Silicon Valley's success is commonly attributed to being within proximity of two major schools (Stanford and Berkeley) fueling the talent funnel. But that is far from a sufficient explanation.

Massive government investment in R&D helped birth the first semiconductor and aerospace companies that helped create the first critical-mass concentration of tech industry and talent.

And those were just the baby steps. The current behemoth of the Silicon Valley machinery is sustained in large part by the enormous amount of investment, as well as ease of access to said investment. Modern startups go to/stay in the Bay Area largely for funding reasons.

> "They also would have sold to Yahoo IIRC but Yahoo didn't want to pay enough"

And therein lies the difference between Canadian tech and Silicon Valley tech. In Silicon Valley Google had enough funding to keep going and reject Yahoo's offer, and thereby growing by leaps and bounds into the giant company we see today.

If they were in Canada, they would almost certainly not have had the funding, and be pressured into an early sale for less, and Google today would probably be a sub-brand of some stodgy old behemoth of an enterprise-tech company.

Funding is, IMO, Canada's biggest problem. I've worked in the Toronto side of the software industry, and still know some people on that side. Canadian tech is dominated by either very large enterprise software firms, or slow-and-steady small businesses. There is no readily available investment source to perform the type of "grow fast, shoot for the moon" type of startups that the USA is known for (see: AirBnb, Square, etc, companies that took enormous amounts of funding very quickly and scaled just as quickly).

A startup in Canada means going for profitability very quickly, and being doomed to a slow-growth strategy, as large chunks of cash are nowhere to be found.

On a more sombre/cynical note: as a Canadian expat in the US tech industry, I basically have given up hope on Canadian tech. The first step is for the industry, government, and everyone to acknowledge that Canadian tech is fundamentally dysfunctional. And I just don't see this happening. Every opening of another satellite office that exploits the large salary gap is greeted with pomp and circumstance and speeches about how Canada's being recognized for its unique technological prowess.

Gag me with a spoon.

Flickr was based in Vancouver, as is HootSuite, ActiveState (the perl guys), Peer 1 Hosting, PlentyofFish. There's Shopify in Ottawa. Edmonton has Stormboard. Toronto has/had Kobo eBooks, Freshbooks, Well.ca, CryptoLogic (one of the main online gambling platforms, though they moved to Ireland), among others. On the more enterprisey side there's Layer 7 in Vancouver (API management), Bycast (bought by NetApp). There's also SMART technologies in Calgary (still independent though no longer a startup). There were many successful game companies (many WERE startups in the 1980's and 90's but are no longer): Bioware in Edmonton, Digital Extremes in London & Waterloo (Unreal & UT, Bioshock 1 & 2), BlackBox in Vancouver (Need for Speed), Uken Games in Toronto (a startup for once ;), and Ubisoft in Montreal (arguably French but most of their success came from the Canadian studio). There are also thousands of startups I haven't even mentioned in smaller communities like Halifax, K-W, Moncton.

I don't think it is necessarily bad that Canada is basically a "farm league", a ground for niche companies (only making millions, not billions). This is just an evolution of it being a "branch plant" economy for nearly 70 years since the early-mid 20th century. Clearly there is a small but thriving startup culture, particularly in Vancouver, or (for now) K-W, where good engineers don't have to go into IT, they can work at pure tech companies. Canadian startups tend to exit the only way MOST do - by acquisition. As Pmarca would say, the problem is with the poor IPO market.

Beyond IPOs, to become a disruptive multi-billion dollar play is by its nature a rare event. Add in the fact that Canada is geographically disbursed across five time zones, with huge (labour-intensive) natural resources to exploit, and the same population as California... the incentives need to be right to change Canada's industry structure. I'm not too worried about it - if one wanted to start a successful tech company in Canada, it's clear that there's enough talent to make it happen, and likely enough capital to get through seed or Series A. It might require foreign capital for subsequent growth investments, but by the time you're in the tornado, that won't be a problem.

I was under the impression that the satellite offices aren't just to exploit the wage gap, it's also to set up a pipeline to get more foreign engineers to the SV based motherships through the TN-1 visa.

I worked for one of them, was not fun. Everything we did was basically something management didn't want to pay a $120K Californian to do. Without the giant salary gap these satellite offices simply would stop existing.

TN work permissions (usually not really a "visa" as such, and note the lack of numeral) are for Canadians and Mexicans to work in the US, and have no tenure requirement with the company. http://en.wikipedia.org/wiki/TN_status