Can Montreal Become an Open Source Startup Hub?

February 21, 2011 8:33 am 22 comments

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“First prize is a Cadillac El Dorado. Second prize is a set of steak knives. Third prize is you’re fired.” –Blake, Glengarry Glen Ross

Seth Godin, in his great book The Dip, points out that the only place that’s worth being, in business, is first place. When power laws and network effects are involved, the first place in line is the only place to be. You need to be “best in the world” at something, or you need to quit and start doing something else.

Technology ecosystems – most business markets, actually — have network effects. And that means that the only rank to have, as an ecosystem, is first place. Best in the world.

Who’s best in the world in Web startups? The San Francisco Bay Area. Who’s second? Probably New York City. Who’s third? Who cares? Third prize is you’re fired.

If we care about growing our local ecosystem, maybe we need to collectively quit our race for 14th or 29th place in the Web startup world and think about building something else. Something that we’re good at, and that nobody else is really working on. Something we can be best in the world at – not 14th in the world, and dropping.

Montreal has the opportunity to be the best ecosystem in the world for Open Source software startups. We’ve got a good cadre of entrepreneurs here who’ve had experience with building Open Source companies. We have investors who’ve been through the process of investing in and nurturing Open Source companies. And we have the all-important talent pool of people who’ve been part of the process.

More importantly, there’s not another leading Open Source city on the globe. San Francisco and Boston have a few companies, but they’re definitely not hubs. The commercial Open Source landscape is spread much further across the globe – from London to Utah to Germany to Austin.

Most of all, Open Source commercialization is hard. Ask anyone involved in an Open Source company. It’s difficult to make the model work. There aren’t easy answers. Startup techniques for other kinds of businesses — investment and release strategies — don’t seem to apply as well. That means there’s a barrier to entry for other ecosystems – one we can exploit.

Right now, I know of at least five Open Source startups in the city.

  • StatusNet – I started this company here in 2008. We’ve raised $2.3M in Montreal and New York. We do about 5000 downloads per month, and we have 45,000 sites running on our SaaS service. We have a staff of 9 in Montreal and San Francisco.
  • Vanilla Forums – World’s best forum software. It powers hundreds of thousands of sites worldwide, including a high-performance SaaS service.
  • Bookoven – This social publishing platform has pivoted to an Open Source software model. Led by Hugh McGuire, creator of Librivox, the immensely popular Open Content audio book project.
  • Stella – This great performance metrics company makes their software available as Open Source.
  • Subgraph – Startup security company whose vulnerability assessment software, Vega, is Open Source.

On the investor front, two of the leading funds in the city (iNovia Capital and Real Ventures) have experience with Open Source startups. Real Ventures (or rather, its predecessor fund, MSU) is an investor in three local Open Source companies.

As for talented potential employees… that’s tougher. There are a lot of talented technical people in the city, and out-of-town Open Source companies like Canonical have local tech teams that can feed into the startup talent pool. But talented business staff with Open Source experience? They’re thin on the ground everywhere. Fortunately, the people who’ve been working in the above companies are a good core for that pool, too.

I believe the conditions are ripe for Montreal to take its place in the technology world as the Open Source startup hub. Next week, I’ll give what I think is a potential plan for Montreal to take the lead in Open Source commercialization.

photo by maha-online.

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  • Josh Koopferstock

    I like the concept, Evan, and look forward to your next article. Also, I think an article on what kind of business models work well for open source is needed (or a link to one of the many already written). If you can tie that into which kinds of businesses/markets you believe can be disrupted by open source, then we’re onto something!

  • http://evan.status.net/ Evan Prodromou

    Oh, absolutely. I think the very first thing that an Open Source business hub needs is to claim thought leadership. If we can get people looking to Montreal for answers, we’re moving forward.

  • http://evan.status.net/ Evan Prodromou

    In haste, I misspelled Hugh McGuire’s name. Sorry Hugh!

  • http://www.instigatorblog.com Benjamin Yoskovitz

    And I missed it, but I fixed it.

  • http://evanprodromou.name/2011/02/21/montreal-as-open-source-startup-hub/ Montreal as Open Source Startup Hub « Evan Prodromou

    [...] Montreal just published an op-ed piece by me on why Montreal can become the Open Source startup hub. Filed under: Uncategorized Leave a comment Comments (0) Trackbacks (0) ( subscribe to [...]

  • http://evan.status.net/ Evan Prodromou

    How’s this for synchronicity? “Raleigh, NC—the world’s first open source city” http://opensource.com/government/11/2/raleigh-nc-worlds-first-open-source-city

  • http://afroginthevalley.com/ afroginthevalley

    I want to like this post, I really do, but I am not sure we can claim the claim…

    Sure feels like we are growing and have interesting traction, but what about the cities where Red Hat, Ubuntu, Mozilla or the Apache Foundation are headquartered? We should attract them here if we want to make that claim!

    The other thing that bothers me, and believe me it’s been bothering me since my early days implication in Linux Québec and FACIL, is that we don’t have a strong local economy of companies, institutions, governements, BUYING open source software (or even USING it for the matter).

    This town and province is painted with the colors of microsoft and oracle, we need a great buy-side to support the supply-side…

    With all that being said, let’s step up to the challenge and see if we can make it a reality. The potential is there, I surely think we should go for it, but the path from here to there is not that obvious… Like all great startups ;-)

  • http://evan.status.net/ Evan Prodromou

    Sylvain: far be it from me to say that Montreal *is* the world’s Open Source startup hub. We need a lot more work to get there.

    What I *am* saying is that 1) there’s not a clear holder of that title today 2) we’ve got a shot at it 3) it’s worthwhile.

    I absolutely agree that having one or more large companies that can spin out experienced executives to startups is really important for an ecosystem. It would be nice to have a big Open Source company that was doing that in our city; there’s simply not one. (Compare Raleigh NC, which has Red Hat, or London which has Canonical. The SF Bay Area has Oracle/Sun, and many MySQL execs have moved back to Scandinavia.)

    I’m working on my next blog post (“HOW TO Make Montreal the Open Source Startup Hub”); I’ll make sure to send it to you first (in OpenOffice format, of course) for review.

  • http://twitter.com/cgtheoret cgtheoret

    I will apologize already for my academic sounding language, but when speaking about power laws and social networks and centers of excellence, I learned all of that stuff while working with the French government (as a researcher at the ENPC in France) to try and develop there Nanotechnology hub in Grenoble.

    The properties of large scale networks applied to society (of which power law distributions are a natural consequence) are described by Actor Network Theory http://en.wikipedia.org/wiki/Actor-network_theory. ANT’s major success has been in helping governments and business set up “centers of excellence”. The reason why there is a power law structure in excellence is because if there is one element missing from a mix, excellence is almost impossible to achieve, the more elements you need to achieve excellence the steeper the power law distribution (the fewer people can actually be differentiated from everyone else).

    I believe that Montréal has some of the elements needed to make this place a center of excellence for open source software. But it is sadly lacking in too many of the elements, those of which Sylvain mentioned but I would add a few more. The most important of which is the lack of a major government research facility. A lot of open source code was developed at CERN for Europe. In the US the DOE (and to a lesser extent DOD) invest heavily in open source projects. Sadly there is nothing in Canada that rivals these types of talent and development hubs.

    In fact for Montréal specifically, there has been a large government emphasis on multi-media, that is sadly not expanding to include other forms commercial of innovation.

    I feel that Montreal and Canada are poorly equipped to help innovation in general, (the SRED program tries to compensate for this and does so successfully) and given the challenges specific to open source startups that is so true that trying to be first here would involve serious amounts of capital and lobbying…

  • http://evan.status.net/ Evan Prodromou

    Thanks for this! It’s definitely an eye-opener.

    Absolutely fascinating to think about the question of a research facility. I’d compare Oregon State University’s Open Source Lab (http://osuosl.org/).

    It’s based in Portland, which is also a claimant to the Open Source crown. It’s ahead of us in other ways — there is a formal “Open City” policy (http://siliconflorist.com/2009/09/30/portland-oregon-open-city-officially-embracing-open-data-open-source/) and one of the world’s most prestigious Open-Source conferences, OSCON, is held there each year.

  • http://evan.status.net/ Evan Prodromou

    Thanks for this! It’s definitely an eye-opener.

    Absolutely fascinating to think about the question of a research facility. I’d compare Oregon State University’s Open Source Lab (http://osuosl.org/).

    It’s based in Portland, which is also a claimant to the Open Source crown. It’s ahead of us in other ways — there is a formal “Open City” policy (http://siliconflorist.com/2009/09/30/portland-oregon-open-city-officially-embracing-open-data-open-source/) and one of the world’s most prestigious Open-Source conferences, OSCON, is held there each year.

  • Morgan Tocker

    MySQL (in the day) had 4-5 Montreal/Sherbrooke based employees. It was more employees than any other location in Canada.

  • http://afroginthevalley.com/ afroginthevalley

    Evan, I’m really looking forward to it, agreed with your 3 points.

    This got me thinking about when “being fist/second” is not the optimal solution, I am not sure we need to be “first” in something to “win”. Maybe being GREAT in many things, at the same time is what we need. Maybe it’s more about collaborative, creative, inventive and open. Much like Open Source, but applied to more domains?

    Je pense que c’est très Québécois de faire des sommets, des tables rondes, des discussions. Aller chercher le meilleur de notre passé de “patenteux” (think Bombardier inventing the snow mobile) et de “placoteux”… We a pretty awesome mashup city if you think about it.

    I really like “La Fierté de notre héritage bordélique” as a meme – http://marieclaudeducas.infopresse.com/2011/02/14/arcade-fire-le-bilinguisme-montreal-et-la-fierte-de-notre-heritage-bordelique/

    So maybe we declare we are the awesomest melting pot in the world…

  • http://twitter.com/nshunter Newman Scott Hunter

    Ottawa, Montreal, and Toronto all have great potential for becoming a major startup hub in Canada. Toronto is the most likely right now because of the work of people like David Crow. Montreal has a massive problem of being both culturally unique and somewhat alienating to people who arrive in the city from other parts of Canada or the rest of the world.

    Montreal also has a huge problem of underpaying tech workers at almost the same level as Ottawa. Major companies in Montreal offer $30 to $50k less than those in Toronto and with the intrusion of RIM into the Ottawa area, Montreal offers are sub par to there as well with a lower cost of living.

    Experienced workers tend to move into areas to work at big companies then filter out into startups at reduced pay after burning out or wanting a change. Relocation is a big factor in people deciding to jump into an area.

    Personally, I’ve thought about trying Montreal, but I personally know a few Quebec xpats that left because of the cliquey nature of the city socially which would make me hesitant to move to the area for anything other than an awesome offer or substantial ownership in an idea.

  • http://www.quebecgeeks.net/2011/02/21/liens-de-la-journee-du-2122011/ Liens de la Journée du 21/2/2011

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  • http://kerskine.tumblr.com/ Keith Erskine

    Hi Evan – I could make a case that the Greater Boston area would have Montreal beat giving the presence of Red Hat (large dev center in Westford), Canonical (Bedford) and Acquia (Drupal – Andover). Novell was on this list but they succumbed to installed-base entropy (which lead to certain partnerships).

    Increasingly though, location becomes less important while locating and nurturing talented people becomes more. I recently asked Nat Friedman (founder, Ximian, where I also worked as a product manager) how many people were local to the Boston office versus remote. He told me that it varied but it averaged out to 60/40%. For a lot of startups this would be unmanageable, but the nature of Open Source development (easily accessible code repositories, tools for tracking work and bug fixes, IRC) made it possible. This doesn’t alleviate the need for really good face-to-face interaction, and having a great city to bring your team to on a regular basis helps a lot.

    Given that, Montreal is a great place for the Open Source hub (it’s a great city) and you and the other startups (and investors) can make it happen if 1) you believe you can and 2) you make a conscience and coordinated effort to make it happen.

    Bon Chance!

  • http://evan.status.net/ Evan Prodromou

    I think you could make a strong case for the Boston area as the “current leader”. *However*, I don’t think there’s a strong sense that BOS == FLOSS, if you get my drift. Could it become the default place for Open Source projects to move to when they’re ready to go commercial? I think it could… as could other contenders (SF, Raleigh, Portland, and Montreal).

  • Canadian

    While I think Montreal has a great potential, there is a key political issue that I think will continue to push it down the list of tech cities: Bill 101. Quebec makes it very hard to be an Anglophone, especially if you have a family. As long as Quebec insists that all[1] children attend French schools, there will be a number of people who do not want to move to Quebec. I grew up in the states, and moved to Ontario a few years ago. I love Canada and would happily live anywhere in the country EXCEPT Quebec. I want my children to attend school in English (and learn French as a second language). I want to be able to easily converse with my children’s teachers and participate in their school programs.

    Singling out Quebec is a little harsh, as I would have the same concern about many other countries (Germany, Italy, etc), but I would suggest that they could easily run into similar issues when it comes to recruiting technical talent.

    [1] Yes, I know that children who have parents who are Canadian citizens and did elementary or high school in Canada in English are exempt from this. Unfortunately this does not apply to immigrants.

  • Anonymous

    Evan,

    As you noted Canonical has had an office in Montreal from very early on in the companies history. Some of the benefits of Montreal have been that there’s a good academic tradition, dual-English/French language, it’s cheaper than other North American locations, it’s east coast which is good for European interaction, it’s not in the USA which is both a pro/con and it has a slightly European feel which is good for managers who are European. On the con side I’d say are no-real government/academic/business buy-in to OSS, some of the labour laws are confusing/difficult if you’re abroad, the talent pool is light and no-one from the USA will move to Montreal (they will move to Boston). Overall we’ve been very happy in Montreal and continue to expand here.

    I’m not sure what gives a place the “right mix” for any industry and of course everyone basically wants support from government while a minimum of interference! One thing I’d point out is that the language/culture situation is pretty unique in North America giving potential access for technology companies to both USA and Europe – that’s a ‘USP’ Montreal could sell!

    Steve

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  • http://evan.status.net/ Evan Prodromou

    I think there are a few things here to unpack.

    First, I think a startup ecosystem is a network that exhibits network effects according to Metcalfe’s Law (value of the network to participants goes up by N² with N participants). There is value to companies in being in a city with other related technology startups. More startups means more investors means more startups means more service providers means more startups means more employees means more startups. It’s a virtuous cycle.

    Systems like this tend to fall into power-law distributions. I’m working on a blog post based on data from Crunchbase, but my first back-of-the-envelope estimates have drop off of about 10x from the metro area with the most funded startups (SF) to the third and fourth (LA and Seattle).

    Now, does that mean that an ecosystem with about a dozen funded startups, and 2-3 investment funds, can’t work? No, it doesn’t. It’s just a lot harder — a LOT harder — for any participant in that ecosystem to make it than for those in a bigger ecosystem.

    So if we want to have a thriving and self-sustaining technology scene, I think being first in something is the way to do it.

  • Another Canadian

    I actually didn’t know this about Quebec, and it means that my company’s time in this province is limited. I will not send my baby to a French-only school. Period.

  • http://montrealtechwatch.com/2011/02/21/is-there-an-open-source-state-of-mind-in-montreal/ Montreal Tech Watch » Is there an Open Source state of mind in montréal?

    [...] an interesting post at nextmontreal on how the city can be an open source startup hub. It is an opinion piece written by Evan [...]

  • Dac Chartrand

    I went to french public school in Ontario. Not bilingual school. French school. From Age 4 until age 18. I spoke french at home with my french family. I spoke english “on the streets” and in English class.

    I moved to Quebec in 1997, studied in an English university and can safely say that, although fluently bilingual, I am more at ease speaking and writing english.

    This is 2010. If you speak english at home then your kids will learn english no matter where in “the western world” you move.

    From my point of view, it would be stupid to move to Quebec and not have your kids use the opportunity to learn french. One of the reasons I moved to Montreal was to keep my french, and have my daughter learn french. It’s barely working! I can’t imagine sending a kid to english school, speaking english at home or with friends, and expect them to learn any french at all.

    Furthermore in Quebec, you can always opt to send your kids to private english school; So long as you are willing to pay.

    This issue is obviously more political than practical. It goes deep and is rooted the historical divide of the city. To me it’s more about inflaming passions and political lobbying than a real issue.

  • https://me.yahoo.com/a/twK1FNN7pMXJ.9D2QiypslRRuR.K80Y-#5ee1c xSmurf

    I agree, there’s a lot more work to be done at a higher level… Until the levels of government start embracing Open Source, it’ll continue being hard to obtain funding for new projects. More over, the state of the internet here is a huge deterrent. Few can afford decent connections to meet their needs (~3500$/mo for 100mbps!). Going past that, the CGI lobby controls most of our infrastructure (public and private, STM, Montreal city, Desjardins, etc) and I hardly see them investing in Open Source. I can only hope things will move, but seeing has there doesn’t seem to be _any one_ that is technically literate in the government, I don’t see that happening any time soon.

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  • Anonymous

    I’m with Dac.  The influence of English is too strong, even in Montreal if not all of Quebec.  The “ethnic” kids who were streamed into French school, I have found, wind up trilingual (English, French, and their ancestral language).  I have a friend in Portland, Oregon (my previous stop) who I took to be your run of the mill Anglo-Montrealer until discovering (while helping him find a new position) that he is a graduate of Ecole Polytechnique and went to French school since his parents were originally from India.

    I learned French later in life, didn’t do well in grade school and dropped it in high school, but my wonderful experience as an intern in Montreal many years ago (so long ago that I don’t want to admit!) inspired me to take another crack at it, and it seems to be working!  Also, back in Manitoba, my niece and nephew are able to attend French school because my brother-in-law is Franco-Manitoban which gives them priority.  The main complaint of the teachers?  All of the students slack off on French once out of the classroom.  Now my sister is happy because my day to day life provides reason and context for the kids. :)

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