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. 

When a Massive Opportunity Knocks!

Editors Note: This is a guest post by Chris Arsenault (LinkedIn@chrisarsenault) a tech entrepreneur turned venture capitalist. Chris is the Co-Chair of the Canadian Innovation Exchange (CIX), a board member at the Canadian Venture Capital Association (CVCA), a Supporter of the C100, among other things. Follow Chris at chrisarsenault.wordpress.com or on Twitter @chrisarsenault.

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The last few weeks have certainly proven to be extremely promising for Canadian Tech Entrepreneurs. Almost $80M of equity financing has recently been secured from some of the top investors in the world to help build our next generation of massive tech companies. It’s even more exciting when you realize that these funds are going to three especially young, dynamic and opportunistic companies, all of which are in our backyard!

Beyond the Rack

Beyond the RackYona Shtern, Robert Gold and the team over at Montreal-based Beyond the Rack (“BTR”) lead the way with a whooping $37M financing round that should propel the company to new heights yet unseen on the Canadian eCommerce front. BTR has quickly established itself as an eCommerce leader by showing the market that Canadian companies really do know what a “hockey stick” revenue growth chart looks like. The teams’ ability to build such a big company in such a short time frame has earned them our utmost respect. We initially met the team and reviewed their business plan in late 2008; by 2011, they were already ranked as one of the fastest-growing online retailers in the entire world. Yona was also wise in choosing his investors, be it industry specific angels or great VCs such as Panorama Capital, iNovia Capital, Rho Canada, Tandem Expansion, BDC Venture Capital, Highland Capital Partners, EDC and Montreal Start Up. If you aren’t a Beyond the Rack member, don’t wait – register now, and you’ll be impressed!

Shopify

Shopify - LogoJust down the road from Montreal is another world class eCommerce team. Ottawa-based Shopify recently closed a $15M second round of financing. Tobias Lutke, Cody Fauser, Daniel Weinand & Harley Finkelstein have developed an industry leading eCommerce platform that is already being used by thousands of leading online retailers around the world. The team, their vision and commitment to execution all combine to make Shopify one of Canada’s tech leaders in an extremely high growth global market. Unfortunately, we missed the boat on the opportunity to work with them, but our friends over at Bessemer Ventures, Firstmark Capital, Felicis Ventures and Georgian Partners were more than happy to come aboard. I’m expecting to see Shopify rise above the tide over the coming years and establish itself as a global leader in its space.

Fixmo

FixmoThe most recent team to announce a substantial equity-financing round is Toronto-based Fixmo. Led by its founders Rick Segal, Shyam Sheth and Joyce Janczyn, Fixmo just announced a $23M round. This investment round included both existing investors (iNovia Capital, Panorama Capital, Rho Canada and Extreme Venture Partners) and an impressive syndicate of new lead investors: Silicon Valley-based Kleiner Perkins Caufield & Byers, Washington-based Paladin Capital Group and Hong Kong-based Horizons Ventures. While the company’s core vision has not changed over the last two years, the product development road map has evolved at a rapid pace. Within an extremely short time frame, Fixmo launched a series of Government and Enterprise products, acquired two companies (Conceivium Business Solutions and Chocolate Chunk Apps), established a series of key partnerships and practically jumped ahead of every other Mobile Risk Management solution provider in the market. Obviously, the founders didn’t do it alone, but the sheer fact that Rick was successful in attracting some of the best talent out there (Bruce Gilley, Jonas Gyllensvaan, Tyler Lessard, Lee Cocking, John Yuen and others) speaks to the long term execution ability and potential of Fixmo.

Ambition coupled with Execution

The average tech financing round in Canada is under $4M. Therefore, the aforementioned three companies basically raised as much cash as 20 average Canadian tech startups combined. Obviously, I get nervous when I see a company (portfolio or not) raise such a large chunk of cash. Why? It’s not because I like the small size of the average Canadian financing rounds. Rather, it’s because I think that too much money for a young business can be as bad as or worse than not having enough. $15M-$40M rounds for Canadian tech companies are amongst the largest we have seen this side of the border in over 10 years. That being said, I do also think that Canadian Tech Entrepreneurs are now entering a phase of Ambition coupled with Execution. We have lived through too many years of “lack of ambition”, quickly followed by “lack of execution”, not to mention the much lamented “lack of capital”. However, we are now seeing deals done where massive amounts of ambition and execution converge, and capital is becoming available to build large tech companies right here in our own backyard. With more companies able to raise the amount of funding they truly need to generate hundreds of millions of dollars of revenue, not only we will stop selling our companies short, they won’t need to move down south. Hopefully other investors will note the phenomenon, and future startups won’t have as much trouble raising the capital both from Canada and into Canada. And that’s good for all of us.

At iNovia, when a massive opportunity knocks, we answer! I’m expecting to be sharing a lot more stories about successful Canadian entrepreneurs, and how they’ve built hugely successful companies here as they compete globally for resources, capital and market share. There isn’t much stopping the entrepreneurs driving Canada’s next generation of large tech companies, and for the likes of Beyond the Rack, Shopify, Fixmo and many others, this is just the beginning.

Congratulations to all the teams mentioned in taking important steps on their paths to success!

Below some article worth reading with regards the above companies:

Editors Note: This is a guest post by Chris Arsenault (LinkedIn@chrisarsenault) a tech entrepreneur turned venture capitalist. Chris is the Co-Chair of the Canadian Innovation Exchange (CIX), a board member at the Canadian Venture Capital Association (CVCA), a Supporter of the C100, among other things. Follow Chris at chrisarsenault.wordpress.com or on Twitter @chrisarsenault.

High Tech Holidays and HoHoTO

I can’t believe it was back in 2008 that #HoHoTO started. For the past 3 years instead of a Holiday DemoCamp or Festive Founders & Funders, we’ve sponsored and attended HoHoTO. (We’ve even helped document the shenanigans). So why the fuss about a holiday party?

Toronto’s High Tech Holiday Party – #HoHoTO

“Fortune favors the connected entrepreneur.” @jcal7 #trueuniversity via @hnshah

We talk a lot about what is going on in Silicon Valley and how to make Toronto better. We can look to Helsinki, Israel, New York, Boston, Austin, and other places. But we have a strong emerging high tech culture in Toronto (and across Canada, just check out the efforts in Montreal and Vancouver). There is a strong vibrant community in Toronto that actively seeks each other out. Maybe because it’s cold and we like to snuggle, maybe because in dark of winter it’s best not to drink alone. But there are entrepreneurs that are trying to do it in Toronto and they like to get together.

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We have a great community that knows how to have a great time. And with HoHoTO the great time also supports a great cause.

What is HoHoTO?

Daily Bread Food BankWe often joke about startups being “ramen profitable”, but for many this is not a choice. We are working with HoHoTO and the Daily Bread Food Bank we hope to improve Toronto. HoHoTO is a Holiday party to raise sorely-needed funds for Toronto’s Daily Bread Food Bank. It brings together the hyper-connected tech, marketing, PR, social media and startup communities  to raise attention and support around a core idea:

“People in our town are hungry – damnit – and we can make a difference.”

Here is the call to all Toronto startups, you should attend HoHoTO and support the Daily Bread Food Bank. It’s a great way to initial meet and connect with other readers of StartupNorth and give back to those less fortunate in Toronto.

It’s easy to sponsor, it’s easy to attend, it’s easy to donate.

Get Tickets Now!

PS this is a call out of our friends to match or beat our sponsorship/donation:

We’re hoping to see everyone on December 15.