The SF pull: How Silicon Valley shapes Vancouver's tech ecosystem

The recent announcement that Vancouver-based workflow company Gumloop is relocating to San Francisco following its USD $17-million Series A round has reignited a familiar debate in Canada's tech community: is Vancouver's proximity to Silicon Valley a blessing or a curse for its growing technology ecosystem?

"It feels like San Francisco is a very strong magnet for exceptional talent, and Vancouver suffers from being too close to that magnet," claimed Gumloop co-founder and CEO Max Brodeur-Urbas to BetaKit, whose team is making the move south. "It's just too easy for someone who's exceptional to get paid three times the amount in California and move down, and then they’re just based there.”

The sentiment resonates with Laura Fortey, co-founder and COO of real estate crowdfunding platform Reitium, who lamented on LinkedIn about "the unfortunate brain drain we face here." 

Recent data supports these concerns about Canadians moving south of the border. According to the U.S. Census Bureau's American Community Survey, the number of Canadian-born residents in the United States grew by over 42,000 in 2022 alone, reaching 821,322 — the largest single-year increase since 2013. It’s a complex topic which requires a nuanced conversation. Vancouver Tech Journal reached out to a number of local entrepreneurs and investors, and many were willing to share their point of view.

Pros and cons

Mitch Richardson, vice president at Rhino Ventures, has a thoughtful perspective on Vancouver's unique challenges. "Our proximity has advantages and disadvantages — as with everything, there are tradeoffs," he explains. The exodus of talent and companies southward isn't just about proximity — it's symptomatic of deeper systemic issues in Vancouver, he says.

Richardson points to concerning trends. Yes, Canadians are emigrating to the U.S., but there are also fewer Canadian-based founders in general. BDC has reported that Canada has about 100,000 fewer entrepreneurs than in 2000 — an even more stark decline when accounting for population growth. A Mars survey finds that only 3.3 percent of respondents view Canada as the best place to grow a technology company.

But the issues Vancouver’s tech sector are grappling with are multifaceted. Richardson identifies several key factors that influence the ecosystem in a negative way: "high cost of living, over-emphasis on work-life balance, sometimes overly 'political' capital sources, and less density of angel investors and entrepreneurs." However, he cautions against viewing these challenges in isolation, noting that relocating to San Francisco often means "trading problems one, two, and three” for “four, five, and six, in a different location."

A particularly thorny issue is the direct competition for talent with Bay Area companies, amplified by the shared time zone. "This dynamic can be tough because Bay Area companies offer significantly higher compensation," Richardson explains, pointing out that the disparity stems from both currency differences and higher salary benchmarks in Silicon Valley.

Richardson observes an interesting pattern among successful Vancouver-based companies: "A recurring theme we see is that the best leaders drive a deliberately counter-culture work environment in Vancouver." These leaders blend Vancouver's positive attributes with a more aggressive growth mindset, "pulling in a relentless drive from their teams that's counter to the local work culture. They reward grit and ambition and instill a 'going for gold' mindset."

Creating a different model

This observation aligns with Jason Morehouse's perspective. The HiBoop founder argues, "We do things differently in Canada than in the valley, regarding growth and sustainability." This distinct approach to building companies suggests that success might not require mimicking Silicon Valley's model entirely.

Despite the challenges, he says, the proximity to Silicon Valley offers tangible benefits, particularly in access to capital. "More so than ever, capital allocators are willing to support businesses wherever they're building," Richardson notes. 

Simran Kang, CEO of My Family Office (MyFO), which recently raised a USD $3.5 million seed round led by Rhino Ventures, confirms this trend: "Venture capitalists from San Francisco are often in Vancouver."

Chris Neumann, former general partner at Panache Ventures, takes a long-term view of the situation: "Vancouver's proximity to San Francisco is a double-edged sword. If you take the short-term view, then you're likely to fall into the tried-and-true Canadian pastime of worrying about brain drain. But we know that, over the long-term, many people who travel abroad eventually come home.”

He adds, “And they bring with them a wealth of experience and connections that they never would have gotten had they stayed here. At the end of the day, I believe that Vancouver's proximity to the Bay Area is a massive advantage.”

How Vancouver can thrive

The challenge for Vancouver's tech ecosystem isn't simply about stemming the flow of talent and companies to Silicon Valley — it's about creating an environment where entrepreneurs want to build and scale their companies locally. As Ryan Smith, a former product leader at Shopify now working on a stealth startup, argues, "People can complain about tax policy or whatever government party they don't like, but we live next to the biggest capital market in the world and it is an advantage for talented Canadians."

The path forward may lie in Richardson's suggestion that Vancouver needs to do better at fostering entrepreneurs while maintaining its unique identity. This means addressing structural challenges while leveraging the advantages of proximity to Silicon Valley, creating an ecosystem that can both retain local talent and attract international entrepreneurs.

Brandon Waselnuk, head of customer success at Mintlify and a founder who previously relocated his startup to San Francisco, provides a pragmatic perspective: “It depends on what and how you want to build.” 

The key for Vancouver may be embracing this flexibility, while building an ecosystem that offers compelling reasons for entrepreneurs to choose to grow here at home.

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