Offshore cruise ship will be micro-nation

It’s a long way from Calgary to the coast — but two Web developers based in the Prairie city will be making the move some time soon. In fact, they’ll be going farther: nearly 20 kilometres off the coast of San Francisco, to be exact.

Mitchell Callahan and Dominik Sauter, founders of Calgary-based website and app design studio Saucal Studios, are taking a berth aboard a new concept in startup incubators: it floats.

Blueseed One — a US$30million cruise ship that will be anchored off the coast of California, focused on providing support for software startups — will house 1,000 entrepreneurs, according to the project’s co-founder and chief operating officer Dan Dascalescu, or about 300 startup companies, who will live and work on the boat.

It’s a big change for Saucal Studios, a 2.5 year-old Web design and marketing agency with clients that include Discovery Air and Coval Energy under its belt. The founders work mainly from their separate apartments, or at the local Starbucks. They occasionally rent a boardroom for client meetings.

Now, they need to take their company to the next level. Saucal is moving into other ventures, including Mojito, an online, do-it-yourself website-building service for small businesses. Mr. Callahan and Mr. Sauter are also working on an iPhone app called MapTune, which allows musicians to connect online.

But Saucal is experiencing growing pains, because it is difficult to find talent in Calgary. “Usually, it happened at critical times during projects, like finding the right business partner to help with Mojito. Sometimes it ends up bottlenecking your opportunities,” Mr. Callahan said.

The agency has had to reach out to Vancouver and other locations for talent that it then has to manage remotely. It isn’t easy, he admits. “So Blueseed sounded like a perfect idea for us,” he said.

Saucal found Blueseed online in April 2012, and was one of the first firms to contact it. “It was the coolest thing I’d ever heard of,” Mr. Sauter said.

The pair flew down to meet the Blueseed team in September 2012, and Blueseed commissioned them to design its website, which Saucal finished in April. They signed up for residency early on.

Theoretically, Mr. Callahan and Mr. Sauter could have chosen other, more landlocked incubators in California, and as Mr. Dascalescu admits, ocean costs are high. The boat will be chartered (buying a new one would have cost US$50-million, he said). That’s still a hefty price for real estate. So, why float the idea at all?

Blueseed is bypassing U.S. immigration rules. “Our idea became hosting startups and incubating them on the ship so that they wouldn’t have to face regulatory hurdles,” Mr. Dascalescu said. “Startup immigrants can’t come to the U.S., and if they do they have problems getting talent.”

The H1-B visa program allows immigrants to work in the United States but is designed for large, established companies rather than startups. By positioning the vessel outside the U. S. in international waters, he solves that problem for immigrant entrepreneurs eager to take advantage of California’s funding opportunities and many contacts and mentors.

Mr. Callahan and Mr. Sauter will be among them when the ship launches in 2015 (later than originally planned). As part of their berths on the boat, they get to take advantage of two ferries a day, which will get them into Half Moon Bay, in Southern California, within 30 minutes.

Each entrepreneur berth costs about $1,600 a month, Mr. Dascalescu said, and there may be an equity arrangement for startups too.

Saucal isn’t the only Canadian startup to express interest in Blueseed. Canadian entrepreneurs are the fourth most common. Most of the startups are software companies, Mr. Dascalescu said, making the ship tech-heavy.

“It’s going to be nerd heaven,” Mr. Callahan joked.

Initially, there will be several microwave links beaming Internet data back and forth from the coast. Later, it will switch to either the laser technology used in military communications, or a meshed network of oceanic robots relaying data wirelessly. The alternative is undersea cable, at a cost of about US$10-million.

An initial seed round of funding for the project came from Floodgate Fund, Correlation Ventures, and Xu Xiaoping of ZhenFund, a Beijing-based angel fund. Subsequently, BitAngels, a group of investors based in California, contributed US$100,000 in June.

“We also have a promise for 1/3 of the launch cost [US$31million] from a venture debt firm in Silicon Valley,” Mr. Dascalescu said.

Canada has lost many entrepreneurs to Silicon Valley, but this is the first time the country will have lost some to what is effectively a micro-nation.