Why Startups Should Choose Canada Over Silicon Valley
techvibes.com
techvibes.com
I am currently a Canadian citizen, working in San Francisco at a company that moved from Vancouver many years ago.
The author seems to be comparing the Bay Area to the entirety of Canada. Canada is not a small area, a city or a state. It is an entire 'continent' spanning multiple provinces with very different laws and dynamics. A startup in Waterloo, Ontario targeted towards engineering may fare better than one founded in Vancouver.
Secondly, he is mentioning his connections in the Bay Area that have helped him succeed in Canada. First he is arguing FOR founding a startup in Canada but then admits that most of his barriers to entry were lifted with help from the valley. There is a difference when you're starting fresh in Waterloo without any outside help.
I think what the author should have done is draw a parallel between The Valley and somewhere in Canada (Waterloo, Vancouver, Montreal, etc...). One may not be better than the other but perhaps working WITH The Valley can help get your startup off the ground elsewhere.
I would personally love to work for a startup back home in Toronto and perhaps one day found my own but I don't see the same enthusiasm towards tech and startup in Toronto that I see here in The Valley.
Having tried establishing my startup in Toronto before, I fully agree with your statement. I know at least 6 more people who got frustrated trying to start tech companies in Toronto/Waterloo and finally gave up and moved to US/valley.
Most Canadian govt funding programs for startups (I tried) are for politicians to handout to their supporters. You need to be incredibly well-connected to overcome the barriers set to get funding.
Most people involved in startup/tech wouldn't give a chance to local startup unless there was validation from someone in US or valley. It was funny that one local VC I was trying to connect with wouldn't return my calls. One evening, when I sent him an email mentioning that I have a meeting with a NY VC next day, the guy calls me 11pm in the night wanting to know more about my startup.
Without valley/NY connections, it is incredibly difficult in Toronto for a tech startup.
It's remarkably little work to do the paperwork. It's annoying, sure. Who the hell likes paperwork? But a "distraction"? Oh please.
If I wasn't getting the money I would honestly be a little annoyed at how little accountability there seemed to be to get public money.
And the whole political connections thing ... I don't even know where to start with that one. I have none and no one I know has any.
I notice no one here has firsthand experience with either. I wouldn't have commented here but I felt I had to leave something here so that other readers wouldn't come away with an opinion that's ... let's say "uninformed".
For one, the people you are talking to have zero experience in running a business, let alone a new one. They do have, however, extensive experience in drawing out meetings, death by powerpoint and producing forms in triplicate.
The grants generally come with a lot of reporting and strings attached, and generally require very large investments to be worthwhile.
We can get R&D tax concessions which are quite useful but the amount of money you need to spend in order to qualify excludes any sort of early-stage tech venture.
The entire process was a giant waste of time for me, and I get the impression they are political operations rather than genuine ones. In fact in my research I found out that infrequently do the funds ever actually give out all the money, but a good portion of the advertised spend (ie, $x00 million in new company grants) actually goes to the departments that spend their days handing out the money.
Not to say that the guys weren't genuinely trying to be helpful, they were. But they are hamstrung by their own reporting requirements and lack of understanding as to what people need money for, and when they need it.
My ultimate conclusion is that special economic zones with, say, 10 years of a tax holiday for a new company starting within that area would be a much better way to go about things. That would spur local investment and employment, have a specific end date and be much easier to administer. It would also favor bootstrapping as opposed to trying to capture large starting funds, which IMO for the outside-the-valley world is a better way to go.
I have a bit of experience with SRED in Ontario, and quite a bit with the Alberta Foundation for the Arts.
Grants are nicer for you (me), but tax credits are doing it right as far as the government is concerned. Canada wants you to create employment. If you have a business that is generating revenue and creating jobs, they'll "give back" money that equates to, sometimes, paying wages at 50 cents on the dollar.
Tax credits are an economically efficient way to distribute government funds.
Now that nepotism sounds more like something that happens where I live, funny that there's the same cronyism over there.
The main take away is to be wary of the hype in the valley. That pervades the culture. Everyone from investors to your family fill you up with hype. You don't get that in Canada. You've gotta fight harder. That, in my opinion, isn't a bad thing. You can go much further on a dumb idea in the valley. *and yes I know that some of the best startups were once dumb ideas. But I don't believe the "valley" made them succeed. I think there's more companies that die because of false positives than companies that succeed in spite of not having them.
And yes. I readily admit that you need connections in the valley. I wouldn't be starting in Canada if I didn't already have a killer bay area network.
BTW. I toured Toronto not that long ago and visited Extreme(s) as well as a few other startups. I was blown away by the quality of stuff being built there and Waterloo. I'd not hesitate to start or join something there. There's real energy in that city ... and it's growing.
I'm sure I'll see the area totally different when I return from SF and I may just find a role that I fit in very well.
I totally agree with you about the over inflated hype currently in the valley. While this leads to a lot of failed startups and 'wrong' ideas being funded, I think it's still a healthy ecosystem for promoting innovation.
Like you said in your article, shooting for the moon in Canada makes you seem insane while it's seen as commonplace in SF.
Why?
Well, let's face it, the most revolutionary things have all started sounding silly and insane. People will buy things over computers without having actually seen or touched them? Humans will fly? Will travel to the moon? Everything is actually well modelled by equations that imply that everything is a wave and has probability it exists?
So just because YOU think it sounds crazy or insane, doesn't mean it doesn't have a chance at something big.
After all, who would want to communicate in 140 characters only, or have a real time feed of everything their friends do, or want tiny square pictures on their phone?
On the subject matter, I've lived in SF for a few years now and I was born in Canada. In the US people will give you a chance, in Canada companies want to know what you have done and get you to do more of it.
This is true. I can name half a dozen billion dollar companies I rolled my eyes at when people told me what they do.
"They're trying to make money by having people tell everyone they know what they ate for breakfast? Really?"
The biggest barrier to start-ups in Vancouver is probably investment availability. There's a few active angels and VCs but you can count them on one hand. The majority who want in seem to be incredibly risk-adverse, treating a 50k angel investment as though it were the last gold bullion on earth.
On top of that, Vancouver is very lifestyle-driven, especially once spring and summer roll around. The mountains and ocean are seductive (that's why I moved out here), and make it seem like insanity to spend 16 hrs a day toiling in front of the computer when there's an entire playground out there.
So, if I were going to start a high-energy start-up, Vancouver is not where I'd pick first.
The good news is SFO is only a two hour flight, and Seattle about that far by car. I think raise in the USA, build in Canada is a great strategy, and quite a few of the successful start-ups raise from both Canada and the US.
There is starting to be a bigger start-up culture. Its not like SF and area where it seems like everyone is doing a start-up, but it is now something that a lot of young people are thinking about and is seen as a respectable way to spend your time.
There are good government programs in Canada, but my limited experience is they aren't what you want to bank on if you are a small, vulnerable start-up. I think where they do come into benefit is in growing from a 5->50+ person outfit.
Vancouver also has a good brand for the right kind of company. Its definitely a lifestyle city (great place to live, but lots of distractions from 24/7 work) - and would be a great place for health/fitness/outdoor activity start-ups because of that. There is a kinda cool video about the Vancouver tech scene from a few years ago: https://www.youtube.com/watch?v=MLQQ3w12Juc
There are accelerators like GrowLab (since 2011), but nothing like the valley. I definitely agree with the overall premise of the article though, people here see a lot of the "money-throwing" over in the valley and feel it's often way overblown/hyped.
Investors in Canada have an appetite for risk somewhere in the neighbourhood of "mutual fund vs GIC" levels. For someone with Silicon Valley connections, fine it could work, but this is not good general advice.
Even iNovia, which is probably the most forward looking VC in the country, has a fairly small fund (low $100M if memory serves), I believe below the size of the average US fund.
It is even easier to raise $800k in grant money too. Depending on your startup, the CMF may think that your startup is in fact an "emerging digital platform" that has promise. Most startups I know that raised this type of capital did so from Americans.
If you are a Canadian angel that disagrees, feel free to talk to me. I know a bunch of pre-revenue startups that are cool, but you won't ever hear of because they've all given up hoping to raise Canadian cash.
Accelerators are a great source of private capital that can be great social proof for angels - just make sure the one you choose / apply to are VC backed because those will be the ones that force you to think big and shoot for the moon.
This year, we opened up an office in Toronto, and even though our standards are the same (exact same interview process everywhere) we've had a measurably easier time attracting CS talent.
Waterloo has been founding great companies for decades - the Watcom compiler came out of there in the 80's and 90's.
1. A quote from a friend who did his PhD there during the period.
Before 2001, Waterloo Computer Science offered Java courses and taught "more industry focused" material. Ever since, with the aid of a certain PhD here, the curriculum teaches functional programming (via Racket) from the start and carries its focus over the entirety of first year.
Following this, the second year courses are standard at any university and act as precursors to the third year Operating Systems and Algorithms courses, the most difficult required CS courses offered here.
I know the rankings are only one way to estimate (and would like to hear a better way :)
Is there a list that puts Waterloo or UBC better than Stanford or MIT? ANY LIST BY ANY MAGAZINE?
http://www.usnews.com/education/worlds-best-universities-ran...
University of Toronto (15th) UBC(27) Vs MIT (1) and Stanford (2)
http://www.acmicpc-pacnw.org/Standings/
Year 2000: UBC tied with Stanford (difference in time, not by much)
http://www.acmicpc-pacnw.org/Standings/2000/Standing.htm
Year 2002: UBC and SFU tied with Stanford (won on time)
http://www.acmicpc-pacnw.org/Standings/2002/standings.htm
Year 2003: top 5, 3 from UBC, 2 from Stanford
http://www.acmicpc-pacnw.org/Standings/2003/results2003.htm
Year 2004: top 4, all UBC and SFU
Year 2005: top 4, 2 UBCs (one winner), 1 SFU, 1 Stanford
http://www.acmicpc-pacnw.org/Standings/2005/Results.htm
Year 2006: UBC rank 1st and 2nd, followed by Stanford 3rd + 4th
http://www.acmicpc-pacnw.org/Standings/2006/results.htm
Year 2007: Top 2, UBC, Stanford 3rd, SFU 4th.
http://www.acmicpc-pacnw.org/Standings/2007.htm
Year 2008: UBC went down to 4th and 5th
http://www.acmicpc-pacnw.org/Standings/2008.htm
Year 2009: UBC 1st, followed by 2 Stanford teams
http://www.acmicpc-pacnw.org/Standings/2009.htm
Year 2010: UBC 4th, tied on # of solutions, diff on time
http://www.acmicpc-pacnw.org/Standings/2010.htm
Year 2011: UBC 2nd, Stanford 1st
http://www.acmicpc-pacnw.org/Standings/2011_Pacific_Northwes...
Year 2012: Stanford 1st, 2nd, UBC 3rd
http://www.acmicpc-pacnw.org/Standings/2012/
So, is UBC good enough to hang around with the big boys? (consistently)
There's a ton of advantages of having your main office in Canada, but there are many disadvantages as well. Seed round pretty much has to be done in SV as Canadian investors are notoriously cheap and horrible [1]. So you get your seed money in SV and then work for cheap in Canada.
The downside is that not having "close" communication with your investors may impact follow-on financing, though that remains to be seen. Also, for certain types of companies being surrounded by a bunch of other startups can be very useful.
No matter what, if you're going to be in the tech industry it's usually a good thing to have some contacts and relationships in the valley. If you're a first time founder then doing everything from Canada is going to be difficult. If you've been around the block a few times, then the downsides aren't so bad, and the upsides are major.
[1] Unconfirmed, but I heard a stat recently that BDC takes controlling interest in 75% of their pre-Series A deals.
From a recent report by the Conference Board of Canada titled "Canada Fails to Put its Money Where its Ideas are—and it Shows in Poor Innovation Grade":
"Ottawa, April 4, 2013—Canada ranks second-to-last among its peers in venture capital investment and business R&D spending, according to The Conference Board of Canada’s ranking of innovation among the world’s leading economies. And the rest of the report card doesn’t get much better, as Canada ranks 13th in the 16-country How Canada Performs benchmarking."
Google the report if you have any dillusions about doing a startup up in Cantada
I suppose Canadian bootstrappers could always mine for bitcoins... that's pretty modern, global too!
http://venturebeat.com/2013/04/02/silicon-valley-north-canad...
http://www.cic.gc.ca/english/immigrate/business/start-up/ind...
EDIT: Bah, too bad they demand proof of secondary education. Sucks for people who couldn't afford college...
Some details: I took two years of university so far, but ran out of money to keep going. I'm now living month-to-month (averaging about "feed myself and pay rent for a room") doing severely underpaid web-app development (think ELance rates.) Apparently my skillset (Ruby, Erlang, systems-level/embedded C, Clojure, some Cocoa Touch experience) would be making me at least $100K/yr in SV, but nobody wants it up here in Vancouver; it's all ASP shops and C++ game-dev, and most of the gigs I do get end up being in PHP, even though it's not my forte.
I really don't want to spend however-many more years it would take to pay my way through school at this rate, struggling out in the software "hinterlands", when a better life is just one border-crossing away.
And technically, If I'm asking for a pony, I don't really want to get hired by a Microsoft or a Google and only work in the US for them; I want to go to the US because I want to participate in SV startup culture, which both includes working for a startup, and starting my own. It seems like that possibility is just locked out for anyone but permanent residents of the US, though.
You can actually get an exemption if you can demonstrate equivalent knowledge and a career progression towards it. What that usually means is having a professor of your field vouch for your knowledge and being able to prove work history for 3 or 4 years of each of the four years of university you didn't take. A two year diploma may cut that amount in half, but I wouldn't necessarily count on it.
If your work history is hard to prove you may want to try other types of visas. TN-1s aren't so difficult, but re-entry can apparently be a pain. You can also get an equivalent to an H-1B by working for a Canadian subsidiary (of, say, MS or Google) for about a year and then getting a transfer to the American head office. I believe these are much easier to get.
And then there's the traditional ways, like being sponsored by family etc. Unfortunately, no matter what, a degree will make it much much easier.
I really did mean a four-year; I just said "diploma" because "degree" implies education was involved. The diploma is the piece of paper. :)
> prove work history for 3 or 4 years
Does that mean employment history? I don't have much of that. Completed contracts, certainly, but I've not been "on payroll" anywhere for more than six months at a time.
I think the work history requirements might have relaxed in recent years a bit, but not by much. 10 years seems to be the point where most American employers start to seem optimistic about being able to get you an H-1B without a degree. But if it's not employment experience you'll have to work twice as hard to document it, and that can be very difficult. Most of my work history, for example, is tied up in companies that no longer exist or as contracts, as with you.
http://careers.microsoft.com/careers/en/ca/home.aspx https://jobs.ea.com/locations/canada/ http://www.google.ca/about/jobs/locations/waterloo/
I also think there was an article here recently about Facebook setting up a Vancouver office just to bring graduates through the subsidiary employment process. It's a one year thing specifically for that purpose.
Hint: If you're an English speaking American with more than 5 years of work experience or a bachelors degree you have enough points- no investment fund needed.
See: http://gazette.gc.ca/rp-pr/p1/2012/2012-08-18/html/reg2-eng....
As an English speaking South-African finishing a PhD at an American university, it's good to know there are other options if the U.S. decides not to give me an H1-B (the quota was exceeded in the first week, so apparently we all get put through a lottery: https://news.ycombinator.com/item?id=5513761)
You need 67 points to get residency status in Canada.
With the new system:
PhD? 25 Points
Speak English? 24 Points
Under 35? 12 points (less 1 point per year over 35)
1 Year of work experience? 9 points
Total: 70 points
There are a lot more ways you can get points. But if you're a young or middle aged English speaker with a degree or a few years of job experience, you're in.
http://www.cic.gc.ca/english/immigrate/skilled/ , currently you only need to prove 11k in savings and the other requirements seem pretty accessible to anyone imho.
In fact, the only benefit here seems to be for founders, but given the comments about the lack of angel/VC money in Canada, fulfilling the requirements looks to be difficult.
Startups CAN actually survive and meet early milestones without us VCs you know. In Canada I'll bet it would be refreshing to "have" to meet those early milestones without being made to feel like a failure just because you're not already "funded." "Are you funded? Yeah, by who?" "You're not funded? Oh bummer." (Person walks away.)
So eventually a Canadian entrepreneur may need/want to move to Silicon Valley, but I'll bet they learn alot - and find it alot more refreshing - to start out at first without the non stop "you got a screenplay? you got an agent?" equivalent I see and hear every day and every hour in Silicon Valley.
We VCs aren't the be all end all.
Happy to take any questions from entrepreneurs.
My company does 100x the traffic of our nearest competitor but you'll never see a TechCrunch article about us, since we're in Toronto. So there's no pressure for overnight success and you can work diligently towards making a better product instead of meeting unreasonable expectations.
TC covers plenty of Toronto based startups, including the last two that I've worked for.
Also, seeing your company on TC isn't all that useful anyways...
Curious where Chile and Brazil fall for privacy/security stuff, including AML and general financial regulations. Costa Rica and Panama are the traditional Central American options, and there are the Caribbean or other island/tax haven options, but a lot of those are too small to have developers (and expensive), and will bend over for the US officially or unofficially, particularly if a small business is involved (without political connections); I made the mistake of doing stuff in Anguilla before.
Sure, the employee pays more in income tax, but there's no lifetime maximum on claims, no 'taking a chance' and hoping you don't get sick, no gambling with your health period. For me that extra 6% I pay in income tax is well worth it.
OK, there's also private insurance (for stuff like dental, and private hospitals). But since companies aren't expected to pay it, it's more competitive.
Why don't U.S. universities run coop programs? My school fought like hell to keep students on campus. I guess they viewed work as destroying the "art" of liberal arts...
I believe that a number of communities like this end up being "geek ghettos" on account of this.
I think this can apply to many cities outside of the silicon valley bubble.
Maybe I'm getting old, but I find it really hard to take advice from such young people. My personal take is that they're bypassing a lot of the experience it takes to make a well rounded business person.
I personally feel like a douche trying to give advice to other people, particularly people older than me.
I have a hard time taking advice from young people too. Well ... until Brian Wong, schooled me during a tech conference we were both panelists for.
A lot of super smart valley entrepreneurs "bypass" what it takes to be a well rounded business person ... I guess. But I doubt that has anything to do with age, and more to do with the current frothy acquisition and funding environment.
It's funny you mention Brian Wong, his company is a competitor of the company i work for. He's a smart guy, from what i can tell, but he would actually be one of the examples i'd use to cite lack of experience.
In software development, lack of experience can be a really big issue. For example, with lack of experience you may choose core piece of technology based on hype. coughmongodb and kiipcough
But, I digress, thanks for the article. Learned a bit about the Canadian start up eco-system.
If you're building disposable demos, you probably have more problems than building software.
Our visa is easier to get. :) (if you're in the US)
Also, I originally wrote it out as s/Canada/(Portland|Austin|Raleigh)/ and then felt like NYC was conspicuously left out. And further realized those other cities could post for themselves.