Montreal’s recent start-up boom is putting Quebec Province on the map as a social media and cloud-driven innovation hub. What used to be a conservative tech city hosting primarily ‘big’ IT including Research in Motion and Nortel Networks is quickly rebranding itself as a top-shelf start-up ecosystem. Companies like Ateneo Digital, Bespoke Mobility, and Art Sumo are just three of what could soon be global household names sprouting out of Montreal. The tech community in Montreal also draws parallels between Silicon Valley in terms of city size, educational resources, and cultural diversity. However, this region’s recent successes might have more to do with a support model that truly understands today’s lean start-up principles. Latin America’s aspiring tech hubs might want to think about rallying behind the Lean model in order to shed negative perceptions toward startup risk, and could also take note of Montreal’s public sector approach to promoting tech entrepreneurship.
Livability is Key to Montreal’s Tech Ecosystem
This bilingual yet proudly French speaking region of nearly four million inhabitants has gone through economic ups and downs during its separatist political movements in the late 80s and early 90s. Nevertheless, according to Montreal native Peter Ryan IT Practice Lead at Ovum, the city weathered the global financial storm of recent years much better than most Canadian and US centers. Rents and overall cost of living have therefore remained stable through the years and continue to be low compared to other North American cities. Low cost of living combined with solid infrastructure, human capital, culture, and a strong IT backbone is what put Montreal right behind San Francisco in the number of technology jobs, according to investment promo agency Montreal International. “These amenities are why Montreal is the kind of city that young professionals are flocking to and see themselves establishing roots in,” stressed to Ryan.
A recent KPMG study also ranked Montreal as considerably cheaper than other North American hubs. In contrast, skyrocketing rents in Boston, San Francisco, and particularly New York are making it difficult for young entrepreneurs to weather the growing pains of starting a new company.
Embracing Lean Start-up Culture is What Makes Montreal Work
According Alistair Croll tech entrepreneur and founder of start-up blog Solve For Interesting, Montreal’s investment community was traditionally risk averse when funding local technology startups. Instead of looking inward, Canadian angel investors and VC funds looked more to US cities like Boston and San Francisco when scouting new firms. In recent years however, “Montreal’s startup communities have really flourished. Some successful exits, a more risk-tolerant investor community, a range of tech events, and an increased emphasis on design have all helped propel the area to the forefront of Canadian tech innovation.”
Montreal seems to have overcome some of the same challenges facing tech entrepreneurs in Latin America today. In particular, risk-averse investor attitudes and the lack of seed-stage funding throw a huge roadblock in front of innovative coders and designers trying to adapt to today’s new startup environment. General Partner at MexicanVC, a California based seed fund working with startups in Mexico says that “traditional venture capital can get through [in Mexico], but only if you take it to the next level and deliver a proven product with recognizable traction in the market.”
According to Reid Hoffman co-founder of Linked-In, this “ready-aim-fire” model is light years behind today’s startup realities. New social media, cloud-based, and mobile applications are flying off the shelf so quickly that success depends almost entirely on measuring market demand and understanding a constantly changing technology consumer base. In short, what may be a good idea now may not be a good idea two months from now.
Today’s Lean startup approach is all about iteration, customer discovery, and only then, development. The days of “build it and they will come” are long gone, says Eric Ries the man who coined the term lean startup. Failure is therefore part of the startup development cycle and not just the end result of an ill-fated project.
According to Alistair, Montreal’s tech investors and public sector support agencies really understand this concept. It’s not only the tech blogs, hackathons, and festivals that create the enabling environment and support network, but there’s actually money behind it. Tax incentives offered by the Canadian and Quebecois governments are specifically tailored to startups and R&D initiatives.
Do Lean Startup Principles Work in Latin America?
According to Salazar, Mexico’s cluster driven initiatives have focused too little on changing investor attitudes toward startups, and more on large-scale IT services implementation and consulting. Focus falls on driving adoption but not necessarily innovation; more consulting than startups. Promotional agencies help create business networks, customers, driving costs down, and certifying processes. Government support focuses on innovation in delivery of services, not pre-seed products.
Latin America culture also tends to punish failure which drives talented entrepreneurs away from taking risks. Recent graduates prefer to work for well-established banks or manufacturing firms. “It is difficult to convince people to take the risk and to adopt an “at least you tried” approach,” explained Salazar. Industry support groups across Latin America could look to the Lean Startup model as a way to throw aside these old perceptions about how startups can bloom into billion dollar companies. If anything, Facebook’s recent purchase of Instagram for one billion dollars underscores the potential in today’s startup scene.
Where to Look For Innovation in Latin America
Latin America’s mega cities may not be the place to go for start-up innovation. Places like Sao Paulo, Bogota, and Mexico City are expensive and dominated by large enterprises that devour most technical human capital. Similar to the United States, LATAM’s mid-sized cities are taking on the role of innovation ecosystems. Curitiba, Brazil, Guadalajara, Mexico and Cali, Colombia all have strong potential. Cali for example is cheap and has a good quality of life compared to Bogota. Many of Colombia’s home-grown technology companies were born in Cali, including Carvajal Technologia y Servicios, CompuNet, and Open Systems. Guadalajara is also becoming Mexico’s design and multimedia center of excellence. Curitiba has been on the technology ‘A list’ for quite some time with big name brands as well as flourishing startups.