Keeping Entrepreneurs Local
Why cities around the world are incenting entrepreneurs and the businesses they found to stay local.
Five years ago, when my company was just getting off the ground, I made a trip from our home base in Vancouver to the center of the tech universe. As I met with VCs on Silicon Valley’s famous Sand Hill Road, one question kept popping up: “Are you going to move your team to the Valley?”
Many things have changed in the world of finance and startup since then. Talent competition has gotten more intense in the Bay Area (well, everywhere really). VCs are increasingly willing to bet on companies in other places and capital itself is becoming decentralized. But people are still asking me when I’m going to move to the Valley. It’s a question worth thinking about seriously.
After that initial trip to SF, I ended up deciding to stay close to home. We closed our first round of financing ($1.9M in January 2009), shotgunned a few PBRs and happily hunkered down in our startup office. We of course had a lot of reach-outs from the expected tech vendors eager to get a piece of our newly found chedda’. But there was another group that was surprising to hear from. Cities.
I received emails from San Francisco, Quebec, Surrey and even tiny Squamish, BC. The emails were kind and congratulatory, but on top of that, they all offered tax incentives to relocate to their jurisdiction. It became clear to me then that cities were pursuing me as eagerly as I was pursuing new clients for my own business. And, if you look closer, this makes a lot of sense.
There is an obvious and massive benefit to having well paid technology workers contributing to the local economy. In just over five years, we’ve gone from three to more than 500 employees and are on track to grow to 700 employees this year. These are young, smart, well adjusted people with good jobs who are contributing to the local economy in a big way. Ignoring the obvious taxes that the company pays, the ripple effect of having multiple tech startups fuelling the local economy is a taxman’s wet dream.
Today I received yet another invitation to relocate our headquarters (see below). It’s very flattering of course, but I still think having roots — whether you’re a person or a company — is critical. I’ve always dreamed of growing Vancouver into a new tech center north of the border. Just as the PayPal mafia has changed the face of Silicon Valley, I feel a dedicated core of Vancouver entrepreneurs — a kind of Maple Syrup mafia — has the potential to create something great here.
But the entrepreneur in me, the practical businessperson, knows that the competition out there to lure my company away from the city is only getting fiercer. At the end of the day, how do I weigh deeper and deeper incentives, a richer pool of graduates and lower costs of doing business in other municipalities against the relationships I’ve built here in my own city and the potential that lies ahead. In short, how do I find a way to keep answering “no” when people ask, “Are you going to move your team to the Valley?”
This isn’t a challenge that’s unique to my company, of course. These are growing pains all successful startups experience. In my case, I’m confident that my home city and I can find a way to reach a technology critical mass together. It won’t be easy, but we need to find ways to attract more graduates, to provide more meaningful jobs and to make Vancouver attractive to tomorrow’s tech. If we can work together on doing that, I’ll be able to keep smiling and shaking my head when people ask if I’m moving to the Valley.
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Below: Quebec makes a pitch to attract tech companies.
Dear sirs,
As the facilitator for the Québec Government Investment Attraction arm Invest Quebec, I’m contacting you to inform you of the advantages your organization could receive in expanding to (Québec) Canada.
Quebec has earned a reputation for talent; creativity and technological innovation. Thanks to this potent combination, Québec’s multimedia industry is ideally positioned to welcome new players and ensure their success. Activision (Beenox), Autodesk, Behaviour, Electronic Arts, Frima Studio, Gamerizon, Sarbakan, Sava Transmédia, Square Enix (Eidos), Ubisoft and Warner are just a few examples of major companies growing in Québec.
Every year, over 4,500 students trained in every aspect of the industry graduate with degrees in multimedia.
Quebec Advantages:
A generous tax regime that encourages investment
· Québec’s is one of the only places in the world to offer such generous tax credits for the multimedia industry (tax credits that can cover up to 37.5% of labor costs)
· Québec’s taxes on investment are among the lowest in Canada and lower than the average rates in the United States, G7 countries and OECD countries.
· To stimulate manufacturing investments, Québec offers an investment tax credit covering up to 40% of the cost of newly purchased manufacturing and processing equipment.
· Finally, Québec reimburses the sales tax on capital goods.
Lower cost of doing business
· Québec’s labor costs average 13% less than in the United States and 10.5% less than in G7 countries.
· In Québec, electricity costs are 13.9% lower than in the U.S. and 30.6% lower, on average, than in the G7 countries.
· Office space rents average 7.6% less than in the U.S. and 36.3% less than in the G7 countries.
Our Digital Media specialist at Invest Quebec, NAME EDITED, will be in British Columbia this week (February 25 to 28) and have requested to meet with you to discuss potential business opportunities in Quebec, along with available financial incentives (tax incentives, interest free loans, grants, etc.) offered by our agency to companies looking to potentially expand in Quebec.
The meeting would last one hour and can be scheduled during the time and date most convenient for you.
Looking forward to your answer.
All the best,
NAME EDITED —
Invest Québec
1274 Jean-Talon East | Suite 202
Montréal, QC H2R 1W3 CANADA
