15 ms·

Reasons to Start a Startup In Canada

71 points by kentf 14y ago

bryanlarsen 14y ago
I may be a little bit cynical about the first 4 reasons, but the last one is very real. SR&ED tax credits mean that the Canadian government will fund 20-35% of your R&D as long as you do the paperwork (aka logbooks) and can stick it out long enough to have profits to apply the expenses against. These benefits are lucrative enough that failed R&D firms are sometimes purchased almost solely for their outstanding R&D tax credits. And the Qualified Small Business capital gains exemption means that your first $750,000 in capital gains is not taxed at all.
- swalberg 14y ago
  Just to be clear, the capital gains exemption applies to sales of shares from a qualified Canadian small business, not all capital gains. Also, on that topic, the Canadian controlled aspect of it can be undone by contracts you have with foreign shareholders, such as VCs. They can own < 50% of your stock but if they're deemed to have control by virtue of an option to acquire more stock or to force a sale, you lose the exemption.
  - seanmccann 14y ago
    And often times the Canadian startup is best off incorporating in DE. There's a little bit about it at http://blog.carlmercier.com/2011/08/29/us-incorporation-for-canadian-startups/ http://blog.carlmercier.com/2011/08/29/us-incorporation-for-...
- crazycanuck 14y ago
  Actually, you don't even need profits to apply the credits against. They are refundable, which means that if you didn't owe taxes to offset against, the government actually writes you a check in the amount of the credit.
  - comforteagle 14y ago
    Increasingly you get led down an endless paper trail of showing documentation, code reviews & ccra is now in the business of sicking auditors on claims to aggressively deny them. Wasted time & headaches.
  - pcc 14y ago
    And also it can work out to a fair bit more than 20 - 35% -- especially if you can use the proxy method for overhead expenses.
    - crazycanuck 14y ago
      We just went through the process for the first time and landed right around 50%. Our claim was reviewed (this is typical for first time claimants), and while non-trivial the process was well-managed and clear. We did it ourselves instead of using a consultant, and they were very understanding of a few mistakes we made, helped us rectify them and sent us on our way. I don't know if this is typical, but I really can't complain; it seemed entirely fair given the dollars involved.
      - pcc 14y ago
        CRA at their info sessions will tell you that they don't understand why more people don't just write their own claims. I think people looking at it from the outside, or for the first time, easily feel intimidated ("its the taxman!"). The reality is that CRA does want to work with you -- e.g. if you go to the info sessions, you can talk directly to the actual people running the SR&ED program, and they genuinely want to reward innovation and help you maximize the money you can get out, while ensuring that taxpayers (who are footing the bill) are looked after. For example: - besides the salaries paid for eligible work, you can also also claim the proportion of certain overhead expenses related to that work. Or, you can just choose to use the "proxy method" where they basically take the eligible salaries and tack on another 65%. This can be huge, and people do ask the question: "that extra 65% may end up being way more than my actual overheads". CRA's response: the law allows you to pick either, so pick the one that provides the most benefit to your business. - a CRA officer once mentioned to me that they were extremely frustrated by being unable to approve a particular claim where the work seemed good, but there was insufficient documentary proof. After many months of continually going back and asking "are you sure you cannot dig up any documentation", someone at the company happened to mention that there had been an internal email conversation thread about the work -- and this ended up providing all the documentation the CRA needed to approve the claim.
kintamanimatt 14y ago
They seem to be rushing with the Canadian start-up visa thing. It's only in a consultation phase and no new category has been created as far as I can tell.
throwaway1979 14y ago
I'm canuck and am very cynical about the startup space in Canada. 1) Large number of the best developers leave. I doubled my salary moving from Toronto to the Bay area. 2) Silicon Valley (and NY) has smart money. Not to insult Canadian VCs, but the ones I've met are glorified bankers. 3) This is no longer true. The recent govt is increasingly unfriendly to immigrants. 4) In the bay area, everyone I knew (and their dog) was working on a startup. Toronto and Vancouver don't compare. 5) I am very jaded by the govt influence on R&D. This attracts the wrong sort of people. e.g. I've heard of consulting firms that will write your proposal and greatly increase your odds of success - all you have to do is give them a 25% cut. Frankly, the cost of creating a startup is low enough that if you believe in your idea/revenue generation potential, you should not waste time writing proposals.
- tlear 14y ago
  1. Any numbers? Toronto you can get some pretty decent money. Also living in downtown with no car as opposed to driving everywhere in Bay area and paying crazy rent. It is not that clear cut imo. NYC is a better comparison probably 2. Not sure on this not enough experience 3. It is trivial to get a visa for Canada to work, compared to US there is no comparison. Note that for Canadian citizens it is different in US (much easier) 4. Yeah thats true, Toronto probably has the biggest community and it is small in comparison 5. So true, the whole thing is a scam. I actually worked on couple projects where these consultants were used. It is embarrassing.
  - pooriaazimi 14y ago
    re. 1: Your parent looks like a legit "throw away", but he's actually not! :)
  - potatolicious 14y ago
    > "Any numbers? Toronto you can get some pretty decent money." Just from my own circles - $125-150K base, with additional equity/bonuses on top, in NYC, for a bunch of nerds only 1-3 years out of undergrad. The range is similar in SF/SV. This is astronomical by "pretty decent" Toronto standards. IMO the notion that NYC/SF/SV compensation eats Canadian salaries for lunch is not really that controversial nor ambiguous. I am easily earning over 2x what I would pull off in Toronto, or Montreal, or Vancouver. [edit] There's an additional point of on top of this: Canada has essentially no major innovative software institutions. Google, Facebook, Microsoft, Amazon, et al act as anchors in their respective communities and their influence can't be discounted. They attract talented people who actually give a hoot about the impact of the things they work on, and provide a talent pool for startups to draw from. They also act as a cushion against the risks of startup-dom, as most capable engineers have a (very decent) plan B. The equation in the US often works out like "I can go work on a nimble team doing really cool stuff that impacts real people and possibly get rich. Even if we fail, I walk back into a 6-figure job working on really cool stuff still." - this has a tremendous impact on the startup scene, and simply does not exist at all in Canada.
jonny_eh 14y ago
"You don’t have Google and Facebook offering astronomical starting salaries for engineers right out of school" Except that's a big reason why I left Canada to work in Silicon Valley. It kinda went like this: "So you'll pay me 2-3 times what I could earn here, the weather is perfect, there's no mosquitos, and I can work on stuff people actually use? Where do I sign?"
- serge2k 14y ago
  A guy just left where I'm working to move down to the states. Makes around 2.5 times what he did here and gets extra benefits (apparently extra for living expenses and such). I am considering checking out the states. I can always come back to BC later and earning some extra money would be good considering my loans. Job I have now isn't bad, low stress and 8-4 every day. pay is decent. Problem is that if I stayed here the pay would pretty much stay constant. Plus I hate living in northern BC.
  - jonny_eh 14y ago
    Move to Silicon Valley/SF it's awesome out here!
nickler 14y ago
There is some real validity to the points, especially with regards to the investor culture, but mostly because there are just far fewer of them. The good ones are out there, just not in the numbers. Staying out of the fishbowl is definitely helpful, and we've found some great traction in a market that has far less competition. I can imagine anyone in our target in SF will have 100 people knocking on their door to get them involved in a beta. Canada is a great little greenhouse, and a warm pond to test, iterate, and evolve. If you can prove your product/market fit here, then you can look at the big ocean to expand without a huge risk on the cost of scaling.
greenranger 14y ago
I cant speak for other parts of Canada but the startup/hacker culture in Toronto is definitely getting better. I find most companies are bootstrapped small businesses compared to the typical VC backed longshots you read about here - Nobody's giving you ten million dollars to build a photo sharing app around these parts.
togasystems 14y ago
I just finished a large contract and am starting to look for positions at promising startups in Vancouver. Compared to SF, there really isn't many options. Most are video game companies. The cost of living is high in Vancouver. While the salaries offered are higher than Toronto, they are no where near SF. I wonder if it would be worth it traveling to San Fran to test the employment market?
- amackera 14y ago
  If you're willing to move to Toronto, you can apply at Top Hat Monocle (my company).
  - togasystems 14y ago
    Just moved from there, but thanks for the offer!
nvk 14y ago
This is very true, at http://quandl.com http://quandl.com we are funded, we have talent and we love Toronto! We are building something big, a Numerical Data Search Engine outside the valley.
jmacd 14y ago
Who cares. Just build your startup wherever you WANT to be and I guarantee that you will have a better result than trying to do it somewhere you don't want to be. If you want to be in Canada then do it in Canada. If you want to be in NY or SF or Idaho or Mexico then go do it there. Nobody actually cares where you are, people truly love great product.
- debugging 14y ago
  True, but I believe the point is having an atmosphere (investors, universities, creative thinkers, etc.) that helps build a company.
tjholowaychuk 14y ago
SF is kinda dirty, and you'll pay easily 2-3x as much for a place too so of course they pay more!
debugging 14y ago
The problem I face in Canada (Toronto) is that I prefer to stay as a contractor. I looked into a few startups myself, and the pay wasn't that interesting (that and the fact I'd have to commute 2 hours per day).
EdLanden 14y ago
It's funny how the conversation is confined to salary potential and government handouts. There is a bigger issue afoot that taints the Canadian IT scene - that is the utter lack of supporting commercial infrastructure. Years of anti small business provincial and federal governments, a pariah lackluster VC sector who's biggest claim to fame is inspring the cynical tv series Dragon's Den/Shark Tank (this is pathetic coming from Canada where there is no investment sector) and an academic sector that is devastatingly irrelevant. Compare to other countries of comparable size/GDP and Canada comes out smelling like a turd - ya I live here and ya I have three startups under my belt. Hmmm, government welfare or an entrepreneur's paradise. That's a tough one.

71 points by kentf 14y ago

I may be a little bit cynical about the first 4 reasons, but the last one is very real. SR&ED tax credits mean that the Canadian government will fund 20-35% of your R&D as long as you do the paperwork (aka logbooks) and can stick it out long enough to have profits to apply the expenses against. These benefits are lucrative enough that failed R&D firms are sometimes purchased almost solely for their outstanding R&D tax credits. And the Qualified Small Business capital gains exemption means that your first $750,000 in capital gains is not taxed at all.

swalberg 14y ago
Just to be clear, the capital gains exemption applies to sales of shares from a qualified Canadian small business, not all capital gains. Also, on that topic, the Canadian controlled aspect of it can be undone by contracts you have with foreign shareholders, such as VCs. They can own < 50% of your stock but if they're deemed to have control by virtue of an option to acquire more stock or to force a sale, you lose the exemption.
- seanmccann 14y ago
  And often times the Canadian startup is best off incorporating in DE. There's a little bit about it at http://blog.carlmercier.com/2011/08/29/us-incorporation-for-canadian-startups/ http://blog.carlmercier.com/2011/08/29/us-incorporation-for-...
crazycanuck 14y ago
Actually, you don't even need profits to apply the credits against. They are refundable, which means that if you didn't owe taxes to offset against, the government actually writes you a check in the amount of the credit.
- comforteagle 14y ago
  Increasingly you get led down an endless paper trail of showing documentation, code reviews & ccra is now in the business of sicking auditors on claims to aggressively deny them. Wasted time & headaches.
- pcc 14y ago
  And also it can work out to a fair bit more than 20 - 35% -- especially if you can use the proxy method for overhead expenses.
  - crazycanuck 14y ago
    We just went through the process for the first time and landed right around 50%. Our claim was reviewed (this is typical for first time claimants), and while non-trivial the process was well-managed and clear. We did it ourselves instead of using a consultant, and they were very understanding of a few mistakes we made, helped us rectify them and sent us on our way. I don't know if this is typical, but I really can't complain; it seemed entirely fair given the dollars involved.
    - pcc 14y ago
      CRA at their info sessions will tell you that they don't understand why more people don't just write their own claims. I think people looking at it from the outside, or for the first time, easily feel intimidated ("its the taxman!"). The reality is that CRA does want to work with you -- e.g. if you go to the info sessions, you can talk directly to the actual people running the SR&ED program, and they genuinely want to reward innovation and help you maximize the money you can get out, while ensuring that taxpayers (who are footing the bill) are looked after. For example: - besides the salaries paid for eligible work, you can also also claim the proportion of certain overhead expenses related to that work. Or, you can just choose to use the "proxy method" where they basically take the eligible salaries and tack on another 65%. This can be huge, and people do ask the question: "that extra 65% may end up being way more than my actual overheads". CRA's response: the law allows you to pick either, so pick the one that provides the most benefit to your business. - a CRA officer once mentioned to me that they were extremely frustrated by being unable to approve a particular claim where the work seemed good, but there was insufficient documentary proof. After many months of continually going back and asking "are you sure you cannot dig up any documentation", someone at the company happened to mention that there had been an internal email conversation thread about the work -- and this ended up providing all the documentation the CRA needed to approve the claim.

kintamanimatt 14y ago

They seem to be rushing with the Canadian start-up visa thing. It's only in a consultation phase and no new category has been created as far as I can tell.

throwaway1979 14y ago

I'm canuck and am very cynical about the startup space in Canada. 1) Large number of the best developers leave. I doubled my salary moving from Toronto to the Bay area. 2) Silicon Valley (and NY) has smart money. Not to insult Canadian VCs, but the ones I've met are glorified bankers. 3) This is no longer true. The recent govt is increasingly unfriendly to immigrants. 4) In the bay area, everyone I knew (and their dog) was working on a startup. Toronto and Vancouver don't compare. 5) I am very jaded by the govt influence on R&D. This attracts the wrong sort of people. e.g. I've heard of consulting firms that will write your proposal and greatly increase your odds of success - all you have to do is give them a 25% cut. Frankly, the cost of creating a startup is low enough that if you believe in your idea/revenue generation potential, you should not waste time writing proposals.

tlear 14y ago
1. Any numbers? Toronto you can get some pretty decent money. Also living in downtown with no car as opposed to driving everywhere in Bay area and paying crazy rent. It is not that clear cut imo. NYC is a better comparison probably 2. Not sure on this not enough experience 3. It is trivial to get a visa for Canada to work, compared to US there is no comparison. Note that for Canadian citizens it is different in US (much easier) 4. Yeah thats true, Toronto probably has the biggest community and it is small in comparison 5. So true, the whole thing is a scam. I actually worked on couple projects where these consultants were used. It is embarrassing.
- pooriaazimi 14y ago
  re. 1: Your parent looks like a legit "throw away", but he's actually not! :)
- potatolicious 14y ago
  > "Any numbers? Toronto you can get some pretty decent money." Just from my own circles - $125-150K base, with additional equity/bonuses on top, in NYC, for a bunch of nerds only 1-3 years out of undergrad. The range is similar in SF/SV. This is astronomical by "pretty decent" Toronto standards. IMO the notion that NYC/SF/SV compensation eats Canadian salaries for lunch is not really that controversial nor ambiguous. I am easily earning over 2x what I would pull off in Toronto, or Montreal, or Vancouver. [edit] There's an additional point of on top of this: Canada has essentially no major innovative software institutions. Google, Facebook, Microsoft, Amazon, et al act as anchors in their respective communities and their influence can't be discounted. They attract talented people who actually give a hoot about the impact of the things they work on, and provide a talent pool for startups to draw from. They also act as a cushion against the risks of startup-dom, as most capable engineers have a (very decent) plan B. The equation in the US often works out like "I can go work on a nimble team doing really cool stuff that impacts real people and possibly get rich. Even if we fail, I walk back into a 6-figure job working on really cool stuff still." - this has a tremendous impact on the startup scene, and simply does not exist at all in Canada.

jonny_eh 14y ago

"You don’t have Google and Facebook offering astronomical starting salaries for engineers right out of school" Except that's a big reason why I left Canada to work in Silicon Valley. It kinda went like this: "So you'll pay me 2-3 times what I could earn here, the weather is perfect, there's no mosquitos, and I can work on stuff people actually use? Where do I sign?"

serge2k 14y ago
A guy just left where I'm working to move down to the states. Makes around 2.5 times what he did here and gets extra benefits (apparently extra for living expenses and such). I am considering checking out the states. I can always come back to BC later and earning some extra money would be good considering my loans. Job I have now isn't bad, low stress and 8-4 every day. pay is decent. Problem is that if I stayed here the pay would pretty much stay constant. Plus I hate living in northern BC.
- jonny_eh 14y ago
  Move to Silicon Valley/SF it's awesome out here!

nickler 14y ago

There is some real validity to the points, especially with regards to the investor culture, but mostly because there are just far fewer of them. The good ones are out there, just not in the numbers. Staying out of the fishbowl is definitely helpful, and we've found some great traction in a market that has far less competition. I can imagine anyone in our target in SF will have 100 people knocking on their door to get them involved in a beta. Canada is a great little greenhouse, and a warm pond to test, iterate, and evolve. If you can prove your product/market fit here, then you can look at the big ocean to expand without a huge risk on the cost of scaling.

greenranger 14y ago

I cant speak for other parts of Canada but the startup/hacker culture in Toronto is definitely getting better. I find most companies are bootstrapped small businesses compared to the typical VC backed longshots you read about here - Nobody's giving you ten million dollars to build a photo sharing app around these parts.

togasystems 14y ago

I just finished a large contract and am starting to look for positions at promising startups in Vancouver. Compared to SF, there really isn't many options. Most are video game companies. The cost of living is high in Vancouver. While the salaries offered are higher than Toronto, they are no where near SF. I wonder if it would be worth it traveling to San Fran to test the employment market?

amackera 14y ago
If you're willing to move to Toronto, you can apply at Top Hat Monocle (my company).
- togasystems 14y ago
  Just moved from there, but thanks for the offer!

nvk 14y ago

This is very true, at http://quandl.com http://quandl.com we are funded, we have talent and we love Toronto! We are building something big, a Numerical Data Search Engine outside the valley.

jmacd 14y ago

Who cares. Just build your startup wherever you WANT to be and I guarantee that you will have a better result than trying to do it somewhere you don't want to be. If you want to be in Canada then do it in Canada. If you want to be in NY or SF or Idaho or Mexico then go do it there. Nobody actually cares where you are, people truly love great product.

debugging 14y ago
True, but I believe the point is having an atmosphere (investors, universities, creative thinkers, etc.) that helps build a company.

tjholowaychuk 14y ago

SF is kinda dirty, and you'll pay easily 2-3x as much for a place too so of course they pay more!

debugging 14y ago

The problem I face in Canada (Toronto) is that I prefer to stay as a contractor. I looked into a few startups myself, and the pay wasn't that interesting (that and the fact I'd have to commute 2 hours per day).

EdLanden 14y ago

It's funny how the conversation is confined to salary potential and government handouts. There is a bigger issue afoot that taints the Canadian IT scene - that is the utter lack of supporting commercial infrastructure. Years of anti small business provincial and federal governments, a pariah lackluster VC sector who's biggest claim to fame is inspring the cynical tv series Dragon's Den/Shark Tank (this is pathetic coming from Canada where there is no investment sector) and an academic sector that is devastatingly irrelevant. Compare to other countries of comparable size/GDP and Canada comes out smelling like a turd - ya I live here and ya I have three startups under my belt. Hmmm, government welfare or an entrepreneur's paradise. That's a tough one.