How the Canadian Tech Scene Encourages Finite Gameplay (opens in new tab)

As someone who has worked in the Canadian tech scene for 25 years, and rode two startups all the way to exit (i.e. acquisition by US companies), in my opinion the problem has nothing to do with exit mindset, good angels, bad angels or SRED.

It is all about talent retention. Up until early 2000, Canadian tech salaries at least somewhat kept pace with US salaries, albeit 20-30% lower.

After the dot com crash, however, for some god-forsaken reason, the surviving tech companies decided that keeping salaries low was the new path to profitability. Every year the HR departments in Vancouver and Toronto do a hush-hush survey among each other and fix their salaries to the exact same level - maybe 2% but usually closer to 1% higher than the previous year.

The result of 20 years of this is that Canadian tech salaries have fallen ridiculously behind those of US companies, resulting in a massive brain drain to the south.

Now that Amazon, Microsoft and Google are setting up shop right here in Canada, the talent drain away from Canadian companies is only accelerating.

I have no idea what it will take to make companies realize that long term success requires retention of top talent and that that in turn requires paying competitive salaries.

There's just one line in the article about low wages, but IMO that's a massive problem with the Canadian tech scene today. You cannot have a thriving startup ecosystem when your best talent leaves for the US right after graduating from college. I love Vancouver as a city and would move there in an instant if it didn't mean taking a 50%+ pay cut for the exact same role (with comparable costs of living to the Bay Area).

I know many will disagree, but I think the commentary on SR&ED killing momentum and motivation in startups is bang on, even though it's a nearly impossible thing to measure or quantify. I'm sure many fellow Canadians reading this comment can relate to the absolute draining feeling when you see that message "remember to update your SR&ED timesheets by the end of the week!".

Time tracking isn't inherently bad, or counterproductive, but I haven't once come across a startup that does their SR&ED reporting with an ounce of honesty. Timesheets are essentially fabricated based on either what the developers think their managers expect to see, or based on what the managers tell them to fill in, and it's entirely understandable - programming is not a job where tracking hours makes sense.

Rather than timesheets, it would make _so_ much more sense if instead, high level but detailed quarterly reports were made outlining what was completed, and if there needs to be more detail, an audit can be done. Timesheets kill productivity, motivation, and curiosity to try new things and accomplish actual research and development - what the SR&ED program is intended for. At the end of the day, it's the implementation of the program and the industry of consultants surrounding it that is flawed.

Disclaimer: Clearly biased, I am from Montreal.

> That’s part of why I think that if any city in Canada has the potential to actually develop a Bay Area grade startup scene (smaller, sure, but actually the real thing), it’s clearly Montreal

I would have to agree with the conclusion of this article, Montreal has:

(i) 5 universities very close to each other(i.e. 10 to 20 minutes walk from each other) + Great public transport

(ii) Lots of government subsidies for startups, on municipal, provincial and federal levels

(iii) Small tech companies and startups can afford rent downtown (or in the mile-end), where other tech companies and universities are located. (I also have a 1200sf apt downtown for 1/6th the price of SF)

(iiii) It's an amazing market where to fail quickly. Quebec is some sort of small scale self-sufficient society where you can experiment before scaling. And outsiders tend not to look at failures in the Quebec startup scene

(iiiii) It's surprisingly easy to get funding from the massive government investment funds(IQ, CDPQ, BDC), and they have been focusing more on the startup scene lately.

(iiiiii) The french Canadian "culture" tends to be bolder and more dynamic than what you would expect in the rest of Canada. Can't hurt the ecosystem if you're expected to move fast and fail quick

(iiiiiii) Move to MTL already, we want more startups!

It's a difference of cultures. Canadian culture traditionally focuses less on making a lot of noise, standing out from the crowd, etc. Canadians are almost infamous for politeness, especially compared to Americans.

Now, couple this with the ease at which Canadian engineers can get jobs in the US and the picture emerges, bright and clear. Any Canadian with a lot of ambition may be alienated by the relaxed culture in Canada and subsequently move to the US, further reinforcing the cultural divide.

On the other hand, Canadians (and even Americans) who are disillusioned with what they may see as an excessive ambition and a relentless focus on "growth hacking" might opt to live in Canada, also reinforcing the cultural divide.

Who says it doesn't work?

If it produces viable companies, it does work (sure, it might fail to do that, but the parent haven't showed that).

Don't have to ve FAANG sized.

If anything, in my book, it's more of a societal success and healthier for them to NOT be FAANG sized - and screw the VCs.

Some nuggets here.

Totally agree with the second order effects of incentives and milestones.

The author seems a bit overly enamored by SV though. It's really not all its cracked up to be. Stop trying to be SV. SV has produced some truly toxic companies. The world can do much better, but they wont do it by copying what works in SV. I think Canada should just experiment more. Try different things. Have the courage to forge your own path.

IMO the conclusion isn't that the scene "doesn't work" but that it's not producing a lot of "moon shots" and tends to focus on "roof shots". There is nothing inherently wrong with this strategy and it produces solid gains over time, but it's a lot harder going to accidentally create a billion dollar company. That said, Solect got acquired for 1.5B back 20 years ago, Shopify exists, it's not like there are zero Canadian unicorns, they just get produced a lot more slowly.

I’m 10 years into my career and been in Toronto the entire time. I often feel like I’m slowly wasting my talent here that would be better utilized somewhere else. Maybe Shenzen or the West coast.

I work days at a job and nights and weekends on my business. The business is doing good, it’s slowly scaling, just a long slog.

In the last 10 years I worked at around 15 different places as a contractor. I met a lot of developers and tech people in general. I get the sense that people here just don’t have the motivation or ambition for business. Maybe because house prices have shot up the last few years, or because it’s the financial capital of Canada. People just want to make money (again the house, living costs, and taxes are high) or move up the ladder. Or maybe because life is comfortable so everything moves at a slower pace.

On the technology front, growing up learning about Nortel and RIM/Blackberry, I just feel like the Innovation Ecosystem is just not here compared to other places. Maybe it’s partially because Toronto Is just too conservative (eg. East Coast vs. West Coast mentality). There’s a lot of Fintech, Marketplace (Shopify), and SaaS Apps. Pretty much safe bets in terms of Businesses.

I think as a tech Founder part of your goal is to try to balance money generation with innovative ideation. Companies here adhere to money generation before innovative ideation, which results in “meh” businesses.

Being Asian I also feel disadvantaged. It’s like if I moved to Shenzen I would have an advantage because I’m westernized people there would value me more. But the grass is greener on the other side (aka. 996).

I think the Government protects businesses too much vs in the States. Seeing how there’s so many monopolies it’s hard for the small startups to rise up. Look at the telco monopolies and how verizon gets blocked into coming to Canada. Or how the marijuana LPs get a huge head start before the micro craft growers can enter, and you still need a bunch of license to grow and distribute.

It’s a comfortable life here though. I’m mainly here because of family.

My last point is that there is a big problem with startups being acquired by US companies. Tim Hortons got bought out by BK, North got bought out by Google. When I first started, this notable design company behind Medium, Teehan+Lax got bought out by Facebook.

Also, I think North got propped up by the tech media here even though their product was never good. v2 showed promise though, maybe they just burned too much VC/Angel/Grant money so they had to sell to Google.

If you wanted to summarize that uncanny Canadian quality about television, movies, and lately startups, it's that they are the artifacts of a mandate, which is usually a condition of some kind of institutional funding, like SREDs, but also a bunch of other vehicles. The finite game is that a lot of capital and incentives come from agencies who have government mandates, which gives everything a certain tint.

So glad to read this. The author wrote a story some months ago about the reason SV angel works is because it's part of the social signalling for wealthy people. You make money, you show you can do it again, and that's what makes you a player. In Toronto, it's different.There are excellent global tech companies in Canada (Ubisoft, EcoBee, Shopify, Pornhub, etc.), but like everywhere, excellence is exceptional.

It's the "why is this weird? Oh, because they had to write around this condition of their granting agency." The US has tons of public funding as well, but much of it is defence driven, which has more general reusable business applicability than say, "culture," driven. Not sure what the solutions are, but something we should put words to as that weirdness has been a ceiling on growth and opportunity here for a couple of decades.

Building a successful startup is hard. Even a software startup. You don’t just need a few engineers who know what they’re doing. You need designers, product managers, data analysts, marketeers, PR, some sales people maybe, finance folk, people ops, and maybe even a lawyer or two who understands tech. On top of that, you need people who are capable of bringing it all together and operate different orgs as a real tech company should, ie managers.

If you have any hope of succeeding, you need to eventually fill all those positions with experienced hires. Where are all the experienced tech workers? They’re in the already established tech hubs. How do you get those experienced tech workers to move to your aspiring tech hub? I don’t know, but certainly not with lower salaries and skimpy benefits. I don’t think I would leave SF to work at a startup in Toronto, or, let’s say Houston, where I couldn’t be confident that the company would be able to fill all the other roles it needs to to succeed.

This could've just as easily been written about the Phoenix metro area. Phoenix is the 5th largest population center in the US, barely now beating Philly, and while we've had a handful of few dozen small or medium successes (and a very small handful of big ones), our startup scene is... mediocre at best. The good vs. bad angels thing is a factor: we have no REAL good angels to speak of. (Happy to be corrected here.) No one is in the game for the game's sake. And our bad angels are even few and far in between. There are a handful of VCs, family offices, and such, but they usually want lower risk, post-revenue opportunities. There are one or two "angel" groups, but they take forever to stroke a check and it's an ordeal that's discouraging and not a lot of options.

Instead, we have a lot of SF (and other prominent geo) companies moving their ops here because we have lower cost of living and lower tax rates (though our top bracket just took a big step up due to 208) and a decent talent pool.

And while there have been a few incubators and such and there's a feel good startup community in YesPHX, there isn't any real circulating _money_ here. The uber wealth in this state is concentrated in old money forms like real estate and healthcare and conservative family offices and Bruce Halle's tire money and whatever the hell Bob Parsons is up to, but we lack that interconnected network of IPO-30-and-40-something-millionaires-willing-to-throw-down. We don't have anything resembling that.

From what I've heard, SLC is doing better on this front and beating us at a game we should be winning, but no one stays here after they make success, no one rich enough to matter is willing to splash out any real money themselves, and it ends up being a self-fulfilling, far too conservative environment for startup investment.

That being said, there are definitely some great startups still trying to make a go of it here. And per Gregslist & Crunchbase, we have over 300 startups here, with over 100 of them VC funded. And you'll see successes come out of here: InfusionSoft, CampusLogic, and sure a bunch of others... but nothing quite like a mega IPO, and nothing that feeds enough capital back into a huge pool of newly minted moneyed people ready to pay it forward into the next cohort. That ecosystem is damn hard to build up, it turns out.

The Canadian startup bureaucracy is real. I find it kind of funny that the main requirement for IRAP funding is that you don't actually need the money.

It's extremely frustrating when you see a punt like Element AI get 20 million from the government, despite not having any product direction or seemingly any idea what to do with that money. It feels like people are rewarded for navigating the bureaucracy rather than actual startup success.

Bah, this reads like a screed. The author wants Canada to be like the US, but they are fundamentally different countries with fundamentally different ethos.

The motto of the US govt. is “Life, Liberty and the pursuit of happiness.” Contrast that to the Canadian motto of “Peace, order and good government.” The rest flows from this difference in perspectives.

As for Montreal being a tech hub? Blech. The city is covertly racist to anyone who is not French Canadian. Death by a thousand cuts.

I think you could put any non-Valley country/region name there instead of Canada

This is a very interesting piece but:

1) Although it may be impossible ... you might need 'more data' to prove your point and

2) "SR&ED forces you to play finite games, because it forces you to articulate what you’re spending this money on. And so you have to justify, at the very least, what problem you are solving and what specific steps you are taking to solve it. You enter the world of problem definition, where building your startup becomes Serious Work, with official time sheets and government forms. "

I think is just straight up wrong.

Not only is focusing in the problem just fine, it's actually probably a healthy thing.

The 'real answer' to these credits is that they are probably not needed, a 'good startup' should just be able to fund itself.

But the fact that forms and some degree of problem statement are required is not the problem.

Infinite growth is a delusion. Who said that behaving like a tumor is the best path for a company? Especially when we complain all the time about colossal corporations being more powerful than nations. That's what you get with infinite growth: monopolies, too-big-to-fail companies, etc.

One thing this article seems to miss is that the tech scene in Canada isn't the same as the tech scene in America because Canadian capitalism and ideals are vastly different than Americas. I'm a 6th generation Canadian who left and went to NYC to build tech companies, much to the dismay of my parents who continually asked "why are you so interested in getting above everyone else?". While I agree with a lot of what the author said, I think that the Canadian tech scene doesn't jive yet because Canadians haven't really embraced ruthless capitalism fully.

There's a lot in here, but the title may be better as "How the Canadian Tech Scene Encourages Finite Gameplay"

So is this romatizizing the bay area, or are these the true reasons for bay areas success?

> If Montreal weren’t in Quebec, it would be an unstoppable startup scene.

I'm really puzzled by that statement. I don't see Quebec as having anything particularly different from other provinces that is harmful to startups. French? Everybody in Montreal speaks English anyway, and developing i18n software is super-trivial if you do it from the start; not something that would impact startup velocity in any meaningful way.

Or was this meant the other way around? That Quebec founders are disadvantaged in the same way that black and female founders are disadvantaged in SV?

The bit about accelerators is interesting to me. I was involved in QICSI, a Canadian startup accelerator as part of one of the startups there. I was then part of another startup from that same accelerator. Have encountered several others that have bounced from accelerator to accelerator. And it does almost seem like a very milestone and very checklist driven thing.

They all seemed to just be jumping from accelerator to accelerator. Does that happen in the USA? Do you go somewhere else after Y Combinator?

Good? Trying to be like SV and push Canada in that direction is toxic. I agree salaries should be better, but they should be better across all sectors, not just technology.

"In contrast, infinite games are played for the purpose of continuing to play. You do not “win” infinite games; these are activities like learning, culture, community, or any exploration with no defined set of rules nor any pre-agreed-upon conditions for completion. The point of playing is to bring new players into the game, so they can play too. You never “win”, the play just gets more and more rewarding."

Sounds nice...

This is a good take in my opinion and generalizes to any endeavor of creation. You can't plan that. Only when you have figured everything out can you move into a production mode. In game dev, this is informally known as Czerny's method. Production is a finite game but design is an infinite game. Forcing startups to work like they are in production is a good way to lol them.

I'm from Indianapolis, but currently in South Korea, where accelerator/incubator programs are funded by the government. Angel investors work in some government agency. Centrally planned and controlled "capitalism". Engineer salaries much lower than US or Canadian salaries. Yet somehow, the Republic of Samsung/Hyundai keeps churning.

Interesting. I wonder if Canadians insist that only Canadians must be hired by the FAANG companies in Canada.

As someone just applied for immigration to Canada, this post trigger my anxiety.

I thought this was somehow about gamification UX or actual game design or something, but the actual article title is “Why the Canadian Tech Scene Doesn’t Work”, which is more informative to me, at least.

I try to be charitable when I critique an article, so Alex please don't take this comment as a personal attack. I appreciate your writing of this article and your efforts to improve Canada. There are some truths in your article and an interesting perspective on the cascading feedback loops, which I think has merit, but there are some factual errors here that I think should be addressed.

> The problem with SR&ED credits, honestly through no fault of their own, is that you have to say what you’re doing with them.

That's not true. The SR&ED program is retrospective. It's an earned grant. If your company does real scientific or technological research you get a portion of the salaries and overhead back after you already did the research. And a small portion of consultant or contractor fees as well.

It's true that you can have your project span multiple years, but at the end of each year a new report is written with the chief technical and scientific uncertainties that were encountered and how they were addressed. I've written multiple, funded claims for my own business and for others with Paul Vice from GetGrants in Toronto. None of my claims to date have been rejected or failed to survive an audit. It pays to have professional help with these so you don't waste time doing unnecessary, distracting work. They can be assembled by the natural exhaust of real research, like Git commit logs or project plans.

> To be clear: I am not saying there are no individual success stories of Canadian startups, or that there are no good angel investors or VCs here, or that there are no individual instances of things going right.

Well, you kinda are though. Most American companies don't raise rounds in 72 hours. Even ones that go through YC sometimes fail to raise for months. It's true that it's slower here, but there are some good angels like Andrew Peek or David Crow, both of whom have invested in a company of mine. One private angel invested $50k in less than a day of thinking about it.

Also, on the topic of individual success stories: We have RIM, Shopify, and plenty of successful financial services startups. We're one tenth the size of America, we're not going to be unleashing Facebooks or Googles every couple years.

> Including salaries, which is helpful if you’re staffing entry level positions but a huge problem when you’re trying to recruit experienced managers & senior talent.

I completely agree. But there is a reason why salaries are lower here in Canada. Most of our workers don't work as hard and they don't have to worry about healthcare costs. There is less of a culture of brashness here and, subsequently, our startup scene looks different. We make less, true, but we see our families more. I'd rather have it this way, and if you're really good smart companies pay out big anyway.

Anyway, thanks for writing the article I hope you take these comments well.

I have absolutely nothing to back up this statement, but I wonder if the problem with the Canadian tech scene is that, from a societal level, Canadians are more conservative and risk adverse.

Interesting analysis of the differences between the two scenes, but I'm not convinced of Danco's assertion that bad angels keep away the good. It seems equally possible that the attractive draw for angels (and all VCs) of a red-hot scene like SF is simply too powerful, so all the "good" angels flock there rather than waste their time in a less productive market.

The same phenomenon he describes where liquidity events propagate the cycle of early movers becoming angels could easily take place on a larger scale where an exodus of "good" angels from SF seeking value in other markets disseminates this model and evens it out a bit. This could also dampen some of the externalities created by this feverish form of capitalism i.e. ludicrous real estate prices, crushing income inequality, etc.

Of course this would take some rather weighty exogenous event taking place to make either SF or the US unattractive locations to start a business.

I have a contrarian take. The Canadian tech scene is limited not by the Captains of Canada’s industry (although it might be a factor, but not the major one) but by the simple fact that Canada’s economy and population are much smaller than the US and importantly, Canada doesn’t throw insane amounts of Cash into its Defense industry. They also cannot deficit spend forever like the US can because of the USD. I would wager these structural issues are likely to be more consequential than debating over compensation fixation.

This is poorly written. I lost interest a minute into the article and skimmed the rest of it and didn't take much from it. The blob before the first subheading just repeats that the Toronto scene is not a good one – this could have taken just 3-5 sentences, and not 5 paragraphs. The part about good/bad angels, finite/infinite game typically would have been interesting to me but I was asleep by then. I recommend putting a summary in the first blob, and/or making the subheadings more informative e.g. instead of "Angels" "Deal Speed and Founder Leverage", should say "Angels are Shortsighted and Play Finite Games" and "Deal Speeds are Magnitudes Slower".