Should we celebrate Canadian entrepreneurs who sell out?

It started, from at least the mid-1990s, as fears over a Canadian computer skills shortage. Then, as more people learned programming and sought jobs at the big tech companies, industry pundits fretted over a “brain drain” to the United States. Now it’s a question of how many startups here will wind up as sellouts.

As BlackBerry teeters on the brink of a possible sale to Fairfax Financial, many everyday Canadians never hear about the much smaller companies, with their glory days possibly still far ahead of them, that get gobbled up by the likes of Google, IBM or other giants. Given the fact that the Word Economic Forum continues to berate this country for its lack of innovation, it would be reasonable to suggest that too many of our entrepreneurs prefer a quick payout to building a more established brand.

Looking at the data, however, suggests otherwise. This past spring, the MaRS market Intelligence unit released a report that showed 183 Canadian startups had been acquired over the past five years. That may sound rather high, but the biggest U.S. companies only nabbed a handful each: Google bought six companies here, IBM five, and Salesforce.com four.

Meanwhile accelerators and incubators like Jolt, IdeaBoost and others are bringing in dozens of fresh innovators into their programs every year who will probably develop at least that many new entities. We are creating far more startups that are being consumed. According to MaRS investment manager Neha Khera, meanwhile, you can hardly blame the firms who go to a U.S. buyer.

“First, Canadian company success appears to be largely correlated with companies breaking outside of their regional boundaries and getting closer to their end markets,” she writes. “In the majority of cases, this happens to be the US. And it appears that one way to reach these end markets is by raising funds from an investor in the same key region.” Though some companies that pursue this strategy may grow big enough to go public eventually, however, knocking on the doors of U.S. venture capitalists may also make them more likely to become takeover targets.

Most startups don’t necessarily see U.S. dollar signs as their exit strategy, however. According to another report from consulting firm PricewaterhouseCoopers earlier this year, only 44 per cent of its survey respondents said they are looking towards a merger or an acquisition to exit the market, “a stark contrast to the 76 percent who were eyeing this route just a year ago.”

The poster boy for not selling out right now is Ryan Holmes, the co-founder of social media monitoring service HootSuite, who has been talking up the idea of building a “maple syrup mafia” in Canada that would rival the U.S. startup scene. There have always been this kind of patriotic response to the call of selling out in the tech industry. Before the maple syrup mafia, there were dreams of a creating a “Silicon Valley North.”

Whether they get bought by a U.S. firm or not, startups have any particular obligation to stick it out in Canada if there is more opportunity elsewhere. Excellence in entrepreneurship should not be driven by the interests of patriotism but the interests of customers -- where will startups find the richest source of funding, the largest audience and the right ecosystem of support to deliver the best possible iteration of their original idea? If the question isn’t here, the question is not whether anyone sold out, but why we’re not investing more to make leaving inconceivable.