Canadian startup ecosystems score highly in global report with two areas for improvement

Canada’s tech startup ecosystems performed well in Startup Genome’s annual global startup report, says the founder and CEO of the San Francisco-based innovation policy advisory and research firm.

Startup ecosystems in the Toronto-Waterloo corridor (Canada’s top-ranked ecosystem) and in Montreal rose in the rankings this year, “so that’s really great news,” JF Gauthier said in an interview with Research Money.

Toronto-Waterloo’s ecosystem tied with Chicago’s at No. 14, up from 18th in last year’s report. “The Toronto-Waterloo corridor is one of the fastest-growing and densest innovation clusters in the world,” according to the report.

“It’s normal that one city in a country pulls ahead because of the movement of resources (including entrepreneurs, tech talent, investors and customers) when it does,” Gauthier added.

Between 2013 and 2018, the Toronto-Waterloo region created more tech sector jobs than New York, Seattle and Boston combined, the report says. The corridor represents 17 per cent of Canada’s GDP and about 275,000 tech workers.

Montreal’s startup ecosystem ranked No. 31 in this year’s report, tied with Dallas, Hong Kong, Munich and Sao Paulo. That’s up from Montreal’s tie for 36th last year.

Two areas require attention 

Gauthier said that despite improvements in the global ranking, there are two areas where Canadian tech startup ecosystems need work.

Several Canadian ecosystems performed poorly in “market reach,” which includes both domestic market reach and global market reach.

“There’s lots of great innovation in Canada, but [startups] don’t get out of the gate and go to the whole world very early,” Gauthier said. “Our startups don’t do enough global market innovation.”

Canada’s early-stage tech companies need to focus much more on developing scaling and business-to-business sales skills, market intelligence, and global partners and channels, he said.

The other area requiring attention is investment in early-stage startups and ecosystem programs, Gauthier said.

A decline in such investment compared to other global ecosystems is a big factor for Vancouver’s startup ecosystem ranking No. 29 in this year’s report, down four spots compared with last year, he noted.

Early-stage investment in Toronto’s tech startup ecosystem also has slipped compared with about three to four years ago, Gauthier said. “We need to reinvest in this industry of the future. We need to pick back up," he said.

In contrast, Montreal’s early-stage ecosystem is growing and receiving support, he said. In 2020, more than $1.2 billion in venture capital was invested in Montreal region startups that have become growth-stage companies, such as AppDirect and Sonder.

Calgary and Ottawa among top emerging ecosystems

Startup tech ecosystems in Calgary and Ottawa ranked in the Nos. 61 to 70 group in this year’s Startup Genome report and were listed among the top 100 emerging ecosystems.

In 2020, Alberta tech startups attracted a record $455 million in venture capital, with Calgary companies capturing $353 million in more than 33 venture deals. The city is one of the top 15 cleantech markets globally and is ranked as one of the fastest-growing tech talent pools in North America

Local innovation entity Platform Calgary is playing the “keystone” role in leading and coordinating the ecosystem, including the new Platform Innovation Centre set to launch this fall in downtown Calgary, Gauthier said. “I believe Calgary is now on a growth trajectory, because the right work, the right policies, are being done,” he added.

Gauthier also welcomed Alberta Innovates’ announcement last month that four new business accelerators will set up shop in the province to help startups.

“Accelerators are really part of the ‘glue’ of the ecosystem,” he said. “They basically centralize and extract mentors, skills, knowledge and startup experience, and they bring all of that to startups.”

Value of tech industry is spreading globally

This year’s Startup Genome report included an analysis of 280 global startup ecosystems. For the second year in a row, North America contributed more than 50 per cent of global startup “ecosystem value.”

However, this year’s report also shows that the global value of the tech industry is spreading worldwide among startup ecosystems, Gauthier said.

The top 10 cities in this year’s report captured 63 per cent of the global value of tech, significantly less than the 87 per cent they had in 2011–12, he said.

Tech is now a $35 trillion global industry, with startups growing on average 10 per cent annually worldwide, according to the report.

Gauthier said that a global decentralization of the tech industry is occurring due to startups becoming industry players, particularly those that were once solely software providers. Examples include Airbnb in the hospitality industry and Uber in the transportation sector.

The second factor is “deep tech,” where industry expertise is becoming more important than software engineering skills on their own, Gauthier said. Other technical expertise, such as hardware engineering, logistics, design, data science and electronic engineering, are also equally important.

That type of technical talent isn’t confined to startup ecosystems such as Silicon Valley, New York or London, but is spread across the world, Gauthier said. "With the rise of deep tech, we see a decentralization of value creation and value capture in tech systems," he said.

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