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Introduction to Toronto’s startup ecosystem
The city of Toronto, with its vibrant and diverse population, is a leading financial hub of Canada. It also features among the top cities of the world as a favored startup destination. A number of factors are responsible for this: a global population, less competition for talent as compared to the Valley, a growing number of accelerators and incubators, and an approachable startup community. In StartupBlink’s 2019 report, Toronto ranked 1st in Canada and 15th globally.
Earlier, Toronto’s startups would either move base to the US or sell their startup way before they gained any traction. This led to few big exits or IPOs in the city. But gradually, this is changing. Toronto startups are on their way to becoming global giants. There is a network of entrepreneurs and other startup resources such as universities, accelerators and coworking spaces that is fueling this growth.
Here’s taking a closer look at these developments and more…
Most successful startups in Toronto
- FreshBooks (@freshbooks): FreshBooks was founded by Michael Dermont and Joe Sawada in 2004 to solve the problem of accounting for small businesses. The company has rapidly grown to become a leading cloud accounting solution, with investors such as Oak Investment Partners, Atlas Venture and Georgian Partners.
- Bionym (@bionym): Specialising in authentication technology for consumer electronics, Bionym has also developed technology utilising gesture control and application development. So far it has raised about $15.4M in three rounds from investors including Relay Ventures, MasterCard, Salesforce Ventures and Export Development Canada.
- Wattpad (@wattpad): Wattpad is a highly popular community of writers and readers. It has raised around $70M in funding and has 25 million users. The company was founded by Ivan Yuen and Allen Lau in 2006.
Advantages for a startup in Toronto
Christine Andrews, the owner of Acme Works, was kind enough to ask three startup founders what, according to them, are the unique advantages of Toronto’s startup ecosystem. The responses pointed to a combination of several factors. One of them believed it is the low cost of living as compared to New York and San Francisco, combined with lower salaries and less competition for engineering talent. The other startup stated that it was easy to stand out due to the small number of tech companies, while the third credited the entire startup ecosystem and community as being easy to approach and supportive.
One of the most repeatedly stated advantages of Toronto as a startup destination is its diverse and global population. This allows startups to view their products in a global context. Toronto’s international population is also pointed out by the team at iQ Office Suites, shared office space in Toronto, as an important factor in fostering a dynamic ecosystem in the
Toronto is the largest and strongest startup ecosystem in Canada, says the team at INcubes, an incubation program. This is due to the fact that it’s the most populous and economically powerful city in Canada. “Toronto’s population is very culturally diverse; making this city the perfect environment for innovation, healthy competition and potential international expansion,” the team explains.
Aside from a global population, the city has also seen a rise in the number of incubators, accelerators and coworking spaces that are propelling the growth of startups. “Innovative new companies and initiatives are everywhere, incubated by top universities such as the University of Toronto, York University and Ryerson University,” mentions team iQ Office Suites.
Disadvantages for a startup ecosystem in Toronto
Although Toronto’s startup ecosystem is evolved over the years, it seems it has not evolved as much as other ecosystems such as Silicon Valley and New York. This makes it a less favorable destination for startups as well as talent.
As in most startup ecosystems, access to private investment seems to be a major issue in Toronto as well. States team iQ Office Suites, “Canadian startup ecosystem is much more conservative than the one south of the border, and it makes a big difference. When it comes to later stage investments, many startups have been dependent on U.S. investors.” Due to the lack of private funds, companies often rely on government grants.
The high level of competition to receive funding and risk aversion in Canada as compared to San Francisco does not help startups. Another pain point is recruiting top-notch talent as most developers and engineers would much rather take up “safe” jobs at big companies than risk joining a startup.
Key Players of Toronto’s startup ecosystem
- Extreme Venture Partners: A successful Canadian venture fund, EVP focuses on mobile and has funded more than 20 companies. It has also launched an accelerator, Extreme Innovations, that provides startups with mentoring and tech expertise.
- Apricot Capital (@apricotcapital): It is a seed stage investment fund based in Toronto and Boston. It founders are Jennifer Lum and Peter Wernau. It invests in early-stage tech companies, some of which include Crashlytics, OnSwipe and Massive Damage.
- Version One: This investment firm is very clear about its areas of focus: social platforms, marketplaces and SaaS. They invest in products having large markets. Their typical investments range from $500K – $1M in Seed and Series A rounds.
- Startup Weekend Toronto (@startupwkndTO): The last edition of the event in Toronto revolved around the Internet of Things. Start Weekend is a global event that brings together designers, developers, business experts to build a prototype and llearn about entrepreneurship.
- Toronto Homecoming (@TOhomecoming): As the name suggests, it is a networking event that connects Canadians working abroad with job opportunities in Toronto. It is a great initiative to bring back local talent and sees the participation of companies such as FreshBooks and a number of startups. The main industries that the event includes are financial services, technology, and retail and consumer goods.
- TechTalksTO (@TechTalksTO): It is an ongoing speaker series aimed at developers in Toronto. The event is sponsored by FreshBooks and can be attended by prior registration.
- Lean Coffee Toronto: A peer group for entrepreneurs, it features case studies, group discussions, and activities that expose entrepreneurs to situations they will have to deal with. Their Meetup page has details of their next event.
Organisations supporting startups:
- Futurpreneur Canada (@FuturpreneurON): A national non-profit organisation, Futurpreneur Canada provides mentoring, financing and other support to business owners between the ages of 18-39. It has an impressive network of 2800 volunteer mentors.
- VentureLab (@ventureLAB_): A non-profit innovation center, it is helping entrepreneurs take their ideas to the market. A member of Ontario Network of Entrepreneurs, it offers mentorship and networking opportunities to entrepreneurs.
Though the lack of sufficient venture capital is an important issue, there has been a significant improvement on that front when compared to past years. Toronto’s startup ecosystem is developed enough for startups to connect with mentors, share ideas and develop global products. It will only have to keep pace with other ecosystems such as the Valley and NY to avoid loss of talent and ideas!
Team iQ Office Suites