Mar 07, 2017 (LBO) – Toronto’s startup community has begun to rival Silicon Valley and offers more advantages to new companies.
One reason is that the 2,100 and 4,100 tech start-ups in Toronto’s ecosystem don’t have to compete for engineers with Google and Facebook.
“To compete in that environment for the best talent would be very, very fierce,” said Allen Lau, CEO of the fast-growing storytelling app Wattpad, according to CNBC.
“In a smaller pond we are the bigger fish.”
Toronto and the cities immediately surrounding it had a population of 5.4 million people in 2015, and there are 150,000 full-time students enrolled in universities throughout the Greater Toronto area.
Another reason for the growth is that the federal and provincial governments offer strong support for technology innovation and financial assistance. Start-ups are also supported by a robust venture capital community.
More than two billion dollars in venture capital was disbursed in Canada in 2016 — a 15 percent increase over 2016 and the most funding since 2002, when the number hit 2.7 billion dollars, according to the Canadian Venture Capital & Private Equity Association.
Canada’s biggest venture deal of 2016 was Thalmic Labs, a maker of wearable technologies based in Kitchener, Ontario, near Toronto, pulled in 120 million dollars in a series B round in September from investors, including Intel Capital, The Amazon Alexa Fund and Fidelity Investments Canada.
One important catalyst has been the critical mass of successful Canadian tech firms, such as Shopify, Hootsuite, Kik and D2L, with offices in the city, alongside U.S. companies such as Facebook, Twitter and Google.
“You build some anchor-tenant companies, they scale up, and the talent goes on to start other companies,” says Mike McDerment, CEO of FreshBooks, an accounting software provider based in Toronto.
“Capital doesn’t really care about borders,” says McDerment. “It’s a really good environment to make an investment.”
Investors say they can hire senior Canadian engineers for 70,000 U.S. dollars, while rates in New York or Boston would be at least 100,000 or 200,000 dollars.
It helps that Toronto’s cost of living is lower than that of New York’s pricier tech hubs.
“Although it’s not a cheap city to live, it’s still affordable,” says Craig Morantz, an angel investor in the Toronto area who previously served as CEO of Kira TalentMorantz.
“It’s not San Francisco. It’s not New York.”
Toronto is also very diverse, with 49 percent of the population made up of immigrants, according to Tech Toronto. “Having that kind of diversity helps you build great companies,” says Morantz.
“When you’ve got someone who is maybe first or second generation, they are coming to the table with a unique perspective.”
The city also has a thriving infrastructure to nurture start-ups, with hubs including DMZ, a technology incubator at Ryerson University, and MaRS, which helps connect start-ups in information and communications technology, cleantech and health with funding and advice.