Silicon Valley offers more than deep pockets
READILY AVAILABLE TALENT DRAWS SOME CANADIAN STARTUPS SOUTH
For many Canadian university graduates with highly coveted technology skills, Silicon Valley radiates a frenetic energy and lifestyle that’s hard to pass up.
But startups also are testing the waters of the San Francisco Bay area in varying degrees — some with contract workers, others opening permanent offices — but there’s plenty of debate over whether Silicon Valley lives up to the hype, and if the Toronto-Waterloo corridor, which is aggressively trying to compete, can’t offer a competitive, if not identical experience.
Canada’s two billion- dollar startups, Kik Interactive Inc. and HootSuite, have a presence there, albeit a small one, and others are looking to establish a foothold.
They face vocal advocates — including the mayors of Toronto and Kitchener-Waterloo who recently went on a mission to Silicon Valley to sell the region — who would like to convince startups to stay put, and talent to return to Canada, along with investment dollars. But what’s becoming a compelling option in this tug of war is the middle ground: exploiting California’s talent and deep pockets without moving there.
“You can either convince a team of people to move to Canada or you can start a satellite office,” said Dave Jaworsky, mayor of Waterloo, Ont.
The mayors’ drum beating could be seen as a preemptive tactic; there is an increasing number of University of Waterloo graduates moving to California, although they still make up a fraction of the school’s alumni.
Between No v e mbe r 2005 and December 2015, the number of Waterloo grads in the state grew 70 per cent. But the 2,137 who have permanent addresses in California still make up less than two per cent of the overall alumni network, and roughly five per cent get their mail in the U.S.
In contrast, one- fifth of all alumni call Kitchener, Waterloo, Cambridge, Guelph and ot her s urr o unding c o mmunities home, many of whom start their own companies or join existing startups.
Yet, the University of Waterloo, which has the arguable distinction of producing Canada’s highest- calibre engineering graduates, recognizes that students are inclined to follow Silicon Valley’s potential.
“We are seeing a pretty significant demand for our students and we’re trying to grow to respond to that,” said Wayne Parker, dean of engineering at the University of Waterloo, who hosted an alumni event in California this spring.
“When we introduce new programs, we do evaluate them with respect to the need out there in the industry.”
Derek Ting, CEO of TextNow, a low- cost wireless solution that had $20 million in revenue last year, said he opened an office in San Fran- cisco in April with four staff to pursue qualified employees, not to coax dollars from U.S. investors. Ting contends that despite the University of Waterloo granting nearly 8,000 degrees last year, there is certain talent that’s challenging to find.
“Before we opened the San Francisco office, we really had nobody that was responsible for finding ways to get new customers,” he said. “I’m not saying there aren’t those people in Canada, but those people are much easier to find in Silicon Valley.”
Ting plans to expand the satellite office to 10 people within the next 12 months with staff who specialize in marketing and can figure out the optimal product mix to retain users. However, he said the head office and its 80 employees will remain in Waterloo, despite pressure from venture capitalists.
Adarsh Pallian, chief executive of Vancouver- based Trippeo, is set to make a similar move to San Francisco.
After launching his software company that automates the travel and expense process two years ago, and with a year of paying customers under his belt, Pallian wanted to move from shared work space into a permanent office in the same building.
After recently spending six weeks in San Francisco for financing discussions and a series of meetings with customers, he plans to open an office there in the fall, with a team of six sales and marketing personnel.
Similar to Ting, Pallian said an office in Silicon Valley will make it’s easier to attract new customers. But it also provides opportunity to mingle with potential investors.
The company raised an undisclosed amount from a Seattle- based investor last year, and is attempting to close a few rounds in the coming months. ( To date, Trippeo has received no Canadian funding.)
Pallian’s reason to keep his six- person headquarters in Vancouver is mostly to keep the exorbitant costs of California’s development talent off his balance sheet.
“As a Canadian founder, I’m still a firm believer of hiring people in Canada. I’m not a believer of moving everything there for the sake of moving there,” he said about a Silicon Valley move.
Derek Ball’s ties to California shed light on when it’s right to be present in the state. He was already in the United States when he incorporated atVenu in Delaware. He operates an office in Orange County and created a registered entity in Calgary where all but three of his team of 10 now work.
“I think opening up a satellite office in the U. S. doesn’t make sense until you really know your product already strikes a chord with your customers,” Ball said.
“You have to get that initial traction. Opening an office before that doesn’t serve a lot of purpose.”
Once startups have reached that point, he said, they should concentrate on acquiring customers, finding distribution channels and scaling the business.
BEFORE WE OPENED THE SAN FRANCISCO OFFICE, WE REALLY HAD NOBODY THAT WAS RESPONSIBLE FOR FINDING WAYS TO GET NEW CUSTOMERS. I’M NOT SAYING THERE AREN’T THOSE PEOPLE IN CANADA, BUT THOSE PEOPLE ARE MUCH EASIER TO FIND IN SILICON VALLEY. — DEREK TING, TEXTNOW