True to form, the Canadians are politely spying on Silicon Valley

By Dan Raile , written on September 5, 2014

From The News Desk

Rocketspace is a co-working whatchamacallit occupying 70,000 square feet (and counting) spread between two iconic buildings in the bank-clad canyons of Sansome and Bush Streets in San Francisco's Financial District. As such, it's an unlikely headquarters for an international spy ring.

Perhaps that's the point.

Back in June, I went to Rocketspace to meet with Canada’s Consul General for San Francisco, Cassie Doyle, and Senior Trade Commissioner, John Zimmerman.

For the past three years Canada has been using Rocketspace as the base for a trade and economic development scheme to help Canadians -- Canadians! -- infiltrate Silicon Valley. The program provides free office space for selected Canadian start-ups, choreographing a barrage of meetings with potential clients, partners, investors and mentors in the Valley over the course of a four-month stay.

The goal, said Doyle, is not just to secure investment and help these particular Canadian companies expand into American and global markets. There is an even more basic cultural component: Doyle and Zimmerman hope that by exposing Canadian entrepreneurs and innovators to the region’s ecosystem and signature way of doing business, their enterprising citizens will bring some of the magic dust back home with them.

That’s right. I’m talking about a Canadian plot to infiltrate the Valley, and squirrel its secrets back North. Spies. And they’re blending in: learning to talk the way we talk, to do things the way we do them.

Andrew D’Souza was a member of the second CTA cohort at Rocketspace, in 2011. As COO of edtech start-up Tophat Monocle (now just Tophat) he had been tasked with opening a satellite office in the Bay Area, and was able to secure a placement in the Rocketspace program.

Tophat has garnered significant corporate partnerships and nearly $20 million in venture funding from a combination of Silicon Valley and Canadian sources through its involvement in the program and subsequent establishment of a more permanent office at Rocketspace.  D’Souza attributes a large part of these successes to the CTA’s support and guidance.

“I was suprised by how nimble and responsive the Canadian government was. They moved quickly, were ready to open the rolodex and help. It was different than other interactions I have had with government,” he said.

The other companies in that cohort met with similarly glowing fates.

“About half of them stayed in the Bay Area, one got acquired by a California company, and almost all recieved venture capital,” he said.

As I spoke with D’Souza on the phone, weeks after my initial meeting with the Consul General, the scope and outline of the Canadian plot came clearer. He described to me a syndicate of Canadian operatives, channelled through the consulate and the trade commission, forming a deeply entrenched network that most of us fail to recognize for what it is.

“When you start to peel back the hood, you see just how many Canadians there are working in the Valley, and how many Canadian companies. It’s much more than you think,” he said. He characterized his government’s strategy as “putting spies on the ground where the action is happening.” I was shocked by his audacity.

“The Canadian Accelerator is designed as a soft landing to a bigger move,” he said. Truly, the barbarians at the gates these days have no shame.

Recently, D’Souza has turned a corner. His new company, the biometrics technology firm Bionym, has sponsored a program called Toronto Homecoming, which aims at recruiting some of the Silicon Valley Canadian network to come back home. In other words, they are pulling their key people out.

“There is great technology in Toronto, but the question is: how do we get it to market? There is a bit of a leadership gap but if we can import some of the Silicon Valley experience – the culture and pace of innovation and delivering product – then Toronto has the potential be very fast growing in the near future,” he said, noting that nearby Waterloo University is a huge research institution with top-notch engineering programs that has been sending its students to major Valley tech corporations as interns for years.

After we hung up, I had an uneasy vision. A pathetic, wasted bald eagle, its feathers clotted with real maple syrup, grounded and struggling like an Exxon Valdez seagull of yore. From their accelerator space in the former Standard Oil building on Bush Street, the Canadians were making preparations to loose this tide on the unsuspecting American populace. It was finally happening. I was in the right place to stop it, but I would have to be careful.


My next investigations quickly revealed that the situation was worse than I’d initially thought. Canada had a robust operation underway, but they weren’t the only state actor making Silicon Valley incursions, with designs on plundering the region’s magical resources and transporting them to foreign shores.

Rocketspace alone hosts government-affiliated operatives from Brazil, Chile, Columbia and Spain, in addition to the conspiring Canucks.

Most European countries have also established Silicon Valley beachheads in recent years, a partial list of them can be found in this report by the Bay Area Council Economic Institute. The situation has clearly gotten out of hand. And so I lay this, dear reader, at your doorstep. From the digital heights I brandish my latern, at this late hour, to warn you of the invaders’ impending march.

The countries involved have deployed various methods toward their goal. Some, like Canada and Germany, bring companies in based on firm criteria, for a fixed period, with well documented goals. Others, such as Brazil, tailor their offerings to the identity of the companies which they import into the Valley.

“We don’t want to have a packaged solution. We try to understand where [our companies] are at, what they are looking for. Each startup has different needs,” said Silvia Pierson, head of international relations at Apex Brazil.

Apex runs a program out of the other Rocketspace faciliyt, the former Bank of Hong Kong building at 180 Sansome Street. It hosts 20 startups at Rocketspace as part of a federal Brazilian initiative through the Ministry of Development and Ministry of Science and Technology.

Like their Canadian counterparts, the Brazilians support their fledgling companies by orchestrating introductions, visits and meetings with potential clients, partners, investors and even competitors. They hope that immersion in the Silicon Valley business cycle will rub off on Brazilian entrepreneurs, who will not only build successful international companies but set an example for their countrymen and countrywomen, refreshing Brazil’s more staid business models.

Flavia Fonseca, an international business analyst with Apex, talked to me about building bridges between Sao Paolo and Silicon Valley, and bringing unicorns across those bridges. If that sounds like metaphorical nonsense to you, then take note. The Brazilians too are learning to talk our talk.

For its foreign government clients, Rocketspace is not just a neutral shell from whence to launch these sorties. It plays an active role as a microcosm of Silicon Valley. It hosts over 100 companies from incipient start-ups to traditional corporate heavyweights, provides access to in-house VC’s, puts on near-daily networking and information events, and supplies a steady stream of ready-to-work graduates from its Rocket U programming school. Rocketspace founder and CEO Duncan Logan, himself a UK immigrant to the Valley, provides mentorship and connections to young start-ups. And foreign countries have reason to be impressed.

“So far at Rocketspace we have had five start-up companies attain billion-dollar valuations. The last time I checked, no country besides America can claim that,” Logan told me in March.

Most of the government programs I’ve come across rely on government resources to select the best-suited among would-be corporate crusaders in their homeland. This is perhaps a dubious approach: governments generally fare poorly when they try to pick winners, and the common wisdom is that even seasoned venture capitalists only pick them correctly 10-to-20 percent of the time.

Still, the upsides are irresistible and the most-desired results are intangible. So the emissarial entrepreneurs keep coming, and their government sponsors keep footing the bill. As the rest of the world (and much of America) struggles to climb out of recession, Silicon Valley glows brighter and governments the planet over, from Boston to Bogota to Berlin, are laying on schemes to master the innovation lightning and coax it to strike at home.

The more I learned about these programs, though, the more I began to feel relieved from my initial anxieties and certain that the biggest winner in all this is Silicon Valley itself.

Despite the teeming of ‘Silicon’-prefixed regions across six continents, from Silicon Alley in New York, to Silicon Wadi on the Israeli coast, Silicon Sloboda in Moscow, Silicon Cape in South Africa, and so on, no place yet has been able to recreate the conditions that have made Silicon Valley such a smashing success over the past decade. At least not to the extent that any have diminished the preeminence of the original Silicon Valley. In fact, the mixed results have only amplified the region’s mystique.

While the economic story of the past five years seems to indicate that Silicon Valley has arrived a golden ratio among capital, technology, academia and business practices, there’s no consensus about how this came to be. All of the government representatives I spoke with discussed with reverence the Valley’s troves of active angels and VC’s, suggesting that it is this unique class of investors that makes the Valley stand apart, and the absence of such investors holding back innovation in their home countries.

There are, of course, other places with a legacy of venture capital. When venture capital entered the San Francisco peninsula in brute force in the mid-20th century, it was an exotic import from the American Northeast and especially Boston. But despite its early lead in VC, scads of educated human resources and formidable research capacity, Boston fell behind and is still trying to reassert itself as a major entrepreneurial hub. There’s not enough space here to go into the reasons for that, but suffice to say that it won’t be easy for the likes of Brazil and Canada to create a sturdy venture capital ecosystem from scratch.

Products coming out of the Valley have been remarkably successful at shrinking the world and transubstantiating former meat-space interactions into the shimmery stuff of clouds. And yet, when it all boils down, Silicon Valley the place is indispensable.

Cassie Doyle, the Canadian consul general, summed it up: “There is only one Silicon Valley.”

Of course, there is a long and rich history of governments sending trade emissaries to where the action is hot. Sometimes these missions have been successful in bringing the heat back home. The Japanese government sent a delegation to the United States and Europe in 1871 on an information-gathering mission with the aim of modernizing the country. The expertise gained over the course of the Iwakura Mission spurred economic growth and military successes, including the defeat of the Russian Imperial Navy in 1905.

Some two hundred years before the Russo-Japanese war, the Russian ruler Peter the Great sent himself incognito throughout Western Europe as part of a large diplomatic mission, including time spent in Dutch shipyards in the guise of a humble shipbuilder. For four months, Czar Peter worked the shipyards of the Dutch East Indies company, the largest in the world. He learned the shipbuilding trade firsthand and returned home to found the Russian Imperial Navy, which in the course of his reign would take control of the Baltic Sea from the Swedish.

So keep a look out for Stephen Harper in a hoodie or Dilma Rousseff in a tech-swag T-shirt. And be on the alert for renegade state actors in your midst, Silicon Valley. But rest assured, even if they succeed, they’ll only make you stronger.