The emergence of startups focused on global connectedness and their willingness to make worldwide sales a priority has put the Toronto-Waterloo tech ecosystem on the move.
Earlier this month, Startup Genome, a Silicon Valley-based startup that tracks technology ecosystem development worldwide and advises businesses and governments on where to make investments that will provide the best returns, released its 2019 Global Startup Ecosystem Report.
Toronto-Waterloo jumped three places, from 16th worldwide in 2017 to 13th, and logged the top spot in Canada (Startup Genome provided no rankings in 2018).
The move up, says Jean-François Gauthier, Startup Genome’s founder and CEO, reflects “a lot of hard work over the years” that is now paying deserved dividends.
“The ecosystem is really starting to create more jobs and more economic growth for the region. So the investments are paying off.”
Speaking to Communitech News from his company’s headquarters in Silicon Valley, Gauthier said key strengths of Toronto-Waterloo are “lots of great talent, lots of great technologies.”
But he said the main reason the region has moved up in the ranking is a willingness by more companies to do the work necessary to break into global markets and produce results worldwide.
“Global market reach was always a problem [for Canadian companies],” said Gauthier. “Startups did not go global fast enough in Canada. Commercialization has been a problem.
“But MaRS [Discovery District, in Toronto] and Communitech [in Waterloo Region] have put an emphasis on solving that issue – getting their startups to go global faster and earlier. I think we’re seeing the benefits of that in this new ranking.”
Gauthier – who is himself Canadian, hailing from the Saguenay region of Québec – said that startups in Canada have long suffered from a reluctance to push into markets beyond North America. That, and a B2B mindset, rather than B2C.
“I’ve been in Silicon Valley for 22 years. I’ve studied 70 ecosystems in 30-something countries. The difference between the top and the middle ones ... has been global commercialization, what I call global market reach.
It’s about learning from your customers all over the world, what their needs are, what their current use of technology is, who the competitors are.
“That’s the big difference between [modest tech ecosystems and] a Tel Aviv, which is creating scaleups at [the] most impressive rate in the world, and a Stockholm, which is creating unicorns at the most impressive rate in the world. They get out of their country.”
Gauthier said that companies from Tel Aviv will quickly build a sales force in New York. Companies from Stockholm will do the same in London. Canadians, he said, are often reluctant to do the same, but that’s beginning to shift.
“Working locally first and then going global doesn’t work,” he said. “It’s about understanding your customers from year one. Not about building a good product for a local market.”
He said that Toronto and Waterloo Region showed strength in fast-growing sub-sectors like artificial intelligence, blockchain, advanced manufacturing and robotics and agtech.
Speaking specifically about Waterloo Region, Gauthier called it “an amazing ecosystem.
“It’s producing one of the highest number of startups per population, which means its funnel, its entrepreneurial mindset, spirit, the strength of the community as an engine for the region, is just so strong. It’s very impressive in that way.
“Waterloo has 1,100 startups per million people, or something like that. Silicon Valley is at 2,000.
“But everybody else is at 300, 400, 500.
“So it continues to create a very dynamic ecosystem. I think this is a real strength.”
Unprompted, Gauthier credited Communitech for playing a vital role in Waterloo Region’s performance.
“Waterloo is creating amazing technologies, but it also has Communitech, which we’ve started calling a keystone team in the ecosystem.
“That means an organization, a set of people, who are really connecting and helping and supporting everyone and co-ordinating. That’s what we see in the best ecosystems in the world. Those who hit above their weight – like Stockholm, obviously – [have] the presence of an organization that brings everybody together and creates and initiates all types of programs to help startups. It’s extremely important.”
Silicon Valley remains the top worldwide tech ecosystem, according to Startup Genome, despite much recent criticism that it is falling out of favour among entrepreneurs due to ongoing social and cultural issues, high salaries and the exorbitant price of real estate. Gauthier doesn’t see the Valley losing its top billing any time soon.
“It’s very popular to talk against the Valley,” he said. “There’s a backlash. The Valley has a lot of problems from a societal point of view.
“But it remains the region in the world that has created the most economic growth, ever. It has never happened before. It’s still growing faster than any other ecosystem.
“Silicon Valley will remain the No. 1 forever, I think.
“It has the most knowledge and the most resources. It’s globally integrated [and] that is a richness that is most important.
“Of course it has problems. Real estate. Immigration, bringing in new talent.”
But he said the availability of capital gives companies in the Valley the means to outsource talent and open offices worldwide, tapping into additional talent streams at lower rates.
Number 2 on the Startup Genome list was New York, followed by London, Beijing, Boston and Tel Aviv.
