Made in Canada: More Boston Tech Companies Poached from North of the Border

11/30/07Follow @wroush

A few weeks ago I chronicled the tale of Xkoto, a database virtualization company founded in Toronto that has a brand-new headquarters in Boston and a brand-new American CEO, courtesy of GrandBanks Capital, which has made something of a specialty lately out of moving Canadian companies (or at least their administrative functions) to Massachussetts. Today the Boston Globe has a nice article by Rob Weisman following up on the trend.

GrandBanks partner Tim Wright told me that one big motivation for the transplants (Xkoto was GrandBanks’ fourth) is to make it easier for U.S. investors to put money into innovative Canadian firms, given tax penalties that discourage U.S. investment in Canadian-owned firms. But Weisman notes that the Canadian dollar’s 65 percent appreciation against the U.S. dollar since 2002 is another big factor—it makes it much cheaper for companies whose assets are still mostly in Canada to expand into the United States.

In addition to the four GrandBanks companies we mentioned—Xkoto, Colubris, Coradiant, and FirstCoverage—Weisman’s piece rounds up three more Canadian transplants:

  • Extend Media, a digital media delivery company started in Toronto, Ontario; new headquarters, Newton.
  • Q1 Labs, a network security company founded in Fredericton, New Brunswick; new headquarters, Waltham.
  • SiGe Semiconductor, a maker of silicon-germanium chips for mobile devices started in Ottawa, Ontario; new headquarters, Methuen.

The Globe piece observes that the poaching has “sparked a mix of resignation and recognition”—recognition that Canadian tech firms need U.S. partners and investors in order to reach big potential markets in North America and around the world. But as long as the companies’ technical brains stay in Canada—as they have in most cases—the cross-border operations don’t seem to result in much resentment or worry.

Outright acquisitions of Canadian companies—like IBM’s recent $5 billion purchase of Ottawa-based Cognos—may be a different story. Some of the company’s Canadian employees are so worried about the value of their new IBM stock options, given the U.S. dollar’s weakness against the loonie, that Cognos has pledged to reimburse them.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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