It’s a startup founder’s dream: a community of 2,500 early-stage tech companies, a government investing in high-tech innovation and expediting work permits, and venture-capital investment levels not seen since the heyday of the dot-com bubble.
This isn’t San Francisco, New York, or London — it’s Toronto. And its bid to become the Silicon Valley of the North is now getting a boost from the Trump administration.
Because Trump was elected US president partly on an anti-immigration campaign, interest in moving to Canada has skyrocketed. The University of Toronto saw a 70% jump in applications from American students at the end of 2016, according to the Toronto Star — and that was before the president began efforts to bar immigrants from seven majority-Muslim countries.
More recently, after a decision to delay the H-1B visas used by American businesses to hire skilled workers, the Canadian government under Prime Minister Justin Trudeau announced in March an expedited work-permit process for the same kind of foreign talent.
And while London is the world’s largest center for financial technology, or fintench, immigration policies are equally uncertain there ever since Britain’s 2016 decision to leave the EU.
As a result, Canada’s startups are seeing a jump in job applications — especially from workers in the US.
“I’ve never seen numbers like this,” said Roy Pereira, CEO of Zoom.ai, an enterprise-tech chatbot startup. “Engineers wanting to immigrate to Canada from places like India are normal, but I’ve never seen anything close to the numbers of candidates from the US.”
His company had 101 candidates apply for a “full-stack software engineering” position in a single month. Of those, 31% were from the US, 22% from Canada, 33% from India, and 15% from elsewhere.
“Certainly the geopolitical environment right now and what Trump has alluded to in terms of his new immigration policy and his perspective on H-1Bs — I think that has made some people nervous,” said Salim Teja, executive vice president of venture at MaRS Discovery District, a Toronto venture program helping position the city as the next great startup destination.
Because of its large footprint in the Canadian startup scene, MaRS — which says it is the world’s largest urban innovation hub and home to 1,000 startups within its venture program across the health, finance, energy, and education sectors — is often the federal government’s go-to adviser on policy surrounding innovation. And it isn’t just home to startups. MaRS, which spans 1.5 million square feet in downtown Toronto, houses 250 larger organisations that lease its space, including outposts for Facebook, Airbnb, and PayPal.
“We play an important role in connecting partners to the startup ecosystem — those could be international investor partners, those could be international corporate partners,” said Teja, who spent six years in Silicon Valley before returning to Canada and helping to build MaRs. “We match incoming talent from both around the world and locally here in the ecosystem to our companies that are growing.”
Silicon Valley investors
One draw for US investors right now is the cheap exchange rate, which takes investment dollars further and makes investments more attractive. Another is the softer competition for deals in the Canadian market, meaning that startup valuations are more reasonable than in places like Silicon Valley.
Toronto — the fourth-largest city in North America after Mexico City, New York, and Los Angeles, with a population of 2.7 million — is relatively accessible from startup hubs like New York and Boston.
The city has attracted the likes of Union Square Ventures, Khosla Ventures, Horizon Venture Partners, Azure Capital, Felicis Ventures, and Sequoia Capital, all of which have invested in Toronto companies. Union Square’s Fred Wilson recently said in a blog post that Toronto was his firm’s No. 3 location for investment after New York and San Francisco.
“They’re not just coming but they’re actually writing checks and investing in companies, and I think that’s what drove us to have a record year in VC last year,” Teja said.
Canadian venture-capital investments hit a 15-year high in 2016 with $US3.7 billion invested, according to Thomson Reuters data. Four hundred and fifty-nine Canadian companies closed 571 rounds of financing, a 36% increase over the previous year and something not seen since 2000.
It’s paying off for MaRS’ startups, which are raising money and making significant exits. Bluerock Therapeutics, a stem-cell-therapy company, last year raised $US225 million in a Series A round — the largest in biotech-funding history, while Highland Therapeutics raised $US200 million from Morgan Stanley. As of 2015, MaRS’ venture companies had collectively generated $US1.3 billion in revenue over seven years, with annual growth of $US1 billion projected by 2025.
It’s not just the startup and VC communities that are growing in Canada — larger tech companies are expanding their presence too.
Amazon is scouting for retail space in Toronto, Teja said. That company made a big hiring push for its web services in Vancouver last August, posting 1,000 positions, and opened a data center in Montreal in December. Cisco and Microsoft are growing their footprints, and Google Canada organised a conference last year called “Go North” for Canadian startups.
Now, according to Teja, the question is: “As this window of opportunity opens up, how quickly can Canada capitalise on this opportunity?”
Key to doing that will be developing Toronto’s own “flavour of innovation” to enable it to compete in the world in a unique way, Teja said, rather than simply trying to recreate the Bay Area.
One way to do that is to create new opportunities as more industries start to overlap with one another. Health companies are becoming tech companies, energy companies are becoming fintech companies. MaRS, with its 1,000 startups across four broad sectors, is well placed to capitalise on that trend.
“The next breakout companies are going to come from these overlap areas,” Teja said.