Is Canada in line to be the next Silicon Valley?
CONTRIBUTED TO THE GLOBE AND MAIL
Chris Albinson is the incoming CEO of Communitech and a Silicon Valley venture capitalist
Change can sneak up on you if you’re not paying attention.
As a Canadian venture capitalist based in California for the past 20 years, I’ve kept a close eye on the tech scene back home — and the transformation during that time has been nothing short of spectacular.
How spectacular? Enough for Canada to shove Silicon Valley off the global innovation podium, and more than enough for me to move back from California to help with the pushing.
That might sound like hyperbole to those who haven’t been watching the geographical shifts among the tech world’s power centres. Sure, Silicon Valley still leads North America (if not the world) in venture capital committed, and it remains home to the world’s tallest tech giants and scores of talented immigrants.
But the Valley wasn’t always this green, and it’s getting less so by the day (try booking a moving truck out of California these days).
Remember Boston? It was the world’s leading innovation region as recently as the early nineties, but it became rigid and uncompetitive. Silicon Valley surged into the top spot but is now facing the same issues Boston did. This leaves Canada — and specifically, Ontario — perfectly positioned to come out on top.
The evidence has been piling up like January snow for a decade, even if some of us have been slow to notice. That evidence is now all around us and it’s impossible to ignore.
In 2016, I interviewed a well-known Valley venture partner in front of an audience of Canadian entrepreneurs. The investor flatly told the assembled founders it was impossible to build a company worth a billion dollars, let alone one that could generate $1-billion in annual revenue, in Canada.
Here’s what’s happened since for some of the founders in that room:
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Shopify Inc. has reached a market capitalization of $167-billion, just behind Canada’s biggest company, RBC, and just posted its first billion-dollar quarter for revenue. Wealthsimple just hit a $5-billion valuation after raising a $750-million growth round. Clearco (formerly Clearbanc) was just valued at US$2-billion. Nuvei Corp., with trailing revenue of $375-million, now has a market cap of $10-billion, as does Lightspeed POS Inc. Sonder is set for an initial public offering at a US$2.2-billion valuation. And Instacart, despite launching in the U.S., was built by a Waterloo graduate and is now worth US$39-billion.
Countless other companies, some of which hadn’t even launched yet, weren’t in the room that day but are on similar trajectories. ApplyBoard, Faire, Ada Support, 1Password, Clio, PointClickCare, Symend, Coveo, Hootsuite, and D2L have all raised more than $100-million and several are likely to go public at valuations north of $1-billion.
Further IPOs are either under way or on the way, as The Globe and Mail has reported. Thinkific Labs Inc. just closed a $160-million offering. Magnet Forensics Inc. is nudging a $1-billion market cap after its recent IPO. Vendasta is working toward an IPO, and many more companies — Axonify, Miovision, Dejero, Trusscore, Vidyard and Intellijoint Surgical, to name a few — are growing steadily on significant revenue and investment.
All of this, a short five years after we were told it wasn’t possible in Canada.
In terms of return on invested capital, Canada is now the third-most productive tech ecosystem on the planet after Silicon Valley and China, and is closing the gap as those two rivals turn inward and stagnate.
It’s not a mystery why this is all happening now.
As the United States has tightened immigration and become less welcoming, Canada has made shrewd policy moves to attract top global talent and capital. Canada now has six times as many skilled immigrants, as a percentage of population, as our American neighbours do — a significant stat when you consider half of the founders of America’s tech unicorns (private companies worth $1-billion or more) were born outside the U.S.
From 2013 to 2019, 80,000 tech jobs were created in the Toronto-Waterloo Corridor alone — more than in San Francisco, Seattle and Washington, D.C., combined. That’s pretty compelling evidence that Canada is winning the hearts and minds of the world’s best and brightest for the first time in a generation.
When you throw in our strong advantage in the next wave of technology (think artificial intelligence, machine learning, quantum computing, 5G, medtech, advanced manufacturing), our relative cost advantage, and parity in access to markets and capital, it’s easy to see why Canada is poised to dominate.
Still, at times it seems our national narrative has some catching up to do. Some in Canada are still operating on the premise that talent follows capital — the basis of the so-called brain drain of Canadian talent to the U.S.
That premise was valid in 2005, but was already growing stale by 2010 as a scrappy new generation of Canadian startup founders and growth-minded investors began to emerge.
Today, it’s simply dead wrong. Why? Because the truth, as we’ve shown over the past five years, is that capital follows talent. Canada had a net gain of 5,000 STEM workers in the past 12 months alone and the capital is following.
It’s one of the reasons why this particular venture capitalist is following the talent back to Canada — and why the podium is ours to own, if we truly want it.
I know I do. Who’s with me?