Few outside of Canada knew about the University of Waterloo, located in the sleepy south-west corner of Ontario. It is now widely considered a breeding ground for top-notch tech talent.
Lauren Haw is the CEO of Zoocasa in Toronto, one of America's fastest-growing real estate platforms. Hussein Fazal, Henry Shi and other alumni of the university are founders of Super. Super is ranked 11th on this year's FT Growth Ranking. The fintech company has a revenue forecast of $153mn in 2021 and a compound annual growth rate of 261%. It also hired scores of university staff.
Waterloo is experiencing a similar rise to Toronto. After 2017, the former President Donald Trump tightened America’s immigration laws. Canada's biggest city, Toronto, added more tech jobs.
According to a CBRE index, this wind-swept Canadian city was once more known for its harsh winters. Now it has the continent's best tech scene. In the FT rankings, the city has 12 companies. This is third after New York and San Francisco.
Toronto's scene is maturing after all these years, driven by remote work and economic pressures. Investors and entrepreneurs agree that Toronto's future looks bright. Ameet Sha, partner at Toronto's Golden Ventures VC fund, says that many people compare the ecosystem with New York five years ago. If you look at the recent momentum, M&A and Venture activity has been a significant factor in establishing the next group of unicorns.
Yung WU, the chief executive of MaRS Discovery District (an innovation hub which helps start-ups by providing advice, office space, and networking), says that when you think of Canada, you automatically think of oil, gas, lumber and rocks. However, he argues, in Toronto, there are seeds for a tech revolution, and that this could be the catalyst that propels the Canadian economy to growth.
Toronto's downtown was once dominated by Canada’s biggest banks. But its skyscrapers are now home to a who's-who of Big Tech.
People compare the New York City ecosystem with where it was five years ago.
Microsoft opened its large office in February just a few steps from Apple and Amazon. Google announced plans to build a building of 400,000 square feet. Twitter, Pinterest and DoorDash can also be found. There are also many large American companies that moved to Canada in search of lower labour costs, but were swept away by a tech boom.
Its growth is due to the investment of universities, businesses, government agencies and policies that welcome immigration. Justin Trudeau launched programs that allowed companies to quickly recruit skilled workers while Trump cracked down on US immigration. Toronto's newcomers were mainly developers, programmers, and engineers, who filled the 88.900 tech jobs that the city created between 2016 and 2020, according to CBRE. Half of its residents are now foreign-born.
Hussein selected Toronto, six years ago, to launch Super, a chatbot that booked hotels, because it had "cheaper housing, a lower cost of living, and world-class engineers." Today, millions of Americans use Super's pre-paid cards to build credit and save money.
Super, which has a large American clientele and secured investment from basketball player Steph Curry and other investors, has moved its headquarters from Toronto to San Francisco. Hussein, however, and the majority of its engineers remain in Toronto.
VCs have taken note of the growing tech talent. Tracker briefed.in reports that Toronto's tech investments and deals jumped from $1.5bn to $5.6bn by 2021 before falling to $3.7bn as the market cooled. Haw said that fundraising has become more difficult since Covid-19. However, "if you have a great business that makes sense, then there are funds with a lot cash that are willing to invest".
Zoocasa, another success story from Toronto. The company was ranked 244th in this year's rankings with a compound annual growth rate of 48 percent and revenue of C$17mn by 2021. Haw, the CEO of Zoocasa, will continue to lead the company.
Toronto's startups continue to face challenges. Remote work allows engineers to work in Silicon Valley and live in Canada while earning higher wages. Super has hired US executives, and Haw said that recruiting professionals with five to fifteen years' experience is difficult. She says, "We have to be very careful when selecting high-level managers." San Francisco still dominates the investment scene. Hussein says that "we will never be Silicon Valley" but "we are seeing more success stories, growth and an ecosystem development."
Toronto's boosters say that entrepreneurs and engineers prefer to stay in Toronto for the long-term, instead of moving south. Sectors such as AI, data, quantum computing, clean tech and life sciences have finally taken off, 10 years after University of Toronto Professor Geoffrey Hinton’s "neural network" research triggered the AI start-up.
Yung says that these sectors are anticyclical and protect them from interest rate increases.
"I have lived through many cycles, more than I would like to admit, but over the next couple of decades this is when the most powerful and valuable companies in the entire world will be built," Yung continued. He is sure that some of them will make Toronto their home.