Often when we think about start-ups, we think of technology start-ups. But in reality, every business that is starting out is a “start-up” – so it is not just technology companies we are referring to. It is any company in the early stages of growth.
Every successful start-up reaches a point where all the advantages of being first to market with little competition are gone. Many start-ups will look to international expansion to maintain a rate of growth that maximizes resources that become redundant, without new accounts to service or more products to make for new customers.
Many start-ups are overlooking Canada, preferring larger emerging markets. But start-ups in particular should be looking at Canada for the following reasons:
- Logistics enables the leveraging of U.S. assets
- Skilled workforce
- Increase online visibility
- Better understanding of the laws, language, culture, people and markets
- Canada and the USA have a long trade history
- Currency and other advantages
The geographical proximity of Canada to the United States – and in particular the way the population is distributed and concentrated in urban areas – enables U.S. companies to leverage their current assets. This results in lower start costs and increased productivity with the current infrastructure. Interconnected financial, transportation and communication systems will further leverage a start-ups current assets, resulting in lower set-up costs and requirements for new resources.
The proximity of the two countries and interconnected communication systems means that Canadian consumers are more likely to be familiar with U.S. brands, products and services because of exposure to U.S. broadcast and cable networks, magazines and other publishers that expose Canadians to U.S. culture and trends than Canada’s emerging market competitors.
Most of Canada’s major urban centres with large populations are located within close proximity to the U.S. border. This means that many Canadians aware of U.S. products and services because they receive U.S. Network and Cable broadcasts, U.S. magazines and more in Canada. This provides the ability to leverage U..S assets much more easily due to Canada and the USA having so many interconnected transportation and communication systems and financial institutions.
Companies that are finding problems in hiring technology staff may find that Canada is a viable solution to meeting their needs for skilled workers. Canada has a number of world-class universities and colleges providing a knowledgeable and highly skilled workforce. High-tech firms regularly recruit computer science students from universities in Kitchener-Waterloo and Toronto.
Online start-ups should be very interested in expansion into Canada because that is the only way to register a Canadain domain. As specified by Cira (Canadian Internet Registration Authority), only corporations, residents of Canada and a few other government and public entities can own a Canadian domain. The big plus is that having a Canadian presence and address will increase trust and loyalty for the site.
For many U.S. start-ups, search engines are a very important marketing channel. In order for a start-up (or for that matter any business) to rank in the Canadian indexes of search engines like Google and Bing, a website should be either hosted in Canada or have a Canadian domain name. There are other factors, but either of the above, or better still both, will make gaining and maintaining online visibility much easier.
Better understanding of market
The differences and similarities between the Canadian and U.S. marketplace, people and society are subtle but somewhat distinct. For the most part, the shopping habits and marketplace are very similar. However, you may find slightly different motivations to buy.
British law is the basis for both countries, so there will be some degree of familiarity with the laws of Canada. The lone exception would be Quebec, where the law is based on principles of French law. There is one difference in law that is important to consider if you are already selling goods or services in Canada. Canada has GST/HST laws that require these taxes to be collected when they enter Canada. Even if you do not have to pay income tax in Canada in most cases you should be paying GST/HST as a non-resident. At the very least, not preparing for the tax will result in border/custom delays.
The language in both countries is English, however, you will find some differences in spelling of words and you may also find that where Canadians will use the British neighbour, favour and colour, you are also more likely to find the U.S. spelling of optimization over the the British spelling of optimisation in Canada. For the most part, values and customs of both countries are very similar with Canada being perhaps more multi-cultural.
It is no accident that Canada is the largest trading partner with the USA. The close proximity of the two countries and common interests fosters a need to co-exist. Several trade and tax agreements between both have enabled Canada and the United States to maintain a fair trade balance. Trade between Canada and the USA has always been an important contributor to both economies. NAFTA (North American Free Trade Agreement) was just a more formal agreement between both governments. However, the two governments have always facilitated trade through corporate structures such as “branch offices” to ease the burden of establishing corporate presences.
Currency and other advantages
The current difference in currency value has made Canada much more inviting. That could change quickly if oil prices rise. The Canadian dollar is to a large extent a petroleum currency because the economies of Alberta and Saskatchewan are closely correlated to oil production and prices. Although the advantages of the currency exchange are going to fluctuate, Canada has a well-educated workforce, stable infrastructure, government grants and logistics advantages over many other other regions that facilitate expansion internationally.
Once you have decided on Canada for expansion, you will want to choose a jurisdiction to do business in – and none is better than Toronto! Toronto is the 3rd largest city in North America, is around 100 miles from two major U.S. border crossings, and the Golden Horseshoe (which includes Toronto) is one of the most diverse economies and most densely populated regions of the country.