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Canadian startups are now being actively courted and acquired by American companies. Should we celebrate this trend, or worry that it affect the nation’s creative talent pool? (Les Cunliffe/Getty Images/iStockphoto)
Canadian startups are now being actively courted and acquired by American companies. Should we celebrate this trend, or worry that it affect the nation’s creative talent pool? (Les Cunliffe/Getty Images/iStockphoto)

Guest column

Are Canadian startups selling out? Add to ...

In what can be a divisive issue, Canadian startups are now being actively courted and acquired by American companies. Recent examples include: Toronto-based Eloqua being acquired by Oracle in December, 2012, for a reported $871-million; Waterloo's BufferBox was acquired by Google in November, 2012, for somewhere between $17-million and $25-million and Attassa, an Edmonton startup acquired by YouSendIt in January, 2011, for an undisclosed amount.

Should we celebrate this trend, which highlights the fact that Canada’s built a flourishing startup culture alluring to investors? Or should we worry that the onslaught of acquisitions is shortsighted; akin to watching the family silver be sold off for a quick buck?

The talent pool

There’s no doubt that the startup-investor system flows in one direction. The sheer scale of the U.S. in terms of its population and economy dictate that, for the most part, even the heaviest-hitting Canadian companies can’t compete to acquire American startups.

And therein lies one of the more contentious issues in this dynamic: When American investors finalize their deals with Canadian companies, chances are those companies, complete with founders and development teams, will move south.

This situation can be unsettling for local investors. Entrepreneurs are inherently creative and once they exit one project, they commonly go back to the drawing board, sketching out the next. Therefore, as the talent is lured away, the Canadian ecosystem will inevitably suffer as a result.

But these acquisitions don’t always have negative side effects. In fact, many serve to to motivate entrepreneurs within the country. As success builds and consistent headlines tout the achievements of home-grown startups, the inevitable ripples of inspiration act to create the next entrepreneurial wave.

Backing winners

I’ve acquired startups in both Canada and the U.S. and have chosen to return to Canada, as have many other entrepreneurs I know.

There are significant advantages to building businesses here; among them are less economic volatility which drives a more stable economy, less competition for talent and a vast base of natural resources which creates a pool of locally-based investors.

The Canadian Government has also announced plans to inject $500-million into the Canadian venture capital industry. Combine this with the Startup Visa Canada program, which aims to lower barriers for entrepreneurs wanting to establish themselves in the country, and you have a real and tangible recipe for creating ongoing startup success stories.

Granted, these successes don’t happen overnight. Most entrepreneurs will tell you, an overnight success is usually around five years in the making. But solid foundations for growth are in place.

The economics

The threat of a closed economy seems to me to be far more dangerous to Canadian startups than American acquisitions. The injection of U.S. capital into the Canadian economic ecosystem is a flow of new money which, in my opinion, should be welcomed with open arms. If this attention from Southern suitors also acts to force Canadian investors’ hands, then that is also has to be a positive.

As we see the emergence of an increasingly more connected global business community, geographical restrictions for investors are inevitably fading away. While in the short term, this may raise the blood pressure of a few local investors, in the long run, the attention our startup industry is experiencing has to be seen as a ringing endorsement of its continuing strength and influence.

Cameron Chell is the co-founder and CEO of Podium Ventures, a venture creation firm in Calgary that finances and builds high-tech startups.

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