One of Toronto’s favourite sons reckons “it’s hot up in the Six”, the city’s nickname being a reference to the 6s in its two area codes, 416 and 647. Drake isn’t shy about telling the world about what’s going on in Toronto. Its startup founders aren’t as confident though.
Although Toronto’s startup ecosystem is one that’s on the up, those involved don’t tend to shout about the scene’s potential. We called in the help of 88 Creative Managing Director Erin Bury, blogger and Founder of ME Consulting Mark Evans and SurePath Capital Partners Founder Mark MacLeod to see if Toronto tech is something we should be excited about.
Blessed are the meek?
You know that stereotype about the nice, polite Canadian? It’s at least partly true and it might even be a little damaging. Social entrepreneur Andreas Souvaliotis has asked if politeness is holding Canadians back, and whether the country can find a way to “stay nice and play to win at the same time”.
He also thinks that the prevailing “future-positive and self-congratulatory” tone among sections of Canada’s business community can stop necessary tough questions being asked.
Canada recently produced its first major IPO when Shopify went public in 2015 and Toronto is home to one of the world’s largest stock exchanges. With up to 4,100 startups based there, Compass’s Global Startup Ecosystem Ranking 2015 placed the Toronto ecosystem in the top 20 highest-performing worldwide.
It can be hard however to find someone from Toronto willing to brag about their home. Your average Torontonian boast sounds something like, ‘Toronto is actually a pretty interesting place to live.’ Toronto Mayor John Tory has appealed for people in the city to start bragging about its potential.
“We don’t go around saying that we’re awesome; we’re amazing; you should look us up. It’s not the way we operate. We’re not cocky enough or confident enough. It’s sort of a problem,” says Mark Evans, a startup consultant, author and blogger.
He says that although there are plenty of Toronto entrepreneurs who are extremely confident about the products they’re building, many don’t focus on being world-beaters. They just want to build a business. Oversell your startup and you also run the risk of coming across too American.
“A lot of founders here don’t have that killer mindset. Americans think everything they do is awesome and that they’re all going to become market leaders and make a tonne of money. We don’t think that way. I don’t think that’s our temperament,” says Mark.
Shopify IPOd at a valuation of $1.27 billion. While the company is headquartered in Ottawa, the move will bring confidence to the Toronto startup scene, as well as a number of potential new angels. Toronto’s own successful serial entrepreneurs, such as Daniel Debow who founded WorkBrain and Rypple (acquired by Salesforce), bring similar inspiration.
“As you get more entrepreneurs being really successful, it’s going to make startups in Toronto more confident. I think it’s just a matter of time,” says Mark.
Toronto entrepreneur Daniel Debow’s (seated far right) startup Rypple was acquired by Salesforce in 2012 – his success will bring confidence to other startups in his hometown
On the map
Startups that have raised the most funding in the last five years
Top investment funds
Top social influencers
- 1. Ilse Treurnicht – CEO – MaRS Discovery District
- 2. Tim Peters – VP Marketing – Ideal.com
- 3. Robert Lendvai – CMO – Flixel
- 4. David Crow – Co-Founder – StartupNorth
- 5. Ben Yoskovitz – Board Member – Proposify
Connected Toronto – Influencer Identification Network from Web Summit
Top industry verticals
- 1. Software
- 2. Mobile
- 3. Biotechnology
- 4. Social Media
- 5. E-Commerce
Startup life in Toronto
Talk to people in Vancouver, Ottawa or any other Canadian city and they don’t like admitting one thing. Even though it’s not the capital city, Toronto is really the epicentre of Canada. The city is the country’s financial hub and centre of business. Its startup ecosystem outperforms both Vancouver and Montreal in output, value and market reach.
“Toronto is the New York of Canada. It’s natural that the startup community evolved here. I think it’s no surprise that if there if there was going to be a vibrant startup community in Canada, it would be in Toronto,” says Erin Bury, 88 Creative Managing Director and former Managing editor of tech news site Betakit.
Toronto’s proximity to nearby Waterloo, considered the hi-tech hub of Canada, has supported the growth of the city’s startup scene. Waterloo is a 45-minute drive from Toronto and home to its own ecosystem, which is focused mainly on engineering talent.
The University of Waterloo is well-known for producing some of the top developers in Canada, many of whom choose to work in Toronto upon graduating, while Google recently opened an office in the city.
A tour of Google’s Waterloo HQ
Consistently ranked as one the best cities in the world in which to live, Toronto is a city of neighbourhoods, where diversity is a defining characteristic. A 2006 census found that almost half of Toronto’s inhabitants were foreign born and it’s often claimed the city is the most diverse in the world. Today the workforce of Toronto startups is 48 percent foreign.
“Walk down the street in Toronto and you’ll probably see 50 nationalities in one day. There’s just a real air of acceptance here,” says Erin.
Changing the ratio in Toronto
The diversity is reflected in an initiative aimed at getting 1,000 new active female angels in Canada. Female Funders was established by Katherine Hague after her company Shoplocket was acquired by PCH in 2014.
Having become an angel herself, she decided to launch the project, which is the world’s first online education platform for potential female angel investors.
Female Funders’ Katherine Hague talks the challenges in digital business
Female Funders serves the dual purpose of increasing diversity in the city’s investment network and also helping Toronto startups go up against those from more traditional tech cities.
“Because we have this sense of being underdogs, there is this idea that Toronto entrepreneurs who achieve any modicum of success need to reinvest that money into the next generation of entrepreneurs,” says Erin.
For the ecosystem to compete at a global level however, startups in the city need more ready access to capital. The 2015 Startup Genome Report ranked Toronto 18th worldwide on this score, noting in particular the difficulty of securing a Series B in the city.
While seed capital is relatively easy to come by, $5-$15 million rounds are tough to secure. Some startups such as 42 Technologies move to the States for their Series A or accelerator programmes while others, such as 500px (Andreessen Horowitz) and Varagesale (Sequoia Capital and Lightspeed Venture Partners), try to entice American VCs over the border.
The Canadian dollar, commonly known as the loonie, is currently valued at 76c and this has made negotiating with US VCs a little easier. They’re getting a cheap deal.
Barely spending investment
The scarcity of VC money in Toronto dictates that those startups that do raise large rounds are typically cautious with their funding.
Founded in 2006, writers’ network and social publishing startup Wattpad was one of the Toronto’s early success stories. They bootstrapped a wildly popular business before raising a $3.5 million Series with Union Squares Ventures in 2012. They then hit one billion user minutes per month before raising a $17.3 million Series B with Khosla Ventures.
The success of Wattpad was a major catalyst in kickstarting Toronto tech
“They barely spent any of it. They were cautious about how they spent money because they weren’t sure if they could get more. Americans raise a big round, they’ll blow their brains out on marketing and sales. In Canada you don’t have that luxury. You have to be a little more pragmatic about capital,” says Mark Evans, a Toronto-based startup marketing consultant.
The largest Canadian Series A in recent times was raised by Wealthsimple, which announced a $30 million round led Financial Corp in April 2015. They’re considered leaders of a nascent fintech movement in the city which counts Clearbanc and Grow as members.
Wealthsimple graduated from OMERS Ventures’ downtown Toronto accelerator OneEleven. The accelerator is aimed at data-driven startups and was established in attempt to bring traditionally dispersed Toronto startups together in one space. City of neighbourhoods it may be, no particular district has yet emerged as the go-to startup hub.
The city has cost and quality of living, a reasonable abundance of talent and an emerging angel network on its side. Toronto has an opportunity to become a real player in the global startup ecosystem. Maybe startups in the city just need to shout a little louder about their achievements.
“There’s a lot more activity than capital. We’re just suffering from a lack of investment right now. We have a good story to tell. We just have to be a little more vocal,” says Mark.
Toronto’s CN Tower – The city has a story to tell, does Canadian temperament stop it being told?
Take it from me
Mark MacLeod has over 15 years’ experience helping fund, grow and exit venture-backed startups. Having served as CFO for leading companies such as FreshBooks and Shopify, he founded SurePath Capital Partners in 2015.
Highline – Based in Toronto and Vancouver, Highline is our most active pre-seed accelerator.
Founders Institute – Part of the institute’s global network.
Creative Destruction Lab – This is very strong accelerator based out of the University of Toronto. It’s particularly good in AI – they launched an AI-focused programme back in 2015.
Top media supporting Toronto startups
The coworking space at BrightLane
Top startup hangouts
TechTO – A tech meetup held the first Monday of every month. They usually get hundreds of people coming along.
One Eleven – Right In the heart of downtown Toronto. Sponsored by Canada’s largest VC, OMERS Ventures.
Be sure to hit any coffee shop on Spadina between King and College.
Top places to go for a drink/out for dinner
Rush Lane – Ask for the Kenhattan. This is a customised Manhattan made for Ken Seto, founder of gaming studio Massive Damage.
The Spoke Club – Members-only spot for the creative and tech community. Awesome rooftop patio.
Soho House – Like Spoke, just hipper.
Lee Restaurant – Only spot in Toronto where you want to order coleslaw. Trust me.
Home of the Brave – A nice hole in the wall on King Street.
The Kenhattan is a must-drink at Rush Lane
Cool coworking spaces
Project Spaces – A founder-friendly coworking spot downtown.
BrightLane – A community of entrepreneurs working together on King Street West.
Foundery – On the west side of Toronto, right next to the best coffee spots.
What’s your view of startup life in Toronto? What have we missed? What are your recommendations? Let us know on Twitter @WebSummitHQ or in the comments below.