Why cities are trying to persuade tech companies to move

Ryan Holmes (originally of Vernon) recently disclosed that he’s received many invitations (with incentives) to move his Vancouver based company (Hootsuite):

It became clear to me then that cities were pursuing me as eagerly as I was pursuing new clients for my own business. And, if you look closer, this makes a lot of sense.There is an obvious and massive benefit to having well paid technology workers contributing to the local economy. In just over five years, we’ve gone from three to more than 500 employees and are on track to grow to 700 employees this year. These are young, smart, well adjusted people with good jobs who are contributing to the local economy in a big way. Ignoring the obvious taxes that the company pays, the ripple effect of having multiple tech startups fuelling the local economy is a taxman’s wet dream.

via Ryan’s post: Keeping Entrepreneurs Local — Medium.

Tech jobs and tech companies can help to improve a local economy. There’s obviously a lot of municipalities trying to get in on the action.

Again, my advice to Vernon is to stay focused on where we can be strongest, and appeal to bootstrappers and remote workers.

Photo credit: Rob Thompson


Manufacturing is not coming back to Vernon, BC

When I’m out around town, I listen. I listen to what people are talking about at coffee shops, at the gym, and at the barbershop. One recurring complaint is:

“Why isn’t Vernon investing in an industrial zone? Why don’t we bring manufacturing back to the area? It’s all going to Salmon Arm, Armstrong, Kamloops and Kelowna.”

Folks, manufacturing isn’t going to come back to Vernon. The days of having a glass factory that employs 300 people in the area are gone. There are 2 main reasons for this:

1. Bad location

Vernon, logistically, is a terrible place to start most factories: we’re not on a main route to a main port. Shipping something from Kelowna to Vancouver is always going to be cheaper than Vernon to Vancouver.

2. China has the capacity, the technology and the supply chain

Across most industries, large-scale manufacturing is moving away from Canada and the USA in general. This was best highlighted by The New York Times’ piece on Apple:

For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.

“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

It would be foolish for Vernon to try to entice large-scale manufacturers back to the area: that’d be like trying to swim-upstream (a whole lot of effort, with very little results). You can’t fight the global trend: manufacturers are going to go wherever has the best supply chain, the lowest wages, and a logical location for shipping.

Vernon’s economic opportunity

“I skate to where the puck is going to be, not where it has been.” – Wayne Gretzky

My friend Amy Hoy says it’s best to target “people already in motion”. The question for Vernon is: who’s already moving here? Who are the people in motion? What’s motivating them to come here?

In our role with Startup Vernon, Kazia and I talk to a lot of folks that have just moved here. Here are the patterns we’ve observed:

  • Many are “knowledge workers” from Calgary, Edmonton, and Vancouver. These are consultants, freelancers and remote workers who can choose where they want to live. They’ve chosen Vernon.
  • They’re moving here for the lifestyle. They’ve come here to ski, to hike, for the beaches, to boat, to bike, and for the natural beauty of the area.
  • They chose Vernon because of family. They either moved to here because they had family in the area, or they moved here because they thought it would be a good place to raise kids. In terms of the latter, Vernon seems to have a competitive advantage over Kelowna.

I think mayor Sawatzky actually has the right idea. Here’s a quote from this piece in the Vernon Morning Star:

Another priority for Vernon council will be trying to bolster the economy.

However, Sawatzky isn’t convinced Vernon is destined to become the centre of large manufacturers and it must consider why people come here.

“Our strengths are an attractive climate, our lifestyle and arts and culture,” he said.

The challenge

There’s two big questions:

  1. Are there enough knowledge workers out there looking to move to a place like Vernon?
  2. If so, how can we attract them here?

What do you think?