No Place for Nerds

While we were busy toasting the energy boom, another could-be big technology slipped away to Silicon Valley. Will the brain drain ever be staunched?

Photography by Brett Gilmour
Illustration by James O’Brien

Located just minutes from the University of Calgary, 24th Avenue is a popular student-housing area. Ask most U of C grads and at least a few have either rented a home in the neighbourhood or at least partied at one. But five years ago Geoff Smith and Garrett Camp, two roommates who shared a house on the avenue, weren’t exactly doing what your typical 20-somethings are up to in their bedrooms. Along with Justin LaFrance, a fellow U of C grad, the trio created StumbleUpon.com, a kind of search engine that, like a TiVo of the Internet, matches users with websites they would find interesting while they literally stumble around the Web. By 2005, the site had over 6,000 users solely through word of mouth. Until last year, it was self-funded and all three men were working on other projects simultaneously.

“We weren’t actively looking for investment in Alberta,” says Camp, who was also working on a master’s degree in software engineering at the time. “We liked the idea of not having investors yet because once you do, you have to think about what they want… and have that additional worry.” Although a few venture capitalists showed some interest in Calgary, Camp says it never felt right.
And then Silicon Valley called.

While at a conference at Stanford University in September 2005, StumbleUpon’s creators met with Brad O’Neill, a multiple start-up veteran who had seen their site and wanted to discuss business opportunities. Through O’Neill, the trio was introduced to other angel investors and during a return trip that December, Camp met Ariel Poler, now chairman of StumbleUpon’s board of directors. In a matter of weeks, they were in the office of Ram Shriram, one of the first investors of Google, discussing how much money they wanted.

StumbleUpon now boasts two million registered users and a roster of some of the most influential investors in Silicon Valley. In addition to Poler and Shriram, StumbleUpon’s other four investors have portfolios that include such big-name sites as StubHub, Google, FaceBook and Kaboodle.

Although LaFrance remains in Calgary with a small team, Smith and Camp have traded in their 24th Avenue home for a 2,000-square-foot office in an old brick building in San Francisco and are now represented by one of the leading technology public relations firms whose clients also include Dell and Yahoo. StumbleUpon is being touted as one of the biggest tech plays of 2007.

As for relocating to the Valley, “It was a condition as part of the investment,” says Smith. “Well, I wouldn’t say condition, but they said they would prefer it,” Camp quickly clarifies. “But it was a strong preference,” says Smith, and both men agree.

Camp insists they could have stayed in Calgary with LaFrance if they were adamant but they wouldn’t be getting the same level of advice and involvement from their investors, and in turn the same kind of exposure.

ut for Sarath Samarasekera, StumbleUpon’s departure means the loss of a high-profile tech company that could have potentially attracted others to the city and changed what he sees as a bleak situation for information technology in the province. “We didn’t lose two guys who were working out of their garage. We lost a billion-dollar company,” he says. “It may have taken two years to develop but if the climate was here, the investment community was here and the connections were here, they would have stayed.”

The president and CEO of Calgary-based Shopster, an e-commerce site that assists users in setting up their own online retail businesses, says these days Calgary is a tough place to do business unless you’re doing oil. And with opportunities in the United States for IT, namely in Silicon Valley, it’s not surprising companies leave everything behind to relocate. The consequence, he says, is that Alberta is losing some of its best companies and what they could have become. And with that, any hope of creating a substantial cluster of knowledge-based companies.

“It’s not that Alberta is having a tough time spawning these industries–they are having a tough time keeping them,” he says. “If you have a bigger idea than what they [investors] want to do and you are not in the oilpatch, you can’t attract the dollars here.”

At the time of our interview, Samarasekera was in the process of setting up a corporation in the U.S. Costs for Shopster are higher than originally anticipated when the company was founded in 2004 because of the oil boom’s effect on salaries. His business has also grown to a level that it needs a U.S. presence, Samarasekera says. He will soon have to make the decision where to place his next staff member. With 20 employees already in Calgary and with a greater chance of finding a top-notch executive in California, he says he is leaning towards hiring in the U.S. And that could prompt a shift in the company’s orientation.

Samarasekera foresees a point where he’ll have to consider relocating either his entire office or, if it were worthwhile, to keep an office in Calgary and one in the U.S.

Stephen Murgatroyd, “chief scout” for an Edmonton consultancy called the Innovation Expedition, says it’s not surprising startups such as StumbleUpon or Shopster feel the need to relocate from Calgary to an area that is more suitable for their business models. Indeed, in its “Alberta Technology Report 2006,” Ernst & Young LLP found that nearly half of 128 high-technology leaders surveyed had considered or would consider relocating outside the province, the most common reason being for better access to capital.

“If you want to be part of the growing sector that can attract capital, you are most likely to go where the capital is and where the infrastructure is,” Murgatroyd says. “We don’t have a lot of diverse economic infrastructure here. Alberta is so dominated by oil and gas that it’s very difficult to get heard.”

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