Montreal: an Island, not a Valley

by NextMontreal on August 16, 2010

I was recently asked by RWW to share some thoughts on Montreal and why it is a great place for startups. When people talk about great startup locations, places like Boston and Silicon Valley are often top of the list. Yes, they have natural advantages and are hubs for startups. But here’s where Montreal can compete.

Lower costs: There is clear trend in the startup world towards raising less or no capital. Chris Dixon from Hunch talks about this when he says its not that seed investors are smarter, it’s than entrepreneurs are. i.e. Entrepreneurs either don’t want outside capital or if they do, they want it from engaged investors putting in smaller amounts. If you are not raising a lot of capital, then you need to keep costs down. And it’s hard to do that in the Valley.

Montreal and Quebec have the highest level of tax credit support for developer salaries. For every $1 we spend on developers, we can get up to 65 cents back in cash from the government. That can really stretch your runway. In addition, rents and salaries are among the lowest of Canada’s major cities.

Talent access and loyalty:  One of the issues of being located near big, high growth companies is that they suck up all the best talent and raise prices for all talent, because they can pay more. For better or worse, we don’t have this problem in Montreal. Yes, there are some big companies, but for the most part all startups here have equal access to talent. And again unlike Silicon Valley, when we find people they tend to stay. In the Valley you can get turnover rates of up to 30% per year. That can kill a startup.

Great support: I talked about tax credits before. This is just one of the many Federal and Provincial support programs that Montreal startups have access to. There are grant and interest-free loan programs for development and commercialization that can have a big impact for startups.

Funding: Montreal is poised to become a dominant player in the market for startup capital in Canada. Real Ventures (where I am a partner) is getting set to announce a new fund. Larger players like Rho and others will all be announcing new funds soon as well. And of all the provinces, Quebec is the most committed to funding technology with a $700M fund of funds being created less than a year ago.

The European angle: Finally, unlike any other technology location in North America, we have a uniquely European, rest of world-friendly angle by virtue of our multicultural and multilingual make up. This strength has already been applied in life sciences and pharmaceutical industries. As a result many of the world’s leading pharma companies are in Montreal. As European tech companies look to enter the US market, leveraging Montreal makes a lot of sense.

So, for all of these reasons and more, I think Montreal is a great place to build world-class startups. We’re not Silicon Valley. And that’s OK!

image courtesy of Andre Nantel