot.

If you are in Victoria, the island, Vancouver, or the sunshine coast, I would love to buy you lunch (or just a coffee) and chat about the lay of the tech landscape in the area. Email's in my profile if you're up for it.

I started out working for (big surprise) a start up telecom company as a co-op student. I loved it. Then tried the government. I wanted to kill myself. So I tried hard to stay in the private sector. I got a job at Newbridge, which had just been acquired by Alcatel, a company from France. (Alcatel is now Alcatel-Lucent). I was there when they started laying off people. It was around 2001 when things started going south. The start up I worked for went bankrupt shortly after.

So now I was done school. Quite a few friends from different universities had gone south to Cisco, Nvidia, etc. Meanwhile, I tried to get into QNX, but then money became an issue for them and nothing materialized. Jobless, I waited and took anything I could get my hands on, including the dreaded Government, which turned out to be OK. I told myself I'd do this until things settle down and then I'd jump right back to the private sector.

Boy was I wrong. Most of the people, as mentioned in the article, were still put-off by the Nortel debacle. I knew people my senior, who had 20+ years of Engineering who couldn't get hired because they had too much experience. Pretty funny. They took off to the US, eventually returning to start their own company, but swearing never to work for a big corp again. They said the were tired of making other people rich.

In fact, they never really cared at that point to grow a company into a giant one. They just wanted enough to enjoy life. Management in the high tech had a sort of arrogance about them. Too much of a show off in my opinion.

And here we are years after Nortel sunk. Nortel was full of mismanagement. Quite the ego they had. They would have keg parties almost every Friday. Where the hell was the money coming from?!?

The tech sector had been saturated with Engineers and Comp Sci people with the promise of big money. A dime a dozen they were. Most didn't really have what it took, but they did it for the job. We all know that's not sustainable.

It's as though the Canadian high tech people need to go see a Psychologist. They're stuck like a sports team who just had a bad losing streak. They love looking and emulating the US in the aesthetics and show, but don't realize that there's more to it than that. I don't know, I shouldn't speak on behalf of an entire sector, I don't know that much. But something about how they went about things.

Needless to say, the risk taking and drive is no longer here because most of the people that had it aren't here either. And the ones that did remain, are still a bit jaded and don't want to play that game anymore. You need risk takers, and our society is not that anymore. We've all been scared into taking the safe route. This includes myself. Yup, I changed to a different position in the government (really, really boring - but I have a baby now) and at the moment, don't plan to leave. Maybe once the mortgage is paid off, and the kid is older I'll take risks again, but until then, I'm not willing to take a risk. Working for a corporation is silly to me because you have ZERO control. That may be one reason why there aren't going to be many RIMs or Nortels coming up in Canada. People don't trust large corps anymore, so the odds of building one isn't going to get any better.

My 2 cents on this issue. Hopefully I'm wrong and people with guts (not like me) will take some risks. Who knows what the future holds.

The talent drain that exists unfortunately forms a self-perpetuating cycle. It lowers the quality of remaining talent, so there are fewer successful companies, and as a result there are fewer potential tech investors of the kind they have in the Bay Area. This is a perennial problem in Canada that has affected multiple industries in a similar way.

Another local problem in Vancouver is the high cost of living. Even Toronto suffers from this somewhat. They're both pretty appealing cities but they don't necessarily have the best "price to performance" ratio.

I find the focus on public companies to be misguided. Why not look at job creation instead?

I was thinking of going back to Toronto where I went to university and have a network but it doesn't seem very promising.

"risk-averse"