Canada is THE Best Place to do a Startup

Last night was Five Mobile’s big Zynga acquisition celebration party at Cheval’s rooftop patio. Great event, lots of Toronto’s startup community were hanging out. Lots of cool conversations and introductions.

It had a few of us talking about the current state of the startup eco-system right now.

Before your eyes scan down, I think its best to make sure you are sitting, with a glass of ice cold water.

Here’s the exit count by annum (source: techvibes list of acquisitions):
2007 – 6 exits
2008 – 8 exits
2009 – 14 exits
2010 – 27 exits
2011 – on track for 35 exits (about 17 to date)

Yes, that’s right, the startup eco-system is actually on a hockey stick growth curve – phenomenal!!!

The vibe from many folks in the room – “Canada is back, this is awesome, lets go start more companies, why are dumb new grads going to Facebook when they can make it BIG with their own thing”!

In fact, I’m so jazzed up after last night that it makes me want to say something bold. Something crazy.

Canada is THE place to start a company right now – better than Boston, better than New York, better than the f’n Valley.

Look, I know it sounds crazy. I know that you could show many sets of stats about the Valley and deal flow and billion dollar companies and exits and all sorts of numbers. Yes, the Valley is bigger – MUCH bigger.

Bigger <> Better

I’m NOT going to compare quantitatively. Let me instead give you an interesting parallel – the Montreal music scene of a few years back. By any set of numbers, Montreal was and is NOT the heart of the global music scene. Clearly LA, Tokyo, Nashville, New York, etc are all MUCH MUCH bigger and more influential.

Check out this list of amazing bands that came out of Montreal from that period – Arcade Fire, The Dears, God Speed! You Black Emperor, Tegan and Sara, Broken Social Scene… the list is awesome. So, would you rather listen to some churned out robo pop song from LA or would you rather listen to say, The Stars. Montreal had massive influence globally and re-shaped the entire indie rock world.

Seriously, if you were starting a band in say 2003, would you rather be anywhere than in Montreal? Could you imagine doing gigs with Arcade Fire & Broken Social Scene? Can you imagine the community and camaraderie? Would you trade that to go live in LA so you could get a monster recording deal and be hanging with record execs all day? And that’s what I think the Canadian startup scene feels like right now – great companies, great people, great community building cool stuff – everybody is jazzed because something special is happening right here, right now. We’re not the biggest, but it is good here.

The Control Factor

The automatic first whine I’ll hear from so many of you – “but there’s no money here”. Bull poopy. Yes, there aren’t VCs up north. That doesn’t mean we don’t have money up here. Did you read the angel investing report by Bryan Watson. 88 deals, $35mm, 90% net new in 2010. Last night I talked to three different companies who had raised major rounds from angels around the $1mm mark. The angel scene up here is the VERY REAL DEAL.

Entrepreneurs need to understand that the early stage funding scene in Canada does not look and feel like what they read about in tech crunch and from Mark Suster, Brad Feld, Fred Wilson. There’s no Sand Hill Road equivalent. Its just different. You need to find the angels. That means networking. That means contacting guys like Bryan Watson (@bwat) who posts here regularly, or emailing us folks at startupnorth for contacts or hitting up angel investing groups, or applying to local accelerators who will have great angel networks like Year 1 Labs, Mantella, Extreme U, Grow Labs and so on.

This is more important than you think. Angel deals “tend” not to have control issues & board seats or deal vetos and all those fun big clauses you spend thousands of dollars in legal fees haggling over. It means you’ll be less likely to have “Asshole VC” stories, extravagant liquidity preferences, management cram downs, and so on. It probably makes “operating” your startup a lot easier. A very good reason to start a business here.

We Are Building Cool Stuff

I met Ken Seto, one of the founders of Massive Damage. Location based games and check out that art work! Did you guys see what Anish and Jeson were doing with Social Deck before Google bought them? Or Anand Agarawal with BumpTop before Google bought them… the BumpTop GUI was one of the best I’ve ever used. Have you used Kik, its one of the best user experiences on my Android phone. Freshbooks, another great product. Or check out the list of projects that Xtreme Labs is working on. I love having folks building awesome stuff in the community.

Canadian Engineering Talent is Second to None AND Available

Waterloo, U of T, Montreal & Ottawa, there are great, great engineers coming out of these schools. We all know the stories of Facebook, Microsoft, Google fighting over the top grads from the big engineering schools. I could iterate through tons of my ex-Waterloo classmates who are senior product managers or senior devs at these companies. Not only are the engineers great, they are available and affordable. The engineering crunch felt in New York and California just isn’t as bad as it is in parts of Canada. And to be honest, developers are more affordable up north. Probably by a factor of 20-30% versus NYC or the Valley.

I could go on and on about why I think right now is the BEST moment to start a company in Canada. Sure, the VCs, Angels and Incubators in the US are far better marketers and easier to find so in theory its easier to get funded. And I’m sure living in Man Jose or in the large suburban neighbourhoods of Palo Alto is really cool – suburbs are great. And of course, if you’re ugly, you SHOULD go live in San Francisco with the other non-beautiful people anyways.

Or, you could be like one of the awesome bands in Montreal in the early 2000s who got to be part of a great community that did something special and had the time of their life doing it.

Under the Hood – Lymbix

We continue the Under the Hood series with a Q&A with Lymbix CTO and Hot Sh!t List member Josh Merchant (@joshmerchantLinkedIn). (Disclosure: I sit on the Board of Directors for Lymbix and helped them with their application/acceptance to the Microsoft BizSpark One program). Lymbix has raised approximately $3.8MM in funding from GrowthWorks and other angel investors. The Lymbix team is 18 people based in Moncton, NB and continues to grow.


Lymbix Sentiment Intelligence measures the tone and emotional impact of words in everyday written language. As a global leader in sentiment analysis technology, applications powered by Lymbix provide a more definitive look at specific emotions like friendliness, enjoyment, amusement, contentment, sadness, anger, fear, and shame and give insight to the true meaning of what brings positive and negative results. In short, Lymbix delivers incredibly fast sentiment analysis and can identify the real emotion in any domain of text exposing clarity and confidence on an individual message level.

Product Breakdown

An engine that analyzes emotion in text. Simply put, we’ve built an emotional spell check that we call ToneCheck, which looks into the emotions written in email communications, lifting out how someone may feel – or rather, the “tone”, they’ll perceive when they read the message. This technology is built off our core engine, which is available as an API for partners to understand more user expression style sentiment analysis. As a business, Lymbix is building better business communication tools and reporting for companies to analyze communication in sales, human resources, customer support. Think of it like an insurance package fitting nicely into your risk management profile.

How the Technology works

We use an array of techniques to training our systems to better understand the emotional interactions in common day communication. We analyze streams of data, whether it be from Facebook, Twitter, emails, blogs, or the news, and dissect elements of “emotive context”, meaning a snippet of text that can cause an emotional arousal in an individual. This is our linguistics component of our system. We believe in human powered insight, so we then take a slew of emotive context, and blast it through our own crowd-sourced network called We have just shy of 10k raters who give us their opinions of both “real” and “fake” emotive context to gauge the levels of emotion that can occur based on parameters such as frequencies, demographics, 8 primary emotions and so forth. We then build emotional lexicons which give us the power to test any incoming queries to detect emotional relevancy. We then apply our “emotional reaction algorithms” to come up with how different emotions play a part in determining the degrees of emotion in the query. When the system ever detects something that it has never heard of it, it quickly takes action and tries to learn it. In effect, the system gets smarter the more that its used.

Technical Details

We’re hosted on Rackspace, as well as Azure. With Rackspace we have a cloud and private hosted solution giving us the elastic scalability that we need to service this type of NLP on a massive scale. We’re a nice blend of Ruby, Java, and C#. Sounds gross, but for us, the solution fits quite nicely.

For horizontal scaling efforts (our API, and freemium ToneCheck users) we use multiple nodes replicated as our “workers”, sitting on Redhat using served by apache. Sinatra is used to handle the REST calls (essentially the wrapper) harnessing java – linking through sockets to provide really fast linguistic calculations on requests. We persist resident data through redis, and pull sync jobs to migrate up to the master datastore. These ‘nodes’ effectively are spawned up and down as we predict traffic congestion. We take full advantage of Rackspace load balancers to handle distribution of these requests. We monitor this bad boy with CloudKick – probably the best monitoring and performance analytics tool we’ve come across.

For ToneCheck (pro/business), we’re deployed on Azure. Works well for our business customers to give better piece of mind of no data persistence, enterprise integration (on a domain level), and security. Essentially we’ve built a RESTful service on a Web role that wraps the same Java logic as in our cloud. We have worker roles to do some of the heavy lifting, but we try to keep things in the Web Role for high priority, super fast response times.

As our system is ever evolving, in terms of understanding new emotive context, we use our own sync services to deploy lexicons across all our worker nodes (Azure & Rackspace). To build the lexicons, we need massive power, so we use a big hypervisor that performs all our “secret sauce” algorithms from our datastore. We have 3 layers of databases in our system, which seems crazy, but each has a niche. MySQL is basic user data for our apps and all the boring data to keep. Mongo is our dynamic datastore thats used for all our linguistic data and everything we need to build our lexicons, which is sharded for optimization and running our Map Reduce jobs. We also keep a Hadoop datastore for all the new language we’re processing for reporting and running massive queries on for some of our “in the making” linguistic calculations/improvements.

Our development practises are pretty neat. We use continuous integration to achieve higher standards of quality for all our apps. We’re a little old school, still using some SVN repos to manage our data (Beanstalk rocks), but now we’re starting to migrate more to the Git. The team is divided up into sub teams, which are all managed independently, and constantly on two week (global) dev cycles. We do all our project management through Pivotal Tracker, and have wicked fun demo days at the end of every cycle showcasing each teams improvements and brainiac innovations to everyone (while consuming beer and pizza). Our team is very passionate about the problem we’re trying to solve, technology, and code. We’re split about 50/50 Android & iPhone, so that pretty much says it all!

If you’re running a mail client (Outlook or GMail or Lotus Notes) you can try ToneCheck and to minimize the “cost” of dealing with misunderstandings.

Interested in being profiled in our Under the Hood series, we are actively looking for Canadian startups building “interesting” technologies and solving “interesting” problems. Contact me by completing your initial Under the Hood submission.

Hacker House in Waterloo

HackerHouse.caLooks like Waterloo is about to get an addition to the already existing hacker houses and VeloCity residence that are happening around campus.

Does anyone remember Plurk? Plurk was the site that MSN China copied over 80% of the user experience and code for Juku (see the official Microsoft statement).  Plurk is a place where people lurk. It has been compared to Twitter. It generates most of its traffic from Taiwan.

And now it looks like they are opening a more “mercenary/hustler driven” approach to a student dorm. Hopefully, this is the compensation they received from a Microsoft settlement, maybe it is a recruiting tactic – hiring developer talent is a challenge and finding entrepreneurial hackers for the cost of a mortgage payment + utilities is actually a really cheap acquisition tactic. With none of the overhead of the coop program and you’ve already skirted any labour laws by making them work for their own companies. Nice.

The program aims to bring in 3-5 students and run them through the gauntlet.  Here is one of the welcome letters:

I’m Kan [looks like Kan Kan (LinkedIn)], and I’m one of the founders of Plurk. We’re a Twitter type service and the largest microblogging service in many parts of Asia and one of Canada’s most innovative startups (heck, even Microsoft copied us in China!).  Me and two other very successful under-30Southern Ontario area entrepreneurs just recently (earlier this month) announced the launch of our Hacker House ( program, inspired by the very cool Grotto ( and Y Combinator programs in San Francisco.

Basically, we plan to find 3-5 of the best and brightest entrepreneurially minded, technology focused students from the Universities of Laurier and Waterloo, bring them together in a collaborative environment, and then let the magic with the support of a team of guys (us) who have fostered and executed on some of the most successful startups on the web.

While we’re not affiliated with the university in any way, we offer a couple of BIG benefits over Velocity:

1. If you’re accepted, we provide your living accommodations  absolutely free in a sweet pad just steps from the university for the term/year.

2. We take more of a cooperative mercenary/hustler driven approach, providing access to server space, mentorship, capital (in exchange for the option to buy equity into your venture) and other resources necessary to launch either (a) your own venture, (b) collaborate and percolate on ideas with other participants in the program during the term or (c) get hands on experience working on cutting edge projects (particularly in the social, mobile, geo-local, gaming, data mining & search spaces) in various stages of development.

3. While we may not have the visibility of Velocity, I can unequivocally say that the upside and quality of the experience would be far superior for those who want to execute and iterate on ideas at breakneck speed in a constantly changing market and shoot for the moon.

Our first cycle commences at the start of the Fall ’11 school term (September 2011) and we plan to take in 3-5 students and finalize our selection process by the middle of August.  If you haven’t already finalized your living accommodations for the Fall term and like what you hear so far, I’d encourage you to check us out on for more details or get in touch with me directly.

It is a very different approach to residence during the school year. Their focus seems to be very much competitive to UW VeloCity (full disclosure: I am the EiR at UW VeloCity and will be helping the students at UW get access, build products, etc.), but it is a very different approach. The UW VeloCity program houses 70 students, provides access to University and community resources, and for all intensive purposes is opt-in. Many students get into the residence looking for a place to live and learn about entrepreneurship and high tech startups as a career path. The goal is to provide a familiarization to hands-on entrepreneurship.

Hacker House

It is great to see others dedicated to continuing to build the community in Waterloo.