Should Canadian start-ups consider moving to Silicon Valley?

Three weeks ago, Katherine Barr, partner with MDV-Mohr Davidow Ventures was in a Silicon Valley coffee shop. There she overheard a couple of entrepreneurs discussing their start-up and became intrigued.

Before leaving, she handed them her card and suggested they give her a call about funding.

Discussing a start-up idea within earshot of a venture capitalist is the kind of serendipity that seems to only happen down south in the Valley.

Barr, a Canadian expat, related this anecdote as part of a panel discussion on C100 at the Canadian Venture Capital Association Annual Conference.

C100 is a group of entrepreneurs, venture capitalists and other technology workers helping Canadians and Canadian expats in Silicon Valley.

For example, the ground recently hosted 20 Canadian-based start-ups with 48 Hours in the Valley to provide mentoring and give the companies an opportunity to pitch to potential investors.

Barr related her coffee shop story as the panel discussed whether Canadian start-ups need to head out to California in search of capital and customers.

Matthew Clark, senior director of strategic and emerging business team for Microsoft, noted that he’d never heard a Canadian entrepreneur complain about moving to California.

“Many feel compelled to go the Valley,” he said, to “move to where the VCs are.”

However, Shaherose Charania, a former Calgarian now living in the Valley pointed out that the cost of living is much cheaper in Canada, drastically lowering operating costs.

“If you’re that good, the VCs will come to you,” said Robert Simon of Arriva Ventures.

But beyond just venture capital, there are other advantages to setting up shop in The Valley.

Start-up incubators, mentors and the emergence of “Super Angel” investors.

While these advantages are beginning to take root in Canada, it is still nowhere near the degree that they exist in California according to the panellists.

Simon suggested a compromise: Some companies keep their development team in Canada and set up their marketing division in California, a compromise that he said has been successful for some.

As far as venture capitalists forcing a Canadian company they’ve agreed to fund to move south of the border, Angela Strange (whose travel guide start-up was recently acquired by Google) said that the VC  business can be just as competitive as the start-up business.

“If you find an A+ start-up, you don’t want to rock the boat and say ‘You need to move!’”

Chris Albinson, another expat Canuck who does enjoy calling Silicon Valley home, would like to see the situation in Canada improve and worries especially about Ottawa, formerly considered “Sillicon Valley North” before the great tech bubble burst at the turn of the millennium.

“Now that Nortel is no more, there’s maybe four to five years before Ottawa loses its muscle memory,” he said. “Talented engineers will start leaving.”

But, he also said he thinks fears of “brain drains” are over stated.

He explained that other countries like Mexico and Israel consider their expats to be assets, rather than losses.

“Don’t worry about brain drain,” he said. “Worry about brain flow.”