Canada has a new startup champion according to a report released Tuesday. Vancouver ranks 15th on the planet, ahead of the 16th place scene in Toronto and tech-heavy Waterloo, Ontario while Montreal dropped out of the top 20 index. That is according to the 2017 Startup Genome report ranking the world’s strongest startup ecosystems, its first such index in two years. Silicon Valley predictably ranks in the top spot, followed closely by New York, Boston, Tel Aviv, and China’s big cities. But there were changes in the rankings for Canada’s major cities.
The shift is a major surprise considering Waterloo (in conjunction with sister towns Kitchener and Cambridge) has the highest density of startups of any North American city outside Silicon Valley. Vancouver is estimated to have only 800-1,100 startups compared to Toronto-Waterloo’s about 2,100-2,700. Toronto ranked ahead of Canada’s two other major metros in the 2015 report in which it was considered the 17th best on the planet, ahead of 18th place Vancouver and 20th place Vancouver.
Canada actually shows improvement despite the minor shifts, as the report two years ago did not include data on startup cities in the Far East, Hong Kong, or Singapore. This one does, yet Canada’s power remains steady.
“Canadian cities score particularly well on Market Reach, driven by the high share of foreign customers that startups in Toronto-Waterloo, Vancouver, and Ottawa are able to reach,” the report’s authors write, which include Genome CEO and Co-Founder Bjoern Lasse Herrmann, CFO J-F Gauthier, Project Manager Danny Holtschke, Dr. Ron Berman, and Founder Emeritus Max Marmer. They note Toronto-Waterloo ranks 5th and Vancouver 7th on that stat, right behind of Berlin (7th overall) and just ahead of 14th place Stockholm.
“This is largely because of Canadian startups’ access to the U.S. market — when we remove that from Market Reach calculations (captured in our Rest of World customer metric), Toronto-Waterloo and Vancouver both rank below the 10th position.”
Vancouver saw about a 90-percent increase in its exit growth rates between the previous report in 2015 and this edition, while Toronto easily outpaced it at about 180 percent.
Jamming Toronto and Waterloo together might raise eyebrows from Canadians — the two cities are two hours apart on a good commuting day — but it is hard to separate Waterloo from Toronto as a financial pipeline and many people do indeed make that commute in both directions.
Yet, both cities ranked near the bottom 20 in terms of talent access. Surprisingly, Vancouver came in 9th in terms of cost when it came to making new hires despite issues about the cost of living in the city. On the upside, when the talent gets to work, Canada’s western city has a big advantage.
“Focusing on Team Experience, Vancouver (ranking first) and Austin join much larger Beijing, Silicon Valley (in second place), and Boston to complete the top 5, while Stockholm places eighth. This metric showcases well the importance of tech in these three smaller cities of about one million people. This results in a concentration of experience available to startups, with tech entrepreneurship being a strong career option.”
More growth expected in Hollywood North, Ottawa, Quebec City
The report is extremely optimistic about Canada’s growth prospects, regardless of discussion about a windfall in would-be American visa holders embarking to Canada in lieu of easy access to Trump’s America.
One program not mentioned in the report is deliberately trying to lure American visa-holding entrepreneurs to Vancouver afraid they will lose their privileges, while Montreal has one of the lowest cost-of-doing-business values in North America.
The Canadian capital Ottawa, eastern Quebec City, and Montreal are considered among the top regional technology clusters in all of the Americas despite not ranking in the top 20 in 2017. Vancouver, however, stole the show.
“A large portion of this growing success comes from ambitious incubator and accelerator collaborations between Wavefront, BC Innovation Council, Launch Academy, BC Tech Association and others – organizations that are all committed to growing the next generation of tech successes and marshalling a 100,000+ strong army of entrepreneurs over the next decade,” reads the report.
Vancouver startups raised an average of $334,000 in seed funding, far higher than the global average of $252,000. Thirty percent of its founders are immigrants, but only 12 percent are women. But the Ontario ecosystem dwarfs those stats with an average of $443,000 in seed funding and 19 percent of its founders being women.
“The Toronto-Waterloo Corridor benefits from multicultural talent drawn from sixteen academic institutions, most notably the University of Toronto and University of Waterloo, alongside generous tax credits, government grants, and favorable currency exchange.”
Where British Columbia’s capital bests Canada’s economic capital corridor is ecosystem value: the Vancouver startup ecosystem is worth about $9 billion while Toronto-Waterloo’s $7.2 billion. Montreal took in some “impressive exit values” in the last two years and hosts 800-1,400 startups, “but their early stage funding isn’t growing very fast ($123,000 on average). Their global connectedness is pretty good, but they have a hard time accessing top talent.”
Shopify was the main highlight for Ottawa, which has an estimated 450-850 startups according to Genome. Besides strong rounds for companies like You.I TV and PageCloud, the news Blackberry is backing an Ottawa autonomous vehicle research center is the most indicator for the city’s near-future growth.
Quebec City only has 150-300 startups, but saw Oracle buy local company Taleo for $1.9 billion back in 2005 and some significant rounds for startups Caven ($39 million Series D) and Coveo ($70 million total).
Canada’s great technology opportunity
Should Canada truly try to take advantage of H-1B visa upheaval in the United States, all five of these urban economies would grow. There is a talent shortage for engineers in the Western world being filled mainly by Indians. Canada has both national and provincial immigration policies that can be both a headache and a shortcut for getting into the country.
While Quebec prefers to grant visas to people somewhat proficient in both English and French, no other province is so strict. Even so, Montreal and Quebec could make a killing attracting new talent based on the cost of living. If you build it, they will come; should more talent migrate to Montreal, the city’s venture capital numbers and salaries would likely grow as well based on demand.
Similar to Israel’s multi-polar ecosystem across Tel Aviv, Jerusalem, Haifa, Beer Sheva, and Nazareth, Canada has a major opportunity to take advantage of poor policymaking in the United States and a high concentration of homegrown talent (especially in Ontario).
Vancouver clearly has some cost-of-living issues to work on, but they are nothing compared to challenges of living in Silicon Valley. With Vancouver certainly closer to West Coast workers than Toronto or Montreal, they would probably prefer British Columbia if they made the move.
Canada should exit the decade with tremendous multi-metro growth in the technology center with a true race between Vancouver and Toronto to be the capital of the North.