Marketplaces: Huge opportunities exist (see the Pew Research linked, even the most popular categories like ride and home sharing are barely used), yet building marketplaces are incredibly hard and there have been a slew of failures recently. But there will be winners who would learn/iterate from these mistakes. I came across the below fascinating stories (mostly by founders) explaining in detail why they failed and what are the challenges associated with building marketplaces that scale:
Techopia Ottawa "In total, we put about $250 Million worth of new projects into the ecosystem".
Our outgoing CEO, Bruce Lazenby, reflects on some key wins during his five-year tenure. ... See MoreSee Less
Fond and fitting send-off for Bruce Lazenby, outgoing president and CEO of Invest Ottawa Get the full story at: bit.ly/Techopia-BruceLazenby The Innovation Centre at Bayview Yards Kanata North BIA Startup Canada Jim Watson #Ottawabusiness Startup Grind Ottawa Ottawa Chamber of Commerce Ottawa Business Journal
Mark OrganWow, what a mess. The move to SF makes more sense now, it is a complete reset of the business. There is a tremendous amount of skill with marketplaces in SF - probably one of the most difficult businesses to get to minimum scale and also one of the most rewarding.
James MartindaleAn interesting article. A bit of a disdain for sales people there clearly not to dissimilar to what was seen on HBO's Silicon Valley. If you treat your sales people as part-time then unfortunately those will probably reflect in your numbers.
Sean MoffittGreat job Betakit crew rooting this one out - hopefully a cautionary tale for others who decide to move stateside in the future on throwing the Toronto tech talent base under the bus as the key reason
Ian KingThe real question here is how to frame our national investment in education. If we're taking a purist moral stance of education existing as a fundamental human right, then we can not place any restriction on what receivers of subsidized education do with said education. However, that is a deeply naive and fundamentally flawed stance that does not take into account the real politik of global factors at play of a nation existing within a system of nations. Subsidized education is a national investment in our talent development funnel and we need an ROI on our tax dollars. If all the talent we invest so dearly in to develop does not contribute back to our companies and if those grads are not paying taxes to help support our national economy, it's even detrimental to the US who is profiting so dearly from this - that parasitism of our talent will eventually collapse Canada and the US won't have its cheap talent incubator anymore. I've had several conversations with Tannishtha on this in the past.
The only comparable initiative that comes to mind are military-subsidized tuitions that are tied to mandatory years of service. Granted, we are not completely subsidizing tuition and so we can't expect military-levels of lock-in yet the degree of lock-in should be commensurate with the degree of subsidies received.
The alternative discussion here which I've seen Tannishtha propose in some other threads is that rather than restricting movement, the goal should be to create systemic factors that make Canadian talent want to stay and work in Canada. Nonetheless, this really is a a chicken-and-egg phenomenon - which one do we focus on first?
Altogether though, I guess we should end on this note: why are we accepting national subsidies on our education if we're not willing to give back to our country? We take investor dollars and are eager to give them ROI and yet why don't we think this way about our country and its investment in our collective development?
Matthew YangPunitive measure never work, and all they will do is cause frustration and anger among the targeted groups (university students), and it won't do anything to solve the original brain drain problem. If you want talent, be willing to spend money and effort on attracting them, rather than blaming the talent for leaving.
Anthony ReinhartIn recent conversations with Canadian expats working in tech in the Bay Area, most told me they would move back if they saw more opportunities here to work on big, meaningful projects. For whatever reason, they're not seeing them. Another suggested Canada's tech companies cannot claim to want to attract top global talent on one hand, while paying discount wages on the other. If we want to compete with Valley employers for the absolute best talent, we have to be willing to at least match Valley compensation, he argued; otherwise, we're signalling to the world that we're not serious about competing. This is anecdotal feedback based on a small number of interviews, so I can't claim these people's views are representative of all 25K Canadians in the Valley. But to solve this problem, we should probably start by talking to the very people this kind of payback proposal would target.
21 hours ago · 4
John RuffoloThanks Ian King. This penalty idea is not a policy plank of the Council of Canadian Innovators but the reporter seems to have written it that way. The current highest priority of the CCI is the talent agenda and together with the CEO members are developing ideas to increase the talent pool in Canada through innovative immigration and emigration ideas. Lots of great ideas are coming in and being formulated. One idea I heard bandied about is the double taxpayer hit when we taxpayers educate folks and then they immediately leave Canada. We paid for the education yet lose their economic input. So, in Ontario for example, when the Liberal Gov't announced a broad idea to pay for university education, is there a concept to pay for a students education by the taxpayers in exchange for them staying in Canada for say 3 years. This concept would be more of an incentive than a penalty. But as far as I am aware, the idea has not been fully fleshed out. I spoke to the ED of CCI who confirmed that the only point that was raised was the conundrum of taxpayer dollars leaking out ie. Akin to a churn issue for startups.
Ethan HenryNice work Mark Organ. The basic truth is that you have to compete with companies paying a lot of money. Talent follows the money. Working at Eloqua was great, but making 3x my Canadian income in the US is hard to argue with. And if you want senior talent, free lunches and gym memberships are nice but ultimately irrelevant. People beyond their 20's need higher comp, autonomy and flexibility - honestly not things most Canadian companies are famous for.
20 hours ago · 2
Julian D'AngeloYour average grad isn't flocking to the states because they simply can't compete there, my guess is that it's the top 5-10% that are leaving, maybe less. (Though concrete data would be nice.) If you don't have an ecosystem to tend to the brightest minds, you're only holding them back. It's like a junior hockey coach saying, we invested so much into you, and now you want to go play in the NHL?
Mike ShaverMy perspective on this is either informed or tainted by spending 6 years on the board of Canada's largest post-secondary institution, just as a disclosure. I didn't attend a Canadian post-secondary institution myself, but I am reliably informed that they're great. I've hired probably dozens of Canadian grads into positions in Canada and the US.
I think that this sort of initiative would meet with substantial resistance from educators. The ones I know *celebrate* their students finding a position they are willing to move a long way for, and one where their employer values them enough to do visa and relocation work. That sort of actualization is a wonderful educational outcome, and it will be extremely challenging to get educators onside with pushing people into "lesser" (as perceived by the graduate) jobs via financial penalties.
(It's also not clear that it would work. Companies put claw-backs on tuition when they pay someone to get an MBA, and it rapidly just became part of the calculus of a hiring package. If Google or Microsoft or Facebook have to put an extra $50K Canadian into a hiring package to pay the emigration tax -- I can't believe that we're talking about such a thing as serious adults -- then that's pretty likely to just happen, with some clawback. Existing signing bonuses and relo budgets can easily be 3 times that anyway, and one-off costs for hiring are regarded as below the noise floor in many places.)
What these CEOs actually want, I think, is to increase the value that Canadian industry gets out of the Canadian educational system. That's a reasonable thing to want, even if this is a pretty distasteful approach to it. There are lots of things they could be lobbying for that aren't punitive towards people starting their careers by working for a company that is excited to have them. One example: better investment in education-industry research collaborations, especially in the area where colleges have been pretty neglected, and often able to provide more readily productizable work.
(Education is actually a provincial investment, so taken at face value this would penalize a U of T grad going to work in Montreal.)
Benjamin BergenI'm the ED at CCI -- In today’s Globe and Mail our goal was to create a conversation around issues of retention for domestic tech companies. I want to clarify that ideas discussed in the article are not official policies CCI is currently advocating. CCI is instead encouraging provincial governments to design policies that will ensure made in Canada companies can grow and thrive and talent is one of the critical issues. There are many different views on how best to tackle it and we welcome all ideas. CCI is simply seeking a dialogue with government to tackle this important issue for tech sector.
Tannishtha Ray PramanickSlightly concerned here that whenever the topic of the great Canadian tech brain drain has come up as an issue to deal with, people automatically assume that anyone looking to rectify the situation is hinting at closing borders/restricting emigration. I get this article is sort of hinting at that, but even in past discussions when that hasn't been hinted at, people have taken a critical stance by calling out a point that no one is making, namely; restricting movement. Relax guys, no one is saying Canada has only one way of dealing with the issue, and that's by becoming like North Korea. I don't know why this keeps happening.
Hi everyone, I'm a features writer at the Financial Post with a strong interest in tech. I wrote this story about the MaRS west tower opening that references the debate that took place here. ... See MoreSee Less
Ivan TsarynnyHappy to see MaRS reaching this milestone. MaRS ICT and especially Salim Teja were instrumental for helping PostBeyond reaching cash-flow positive state in the early days, focusing on sales and fiscally responsible growth. But MaRS is a polarizing topic and many have an opposite view.
Varun MathurI would just add welcome Claire Brownell and thanks for laying out a balanced view which will reach far more readers.It is good to see different perspectives coming from different local media publications here.
Time for a #brexit to Canada campaign? Great tech talent woke up very unhappy about their future this morning. Many of them Canadian expats. Time to tell them about opportunities back home? ... See MoreSee Less
Reuven CohenLove it, Or we could build our very own debt ridden police state to call home.
1 day ago · 1
Alex TomicIMHO, #toosoon and perhaps not a good idea ever - a desperate, vulture-like quality to it. . e.g. the Swiss, the classical beneficiaries of instability like this, simply sit back and let capital and top talent come to them.
24 hours ago · 3
Andrew Iain JardineI'd like to apologise to the global economy on behalf of my country for making such a terrible mistake.
But please don't kick us whilst we are down. It's a sore subject.
Please also know that educated millennials voted overwhelmingly in favour of the EU. This is not what we want.
Tannishtha Ray PramanickIt actually means we may have to hasten the development of financial technologies to get around the language barriers that will persist now with London no longer being the english-language centre of finance in the EU.
I am in the process of setting up the legal structure for my new business. Planning on a Delaware corp (easy for investors, can use YC SAFE/Convertible note...) with an Ontario corporation sub (get those SR&ED credits). Planning to have a presence in SF and Toronto (with a majority of the employees in Toronto)
1 - Have any of you entrepreneurs done something like this before? Any tips/tricks I should know about?
2 - Any lawyer you would recommend that specifically deals with this US/CANADA combo legal entity structure?
Trevor ColemanTrying to maintain SRED elligibility while having a US org is actually really tough. We have been through this whole thing a number of times.
I think a Canadian subsidiary of a US corporation would not be SRED elligible, but I'm not a lawyer. You should consult the definition of a Canadian Controlled Private Corporation (CCPC):
We ended up going through a lot of pain, including delaware corporations and exchangeable share structures.
Ultimately, the advice I would give is keep it simple. Most cross-border structures actually make it a lot harder to operate your business. The complexity increases exponentially, and the weirdo structures are much more a deterrent to investors than anything else.
Happy to have a call to talk through anything. Just shoot me a direct message.
Wilkins ChungUS based subsidiary would only be eligible for SR&ED as a non-refundable tax credit using the lower rate. Also, if you every plan on repatriating those earnings to the parent company, SR&ED is effectively useless since you get no foreign tax credit.
Only way to get refundable SR&ED is to create a CCPC (with yourself or someone you trust as the only shareholders) and have your parent company contract work to the CCPC.
Send me a message about this if you want to chat. Have very detailed information on this whole process and the benefits/drawbacks.
Reuven CohenIf your pre revenue or have a large share pool, a delaware company will cost you a lot more. If you make decent money it's a good choice. A another cheap first step is an llc with a Corp formed upon first funding.
Mathieu LachaîneStart small, create traction, then put up time & money to create the legal structure.
If the company is not worth anything, the legal structure is just that; an empty shell you've thrown money at, instead of leveraging it into R&D or bizdev.
4 months ago · 4
Elliot NgaiSince your planning to be in Toronto its best to join a regional innovation centre and use their pro bono legal services. They can help you with this
4 months ago
Hussein FazalThanks for all the thoughts/comments. Love this group. Will keep you posted on where we end up with this analysis
4 months ago · 2
Jeff FedorHey Hussein. We did it once and it was a huge hassle. Also brought a ton of scrutiny and very high legal accounting fees . If just doing it for SRED I'd say it's not worth it unfortunately
4 months ago · 4
Cory RosenfieldI would highly recommend working with a Canadian lawyer/immigration expert opposed to a US firm. We (qoints) did consult a US attorney as well. We made our US company (B corp) a sub to the Canadian company because that avoided any issues for claiming SR&ED. Harris Max can share additional insight if needed.
Mark MacLeodYou should speak with a lawyer, but I don't see why you need the C corp. US investors can invest in Canco directly with no adverse tax consequences. Note - as soon as Canadians own < 1/2 of Canco those tax credits start to go away
4 months ago · 6
Mark MacLeodAnd happy to hook you up with some great lawyers
4 months ago
Michael MahonThis will cause you huge problems down the road if you intend to operate principally as a Cdn company. You should be thinking of this via a business lens vs 'how can I secure investment lens'. If you are a Canadian company and intend to operate here, you should incorporate in Canada. Makes more sense operationally, tax wise, legal wise and from pure business perspective. However if you wish to move your business to the US, then go for it.
There is no need for you to incorporate in US just to attract US investors. Canadian legal documents (equity, conv debt, SAFEs) exist that are 'good to go' for US and Canadian investors. I would suggest talking to Chad Bayne and/or Geoff Taber at Osler who have led the way here.
Michael MahonMore to add... we know a bunch of companies that considered this and stayed Canadian (and some even resisted YC's pressure), so can connect you. If you go that route, as a director of your company you put yourself (and other directors) at personal risk from US legal exposure as well as US tax implications. Want to file US taxes with IRS?
Mathieu LachaîneAlso to note, a structure with many LLCs get investors suspicious. Fees are also much higher (double registrations, double tax codes, double flilings) and you will be doing double the bureaucracy management, when you want to focus on the business, not governement communications. And trust me, there more than enough just with one province + country.
Start local, grow global. There is no problem in switching things to a different LLC structure later, *when it will be necessary*.
4 months ago · 2
Francis PerronWhat about Estonia? I see some startups registering their companies over there. What are the benefits?
4 months ago · 1
Stephen PartridgeLove the topic! what did you end up doing? All advice seems sound, though at the same time, I get what you are aiming for. TICs are one aspect and alone may not justify the complexity of a dual reporting structure.. but once you've taken the process all the way from start,growth,scale, and sale (which i did).. you experience a lot of painful pitfalls anyway you structure, so it is smart to try and have more ups than downs).. I have also been working on the next "ideal" structure to try and win more with less pitfalls.. would love to hear where you are at in your thinking.
Hussein FazalThanks EVERYONE for their help on this topic. All your comments were super useful. I wanted to let everyone know where we ended up on this:
We ended up going with a Canadian company as the parent with a US (Delaware) Sub. Our VC's (Canadian and US) invested in our Canadian company and we will be earning full SR&ED credits.
Based on my research and analysis, in MOST cases it makes sense to keep things simple and just have a Canadian company. However we were in a unique situation being in the travel space. BD deals are much easier if you have a US company, everything is done in USD, and in general things runs smoother with a US company (and a USD bank account opened with a US bank).
Feel free to PM me if you want more details.
On the legal side, we spoke with quite a few very smart lawyers. We ended up going with Chad @ Osler. He had a really good grasp on both the Canadian and US side - and the pros/cons of all the different structures. He is based in Toronto and Osler has an office in New York. A lot of other law firms had just a Canadian presence or just a US presence and it would have required us to hire 2 firms and deal with the extra cost/overhead of them communicating with each other.