One key message sounded Wednesday from business and venture capital experts from all regions of the United States – Canadian technology businesses should look into going south, but not until they are ready.
That, however, was one of only a few ideas experts had in common at the Information Technology Association of Canada Ontario (ITACO) U.S. Market Primer held in Toronto on Wednesday. Business development representatives from several offices of the Canadian Trade Commission Service spoke to a group of Canadian technology businesses about what it takes to do business and get funding in the U.S.
Joking that the rest of America is just a “glorified suburb of New York City,” Philippe Wahba, an officer from the New York City Canadian Trade office, said that because New York is home to many Fortune 500 companies, Canadian companies should only come to the city when in at least the second or third stage of product development.
“The company should already have funding in Canada and a Canadian venture capitalist lined up to deal with the American,” he said. “They shouldn’t be looking for less than $5 million, because it’s just not worth the time.”
But Bill O’Connor, a consultant at San Francisco-based Muse Creative Consulting, said partnerships, and not necessarily investments, are the most important benefit of doing business in America. “If your product is doing well and you are running around Ontario selling it, that’s great,” he said. “But if you hook up with (software maker) Oracle, that’s distribution and co-bundling.”
O’Connor pinned down wearable computing and voice recognition as future trends, and said “world-wide word of mouth” and intelligent agents on the Internet will be the content drivers in the next few years.
And, unlike Wahba, O’Connor said it is vital to create relationships in different regions far before the product is complete. “Go down there and chat,” he said about Silicon Valley. “The economy is a network and there is nothing that stands alone now in the new economy.”
According to Skip Brandon, a founding partner at Smith Brandon International and former FBI agent, a similar business attitude exists in the U.S. government, particularly when it comes to security.
“Government is very interested in Canadian high-tech companies because you are very aggressive overseas,” he said. “The FBI liked to work with Canadian companies because they are hard-working and they deliver.”
And, Brandon said, companies don’t need to wait until a product is ready. He suggests getting in touch with government as soon an idea is developed. “They will pay you to make the product they need if you can convince them that they need it,” he said. That’s because there has been a recent surge of government backing in security and, according to Brandon, it’s not all for “bullets and bodies.”
“Because you are a Canadian, you are not necessarily at a disadvantage,” he said, adding that companies need a local contact to help get a foot in the door. “Now, if you are going to go up to the front door of the Pentagon and knock, you are going to have a hard time.”
Judy Bradt, director of business development at The Canadian Embassy in Washington, agreed that one of the new focuses in her region is security. “How sexy is insurance? On Sept. 10, spending a lot of money so nothing would happen was pretty dull,” she said. “On Sept. 12, there was nothing hotter in town.”
Along with security, the emphasis is on government services, bioinformatics, e-learning, e-business and, as Bradt reluctantly admitted, entertainment. “Canadian companies are in there in Washington, but they didn’t pop up overnight,” she said. “You have to build relationships for the long-haul. Washington is good if you want someone with deep pockets who pays bill and is basically next door and guarantees a level-playing field.”
Steve Flamm, the representative from Atlanta, warned that it would be in the best interest of Canadian businesses to have a local manufacturing representative from the southern region to set up distributors and meetings in the south-eastern U.S.
Chicago-based representative Michael Muth said Canadian companies should look to the American Midwest because of its technology industry’s diversity. “The West coast has the programmers, the East coast has all the content providers, and in Chicago we don’t have either, but we do have users and we do have lots of money,” he said.
New England representative John Rodiloco, based in Boston, said that city is the one businesses looking for venture capitalists should avoid.
“Southern New Hampshire is probably the place you want to start,” he advised. “It’s not the high-stress place Boston is and they are a little more open and a little closer to Canadians. Also, stay away from Maine. Maine is in the tanks.”
In the end, where does this leave Canadian tech businesses?
Robert Mout, manager of special key projects at Logic Box (which refurbishes used computers and hardware), said while venture capital is not in the cards for his business right now, the company is looking at exporting product on its own and is looking for the right American market opportunity.
“Our product is trailing edge, not leading edge,” Mout said. “Places like Silicon Valley are not for us because they are swamped in computers up to their necks and they don’t need us. It was worthwhile for us to see that there is different ways of doing business in the different areas, because I don’t think I had a very clear idea that it was so regional and that they all thought of themselves in a different way.”
Canadian United States Relations, part of the Department of Foreign Affairs in Ottawa, is at http://www.can-am.gc.ca
The Information Technology Association of Canada (ITAC) for Ontario is at http://www.itacontario.com
Logic Box Distribution in Mississauga, Ont., is at http://22.214.171.124
Muse Creative and Consulting in San Francisco is at http://www.musecreativeandconsulting.com/