in Canada

Location, location, location

Editor’s note: This is a guest post by Lymbix founder and CTO Josh Merchant (LinkedIn, @joshmerchant). Josh was born and raised in Brampton, before relocating to New Brunswick to attend the University of New Brunswick. Josh and the team at Lymbix are based in Moncton, NB but spend time on planes between Toronto, San Francisco and New York. Disclosure: David Crow sits on the Board of Directors for Lymbix Corporation. 

Idea – check. Cofounder – check. Home base – che-… hmm?

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At a company’s inception, what factors do entrepreneurs consider before deciding on a location to set up shop?

Scenario A:
Some may automatically choose their hometown, whether it is Halifax, Brampton, or even Hazelton, as a default location. With this option, entrepreneurs have the potential advantages of already knowing the city’s particular market quirks and tapping into a network of home-grown connections.
Scenario B:
Conversely, others flock to a major city such as Toronto, New York, San Francisco or Palo Alto, which have a thriving tech communities. This is a great option, as we see many acquisitions and exits coming from these startup hubs.

Is there any benefit to laying a company’s foundations in an “out of market”[1] (non-traditional) city, like Moncton? Definitely. Here are some reasons for why you might choose to set up your next startup in a location other than a major city.

Keep Costs Low

The average office rent and employee salary are noticeably lower in a city such as Moncton, especially compared to Toronto. The ability to limit the rate at which a young company burns through cash can be a major advantage right out of the gate. An “out of market” city injects new meaning into the phrase “cost of living.” In these locations, emphasis is shifted to the “living” part, and entrepreneurs don’t have to uniformly dread the “cost” part.

“One of the big advantages I see, and have been privy to is the political support. In a “smaller pond” with a limited amount of startups and successful IT companies, it is easier to get quickly noticed….We have been extremely fortunate to have the local and provincial government assist in opening doors for us, providing us with early incentives to stay in NB and shine the spotlight on us, which in turn helps raise capital and grow our business.” — Matt Eldridge, CEO & Founder Lymbix

Low Competition for Early Sources of Funding

Getting started is cheap, but eventually everyone needs money to keep that ball rolling. Hopefully by this point, you’ve already got traction and your idea is gaining momentum. Without some form of traction, it doesn’t really matter where you are. If you do have it, however, it is easier to secure government and angel funding in a province like New Brunswick. Why? You will encounter significantly less competition – if any – for what money is available.

Low Competition for Talent

“If you build it, they will come.” Well, it isn’t quite that easy in a small tech community. However, there is a greater chance that there aren’t as many companies drawing the interest of the local, tech-minded talent. Your company could be one of only five fishing in the talent pool in a particular city. Let’s face it, there are smart people living all across this country – not just in Toronto.

I can’t say for sure, but I would venture a guess that there is less employee turnover in a city like Moncton as well. This translates to less time wasted worrying about knowledge transfer, and more time invested in building a strong, diverse team that you can count on.

“Building a company out in a growing tech community is great – it’s like a talent magnet! The more news that’s pushed out of prospering areas like San Francisco, Vancouver and Toronto, the more talented developers want to jump on an opportunity locally without having the resources to relocate.”

If you could do it all over again?

If you were starting out or had to do it all over again, what city in Canada would you call home for your startup? Why? 

Acquisitions across Canada

I wonder where Anand Agarawala (@anandx), Nick Koudas (@koudas), Ray Ready (LinkedIn), Albert Lai (@albertupdates) will set up shop for their next venture?

Footnotes

FN1. An “out of market” city seems to be a great ecosystem in which to nurture a startup.

However, deciding on such a location does have its drawbacks:

  • In the early days, working closely with new clients and prospects can be a challenge in a small market. It is more difficult to have those valuable face-to-face feedback sessions away from large urban centres.
  • If and when an opportunity arises for rapid growth and expansion, you may be hard-pressed to find the quantity of talent your company suddenly requires. After all, startup life isn’t for everyone.
  • Ideas are contagious. It is easy to observe the community-created inspiration in the valley or in Toronto. A twenty-minute coffee break with an intelligent peer can spur an eight-hour hackation thanks to a flood of ideas. Motivation automation.

Editor’s note: This is a guest post by Lymbix founder and CTO Josh Merchant (LinkedIn, @joshmerchant). Josh was born and raised in Brampton, before relocating to New Brunswick to attend the University of New Brunswick. Josh and the team at Lymbix are based in Moncton, NB but spend time on planes between Toronto, San Francisco and New York. Disclosure: David Crow sits on the Board of Directors for Lymbix Corporation. 

  • http://sumbercara.blogspot.com/ Clommot

    I`am not an american nor european or any western part so this post is only a reading stufffor me, no comment.

  • http://engag.io/ William Mougayar

    Two point on this. 
    1) I’m not sure that the choice of the city itself matters on its own. All things being equal, what matters is the relationships you have in the city that you’re in, or the ones that you can attract if you’re a magnet for that. There are enough success cases from coast to coast. Obviously, the Toronto-Waterloo corridor (if there was one) has the highest concentration today. 

    2) Why are we so fixated on the San Francisco connection? I think NYC is another vibrant community/hub for tech startups, and is getting funding levels only second to Silicon Valley. And it’s so much closer and more convenient to travel to from Canada’s East coast. 

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  • http://twitter.com/kovasys Alex Kovalenko

    While I agree costs can be reduced, your chance for success would also be greatly reduced to the fact that it’s almost impossible to compete for good talent in small towns. Small towns have very limited pool of candidates – let alone qualified candidates. We see it all the time when we have clients in such cities as Sherbrooke or Kingston, etc. And as you guys know, your employees are a big part of your company’s success.

  • http://www.getsnappay.com/ Jim Rudnick

    Nice take on all things Canuck here, Josh…and as a strong Hamilton, ON supporter I would like to add that once a community begins to gain some momentum….that in of itself creates more startups…which in turn, creates more momentum. Sort of like a ball of snow rolling down a hill, picking up both size and speed…your talent pool grows and your opportunities too!

  • http://twitter.com/albertsupdates Albert Lai

    Half dozen times later of doing this (startup thing)…. I have a few quick comments:

    1) if you are in most “traditional/hot/social” B2C markets — you must have a presence in the valley at some point if you want to be on equal footing with your global peers (and by valley, I actually mean SF or PA, even the proximity to central SF/SOMA will make a difference IMO)

    2) if you are B2B — being close to customers is important (which may for some mean SF)

    3) being effective at having virtual teams is a huge plus, and becomes an important asset as you will always find people that are not in your hometown/HQ — no matter where you are located.

    4) being in Canada/being Canadian for a LOT of things now is actually a huge advantage, I’m hoping to write a blog entry about this sometime in the near future….

    5) IMHO, being “multi-homed” has major advantages and disadvantages, I like having offices in many regions to take advantage of “local resources” (human, capital, time-zone, etc.)  – there is overhead, yes, and it does take some scale to make this work

    … been meaning to write more about this topic, will probably try to post something in the new years about my own experiences.

  • http://twitter.com/shradr shrad

    I actually have a to disagree (i know, a very un – canadian thing to do ;-0 but I promise to do it very politely). I spent 10 years going to school and working in Saint John, NB. I didn’t grow up there so I didn’t have the connections required to make things happen. The truth is Atlantic Canada is a ‘relationship’ market and as a 1st generation Indian immigrant, it was really difficult to break into it. Also, the only real access to seed capital is the government and guess what? you really need to know someone there too.

    I hope this isn’t coming off as a ‘whine’ post. It’s just a reality check that these experiences are not equal for everyone :-).

    pssst…there certainly were parts of the post i did agree with…best of all Atl Canada boasts some of the nicest people around – so it wasn’t all bad :-)