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When it Comes to 'Disruptive' Startups, What if Big Government Isn't the Enemy?
Looking beyond the simplistic David vs. Goliath narrative in the Bitmaker Labs saga

If you don’t have a connection with Toronto’s startup community, then you might have missed the big news: for over a week, all anyone could talk about was the provincial’s government’s takedown of Bitmaker Labs. The Toronto-based education startup provides a nine-week crash course on programming language Ruby on Rails and, on Monday of last week, the company’s co-founders posted an open letter on their website that informed the public of the company’s recent regulatory troubles. “Two weeks ago inspectors from the Ministry of Training, Colleges and Universities (MTCU) entered our offices to inform us we were under investigation for operating an unregistered private career college,” said the letter penned by Bitmaker co-founders Matt Gray, Tory Jarmain, and Andrew Mawer.

As the news spread across Twitter, major publications in Canada and the United States were quick to pick up on the story. Likewise, commenters were also swift to share their thoughts on the investigation. “Another example of bureaucracy at it’s [sic] best. A bunch of overpaid government bullies interfering with a [sic] innovative educational [and] business organization delivering a timely and useful program instead of the stale outdated programs that colleges and universities now teach,” said one of the many comments on the Toronto Star‘s version of the story. It didn’t matter if it was on the Toronto Star, the Globe and Mail, or Techvibes, the story was the same: a heavy-handed government agency was attempting to stifle an innovative up-and-coming startup.

Anonymous commenters weren’t the only ones to voice their frustration with the government, either, as members of the media, including itbusiness.ca’s Brian Jackson, offered a similar take on the news. “We’re turning our digital innovators into paper pushers,” said Jackson in the lede of an article titled, “Bitmaker Labs fiasco indicative of wider friction between startups and government.”

This week, the situation would come to a resolution with Bitmaker Labs being granted an exemption under the Private Career Colleges Act. Looking back, it seems like such an easy situation to parse: a disruptive startup was forced to bend to the will of a heavy-handed government, but, as with everything, the situation was more nuanced than it initially seemed.

What the Bitmaker saga showcases, on a local scale, is that for a startup there’s no better place to be than under investigation by a government agency. Even if the actual facts of the situation didn’t align with the perceived story, it allowed Bitmaker to leverage a David versus Goliath narrative in which they were the wronged party, and they did so to great effect. The government often makes it difficult for anyone to take their side but, in this case, they may not have done anything wrong.

What was lost in most of the initial reactions to the news is that the MCTU was only investigating Bitmaker Labs, and that the ministry had yet to pass judgement on the company; in fact, there was always the possibility that the MCTU would decide that Bitmaker was innocent of any wrongdoing. That much was made clear in the statement it issued last Monday: “Ontario’s Superintendent of Private Career Colleges is conducting an independent inquiry into the program offered by Bitmaker Labs. No determination has been made regarding the program, no enforcement action has been taken against Bitmaker Labs and the ministry has not requested that Bitmaker Labs cease offering its program.”

The decision to temporarily suspend operation, it turns out, was made by the company itself. “Our lawyers have advised us that, to preempt any possible cease and desist order which could negatively impact our ability to teach going forward, we must discontinue operating our web development program immediately,” declared the open letter the company published.

Later, in a post-mortem with ReadWrite, Matt Gray, one of Bitmaker’s co-founders, told the site’s Lauren Orsini, “Our lawyers told us, ‘Shut your mouths, don’t say anything about the investigation, just tell people the site is under construction.” If Bitmaker had followed the advice of its lawyers when it chose to temporarily close, why then did it go against that same advice by posting an open letter? Perhaps the most telling comment in that regard is the one Gray would go on to add in his discussion with Orsini: “It turns out that going against that judgement, scary as it was, worked out all right.”

Even if we take what Bitmaker and its co-founders have said at face value, it’s important to remember that investigating and auditing individuals and businesses is part of the mandate of any government: they occur on a regular basis, few result in any significant punitive action, and they’re done in part so that the government can gather the vital information required to determine when laws need to be changed. In fact, the provincial government is conducting a review of the Private Career Colleges Act in September, and it’s likely that the Bitmaker case will inform the outcome of that review, perhaps even in favour of less stringent regulation.

Moreover, I don’t think Gray and his co-founders were scared when they published their open letter. Certainly there was possibility that the whole thing might backfire on them. However, they very quickly and astutely realized that could craft the optics of the situation to their advantage. As a result of their open letter and the reactionary press that followed, it seemed as though the ministry had forced the school to shut down and, in doing so, looked like it was acting in a way that was both petty and counter intuitive to its stated goal of protecting students from illegitimate schools. 

What’s perhaps most frustrating about this situation is that it never had to come to Bitmaker’s students being barred from class. In e-mail interview, I asked Gray if he and his colleagues were aware of the Private Career Colleges Act. He responded, “We were aware of the PCCA but believed we were in a grey area because we didn’t market ourselves as an accredited institution or promise certificates, diplomas or pieces of paper.” And while that’s all well and good, part of operating any business is doing research on the laws that will govern one’s business once it is up and running.

I should also note here that Bitmaker Labs is not the only startup of its type operating in Toronto and that, of those startups, it was the only one being investigated by the MCTU. HackerYou, which was started by Heather Payne, she of Ladies Learning Code fame, offers a similarly extensive Rails development class (it was initially incorrectly reported that both of Payne’s programs were also under investigation). On her personal blog, Payne says that she is the first to admit that HackerYou and Ladies Learning Code haven’t always been perfect in their adherence to the PCCA, but that she and her team have spent a significant amount of time becoming more familiarized with its rules. Ultimately, had the ministry launched simultaneous investigations of both Bitmaker and HackerYou, then perhaps outrage would have been warranted. As it stands, I don’t think this is a case of the provincial government trying to stifle innovation.

“We’ve gotten a lot of attention from people who’d never heard about us before,” says Gray in the same article ReadWrite quoted above. He adds, “The signups have been overwhelming again, and we look forward to expanding in the near future.” Even if it was all this was a happy accident and the provincial government is the guility party, Bitmaker Labs is in a much better place today than it was three weeks ago. It’s the story of David versus Goliath rewritten for a modern age–a story that we’re still all suckers for, even when the facts don’t add up.

____

Igor Bonifacic is a writer working for the Toronto Standard. You can follow him on twitter @igorbonifacic.

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