While Silicon Valley is renown for having the highest density of startups of any major tech ecosystem in the world, people are always stunned to hear the second densest is not even a major city.
The twin cities of Waterloo and Kitchener have created a hyperactive techopolis with some 1,100 startups in an area home to just 500,000 people. After Stanford, graduates from the Lazaridis School of Business and Economics at Wilfrid Laurier University in Waterloo are the second-most hired graduates among Silicon Valley tech companies. Now, that scene will get more prominent.
Venture firm Spectrum 28 will sponsor a new entrepreneurship program at Waterloo Engineering to the tune of $2 million. Spectrum 28 is the brainchild of founding general partner and Waterloo graduate Lyon Wong, who graduated from the systems design engineering program. He is a former partner at Lightspeed Venture Partners and intern at SV Angel.
“It’s not enough to just have bright, hard-working students who dream of entrepreneurial ventures,” Wong said in a press release, claiming too many programs are “strictly” undergrad-focused. “They need to understand that having a diverse team of co-founders that includes graduate students or faculty with deep technical knowledge is a distinct advantage when creating a startup — with any hope of long-term success.”
The new program, says Wong, would focus the dense tech ecosystem on uncommon problems that require more advanced solutions. Sprectrum 28 currently lists six portfolio companies on its website — Duetto Analytics, Earnest, Gravitational, Karius, Lookback and Vitagene.
“It would be exciting to know that we exposed a problem no one has solved and have Waterloo students solved it.”
The curriculum is a year long and includes so-called “pop up classes” with faculty and startup experts from Silicon Valley. Topics include matching ideas to the right target markets and identifying personal leadership traits in potential entrepreneurs. The middle of the year will hold a Fast Feedback Day, with the program culminating in a Demo Day at the end of the academic year.
Angels need to venture off before they fly back home to invest
Waterloo and Kitchener are one of the top 30 ecosystems in North America, worth about $3.1 billion, not far behind Montreal. The biggest success story for Waterloo-Kitchener thus far is Kik.com’s unicorn valuation and $50 million investment from Tencent.
However, the city’s lack of direct access to American capital markets is a major drawback. The cities hope for better access to somewhat nearby Toronto with talks of future high-speed train projects, but nothing is set yet.
“This new program fills a gap in the entrepreneurship ecosystem at University of Waterloo by giving student teams direct access to Silicon Valley industry expertise and faculty mentorship, as well as the chance to compete for part of the $2 million seed funding from Spectrum 28,” said Waterloo Dean of Engineering Pearl Sullivan. “This partnership will support our students at the earliest stages of entrepreneurship, which will make for stronger, more successful startups here in Canada.”
There are no indications just yet about how much money new companies could get on average from Spectrum 28. Seed rounds in Waterloo, Kitchener and nearby Cambridge average low at around $120,000. That’s not so different from major Canadian cities like Toronto, Montreal and Vancouver, yet those three cities have also been faulted in the past for their low access to capital. That has partially fueled the brain drain behind Laziridis students’ hiring success in the Valley. However, that drain is an inevitable one for small ecosystems, Startup Compass’s JF Gauthier told Geektime last year when discussing the Waterloo tech economy.
“If you prevent those people from going over, that will never happen here,” referring to the exits that would stuff the pockets of future angel investors, who Gauthier says would probably return home to fund small companies. “They’re going to become entrepreneurs and investors. Please go to the U.S. and make the engineers rich, serial entrepreneurs.”
Clearly, Lyon Wong is an example of the same kind of forward-paying attitude that has built up the authority of angel networks in other small ecosystems. Spectrum 28 sounds like a vindication of the ‘let them go’ philosophy, but there is still much to do to power the suburban ecosystem as it competes with Canada’s big urban centers for Silicon Valley’s attention.