San Francisco or the Shadows: Where Should Startups Build?

The San Francisco Startup Glow-Up

The data isn’t just numbers—it’s lived experience. Founders who relocated to San Francisco in 2024 noticed a difference. It’s easier to meet VCs for coffee, pitch in person, and network with the right people.

• Talent Density: The city still boasts the highest concentration of skilled workers in tech and biotech.
• Innovation Culture: SF retains a risk-tolerant, failure-friendly environment that inspires bold moves.
• Operational Support: Legal firms, consultants, and advisors are all tailored to high-growth startups.

But – and it’s a big BUT – San Francisco isn’t perfect. What happens when your biotech startup isn’t just code and laptops, but requires manufacturing facilities?

Imagine trying to set up a biomanufacturing plant in the Bay Area. Sky-high real estate costs, zoning restrictions, and environmental regulations make it feel like trying to build a factory on a San Francisco skyscraper’s rooftop. (Singapore, anyone?)

Building companies outside of the hot-spots is hard but not impossible

In contrast, regions like the US Midwest or even Canada offer vast land, more affordable energy, and plenty of space to scale manufacturing operations.

But that brings its own set of challenges:

• Talent Retention: Getting and keeping highly skilled employees in non-urban hubs is notoriously tough. Immigration doesn’t make it easy either (looking at you IRCC)
• Regulatory Headaches: For US-based entities, operating in Canada often involves red tape gymnastics. No wonder many Canadian born companies often move to the US after a while.
• Risk of Market Isolation: Canada, while brimming with space and opportunity, can feel disconnected from the aggressive pace of Silicon Valley. No hustle when it is -40 degrees outside.

Case in point: DeepMind’s Edmonton Lab—a promising foothold that Google ultimately shut down, highlighting the struggles of maintaining top-tier AI talent outside global tech hubs.

Canada Plays Its Cards Differently

Despite these challenges, Canada isn’t just a spectator in the VC game. It’s got some unique advantages that smart startups are leveraging.

1. Non-Dilutive Funding: Programs like SR&ED (Scientific Research and Experimental Development Tax Incentive), L2M, NRC-IRAP, BDC loans etc provide critical funding and guardrails without requiring founders to give up equity. Although, there are other expectations from these sorts of funding agencies, they come at a time when founders need the capital to identify product-market-fit.
2. VCCI (Venture Capital Catalyst Initiative): Government-backed VC funding initiatives designed to spark innovation.
3. Province-Specific Funds:
   • Alberta Innovates: Supporting technology and clean energy innovation.
   • Emissions Reduction Alberta (ERA): Funding climate-focused initiatives.
4. (Previously Active) SDTC (Sustainable Development Technology Canada): Once a go-to source for tech and sustainability grants, though now closed, it left a legacy of helping early-stage cleantech companies.

For young startups, these programs aren’t just financial lifelines—they’re time machines. They buy companies the time they need to refine products, discover market fit, and build the resilience needed to survive the hype cycles of global venture capital.