March 20, 2013
This article originally appeared in the National Post on February 25, 2013
The brain drain is a common complaint in Canada, particularly in regards to entrepreneurs, who often go south of the border to start their businesses because investment is easier to find, and the market is bigger. But the reverse is also happening — some entrepreneurs are finding their way back to Canada, driven by business and living conditions.
One of those entrepreneurs is Brian Shuster, who was born in Montreal and moved to Los Angeles as a child. Later, he ran several companies in the United States, selling one — Webjump — for US$25-million in 1999. In 2003, he started Utherverse, a company that creates online 3D environments for people to interact in. He began employing more contractors north of the border, before finally making a permanent move to Vancouver in 2006.
Staffing was a big issue for Mr. Shuster. “I found recruiting the appropriate talent and giving them the incentive to stay and be dedicated to the company in Silicon Valley was a fool’s errand,” he says.
“Everyone is looking for stock options and an IPO, and no one cared what they did as long as they got the title they wanted.”
Things are different in Vancouver, says Mr. Shuster, who drew on the city’s strong pool of video game developers for creative skills.
“I was looking for a talent pool in a city where people would have the skill set to do the work and also have the right attitude and dedication and commitment to follow through.”
Utherverse now employs 60 people in Canada and is entirely operated and owned in the country. An auxiliary office in the U.S. houses just a couple of people for administrative support.
For Cameron Chell, the impetus to return to Calgary was culture. Mr. Chell is co-founder of investment group Podium Ventures, and chief executive of strategic business planning consultancy Business Instincts.
He moved to California in 1999, but found himself in New York on the morning of 9/11. “I was in New York at the base of the tower, walking into the building, when it got hit,” he says.
That shook Mr. Chell, who had already sold his stake in Futurelink, a technology firm he had started in Calgary in 1996. Worth $150-million after his exit, he began to get nervous about security issues and policy in the United States. He began moving his operations back slowly over the next three years, officially completing his migration back home in 2004.
Canada is far less volatile than the U.S., both culturally and economically, he argues. “We have a consistent policy and we don’t have the same strong views around gun control. There’s a live and let live perspective. That drives a more stable economy and society,” he says.
“We don’t have these incredible, ridiculous booms, but we don’t have these falls off the cliff, either. That makes it easier to look out ten years and know that we can get things done.”
Mr. Chell also lauds Canada’s human resources, citing a better education system as a key draw. However, this isn’t the only resource we have. He says Canada’s vast base of natural resources, combined with the lack of competition, makes it a haven for locally based investors.
“The energy business in the U.S. is so established and there’s such a barrier that I couldn’t just learn and get to know everyone in the same timeframe,” he says. Returning to Calgary has enabled him to broker major energy deals that would not have been possible in the United States.
However, Mr. Chell says entrepreneurs can benefit from a presence in the United States early on. Futurelink got its initial funding from Calgary- and Toronto-based accredited investors, before moving into Canadian institutional investments. But by its C series round of funding, Mr. Chell says the money was coming from Silicon Valley.
“When the U.S. money started showing up, that was when we went down there,” he says, adding he faced pressure from Silicon Valley investors to be closer to that market, especially as Futurelink was acquiring U.S. companies.
While Mr. Chell is a big fish who returned home after making his fortune, Canada is luring home far smaller operators, too. First-time entrepreneur Justin Bull is about to pull up stakes and return from Oakland, Calif. to Vancouver after just four months.
“It was a good incubation space,” says Mr. Bull, whose company, Oakland Leatherworks, uses laser-cutting machinery to make custom leather goods such as wallets and bags on a large scale. He had access to the equipment in a shared space in California. He is hoping to capitalize on what he sees as a growing trend for quality handmade goods on the west coast, but by the end of March, he hopes to be doing it in Vancouver.
“Healthcare is so expensive down there. I am a conservative, risk-averse man, he says, adding that he has a good base of contacts in Vancouver. San Francisco is “much more cutthroat.”
This, combined with the administrative headaches of getting an investor’s visa, persuaded Mr. Bull to return to Vancouver, where he will be working from home as a one-man business, either purchasing his own laser cutter or partnering with contacts in Vancouver who have access to a machine.
Entrepreneurs likely will continue to fly south. But at least some are migrating back. The reasons are diverse, but the results are the same: some business owners are coming home to roost.