Recently, there’s been a lot made about the advantages for starting technology companies in Canada, as well as the optimism for the Canadian Startup Visa.
But to me, it’s always felt slightly disingenuine and self-promotional. Canadians trying desperately to convince themselves that they’ve arrived on the tech startup map. In a global market, would anyone with experience, connections, and residence in Silicon Valley, actually choose to start a company in Canada?
Yes. I did.
In the last five years in the Bay area, I’ve built a healthy Rolodex of Silicon valley connections. But in January 2013, I moved back and incorporated my a new company in Canada; and not because of SR&ED, not because of IRAP, not because of soaring engineering costs in Silicon Valley, not even because of the US’s luddite immigration policy which makes it difficult for foreigners to start companies in the US.
I did it largely because of the incestuous bubble of false positives that pervades Silicon Valley.
The valley is an amazing place, and in a lot of ways, I’d say there’s no better place to start a company. If it weren’t for the fact that I have a strong network there, allowing me to leverage what the valley is amazing at (capital, marketing, business development), I might not feel as strongly about starting in Canada.
But for all the positives of the Bay Area, there’s one downside that few talk about which can kill startups: false positives. False positives lead to premature scaling. And premature scaling leads to startup’s death.
It’s well known that startups, new products, and taking risks are all deeply ingrained in the Bay Area culture. But what’s not talked about is the downside to this.
Ideas often succeed there—but nowhere else. In the Bay Area, investors, friends, and early adopters are so embracing and supportive of new ideas that startups get funded, apps get downloaded, and ideas get thumbs up, even if they won’t scale.
All too often these startups hit a wall when they try to scale, after having spent way too long on a vision that doesn’t scale. I love Zaarly, believe in the team, and vision, but I can’t help but wonder if they would have changed directions earlier had they been based out of Vancouver or Edmonton, where they could have better validated their business, instead of being based out of San Francisco, and raising money on (literally) day one from Ashton Kutcher.
It’s not all upside for Canadian startups. People are less risk averse so recruiting is hard. But it’s hard anywhere. I’d argue it’s harder in the Bay area, where instead of competing with RBC, Atco, and Telus, you’re competing against Pinterest, Facebook, and Twitter.
Fundraising is possibly a bit harder in Canada. But Canadian firms I’ve interacted with—namely iNovia, BDC, Version One, and Real Ventures—are great. Furthermore, a 2010 change in tax laws has essentially removed all the barriers for foreign investment in Canada.
The real challenge, in my opinion, is to constantly be striving for a massive vision in an environment where few peers are doing the same. In the valley, you’re crazy if you’re not shooting for the moon. In Canada, you’re crazy if you are. It’s easy to settle for status quo in Canada.
At the end of the day, my advice to Canadian startups is to stay in Canada, but build connections and spend real time in the valley focusing on business development and marketing. And finally to surround yourself with other local startups shooting for the moon.
Originally published in April 2013.