Where are Canada’s startups? The second tier, emerging tech hubs

Startup activity across Canada is spreading to smaller, unlikely cities. While well-known tech startup hubs like Toronto, Kitchener-Waterloo, Vancouver and Montreal continue to thrive, more entrepreneurs are looking at lesser-known options like Calgary and the small coastal town of Lunenburg, N.S., to launch tech companies. Nova Scotia’s university culture and government funding opportunities make it attractive for tech companies to move, emerge and grow there, particularly in the small community of Lunenburg, while Calgary’s “get it done” mentality, according to a community member there, is fostering a tech hub characterized by an older demographic. Chris Adams, co-founder of tech marketing startup gShifts Labs in Barrie, Ont., said in a phone interview that there’s activity across Canada outside of the city cores. “There’s a lot of activity in what I would call two-tier cities,” he said, “so cities that don’t usually get the limelight.” He pointed to activity in New Brunswick as well as areas around Toronto such as Barrie, Burlington and Guelph, Ont. Suzanne Diab, marketing and communications adviser at Nova Scotia Business Inc., a provincial economic development agency, said in a phone interview that companies are being drawn to Halifax and the fishing village of Lunenburg, which offers cost-competitive operating costs and a loyal, educated workforce. “In bigger hubs, what you’ll often find is that there is this revolving door culture,” she said, “where here, once you find a place that fits into your lifestyle and a good place to work, you’re more apt to be a loyal employer.” Within the last five years, Diab said, Nova Scotia has emerged as a hub catering to game development and digital media. The small, 43,305-person fishing town of Lunenburg is now home to game development companies HB Studios and Fourth Monkey Media, while Halifax is home to Ubisoft-owned Longtail Studios and has an office of U.K. company Frontier Developments. “ first operations outside of Europe and into North America, and they decided to choose Halifax to set up shop,” she said. Diab said in a follow-up email that according to KPMG LLP’s Competitive Alternatives 2012 report, Halifax ranks as the top city for cost competitiveness in video game production out of all global markets surveyed. She said that, like California’s Silicon Valley, Halifax benefits from an educated, young population, with 10 universities and 13 community colleges in the province facilitating connections between entrepreneurs and businesses. Nova Scotia Business has worked with the universities of Acadia and Dalhousie to add game development specializations to computer science programs. “That’s been able to attract more companies, and also, help foster and grow the local ones,” Diab said. Kirsten Tomilson, president and CEO of Fourth Monkey, said in a phone interview that Nova Scotia is attractive in part because it offers startup funding such as the Digital Media Tax Credit. The tax credit also offers a 10 per cent geographic area “bonus” for companies outside the city of Halifax. “In terms of sustaining the industry, the government is working really hard to make sure there incentives in place to help entrepreneurs like myself,” Tomilson said. Jason Zeiler, development director at Startup Calgary, a group that aims to build a stronger Calgary network, said in a phone interview that the city offers an emerging tech environment centered on a mentality of “getting it done.” Zeiler said that unlike the hubs of Waterloo and Halifax, which are surrounded by universities and young talent, Calgary is becoming home to a 35 to 40-year-old demographic of entrepreneurs. Zeiler said middle-aged entrepreneurs are coming to the city to create companies and to find co-founders with complementary skill sets. “The entrepreneurs are actually coming out of large companies, learning the skills, and coming across either a large gap in the ecosystem, or they’re tired of the job that they’re doing and want to create something unique,” he said. “A lot of people, if they are heavily focused in IP and don’t know a lot about acquiring more capital from either angels or VCs , they’re willing to actually go out there and meet people in their community.” Startup Calgary’s annual Calgary Launch Party event helps to showcase new tech startups to the larger tech community and the public, Zeiler said. Out of 50 to 60 applicants, only 10 are invited to participate in the annual event, he said, which has helped 30 companies over three years. In the days leading up to the annual event, held in November, Startup Canada works with those young companies to perfect their pitching skills and help them secure more exposure, contacts, and support. One success story that came out of 2012’s launch party was Alberta-based startup FastCab. FastCab is a location-based application that connects passengers directly with taxi drivers instead of going through a central switchboard. At busy times of day, passengers can include incentives in their requests for a pickup, such as an extra tip. Both drivers and passengers create a profile through the app that also allows them to be rated. Each user begins with a three out of five star rating, which changes according to experience. Zeiler said the app aims to connect good cab drivers with good passengers and vice versa. After the event, FastCab reported that its subscriptions had doubled within a week, Zeiler said. “FastCab received the number one award at our launch party,” he said. “It was kind of the one to watch for 2013.” FastCab benefitted from exposure and an engaged tech community that helped the startup build a social media campaign, a new website and other promotional tools. “The energy is here,” he said. “Back in the 1990s people left because there was nothing here, and now there’s just this amazing energy.” Calgary’s tech community is still growing, so startups are not facing ownership and protection issues, which occur in some of the more established hubs, he said. “If you are here, you’re going to be part of the action instead of watching it from the outside,” Zeiler said. Though smaller, lesser-known tech hubs are emerging, established cities and hubs continue to grow. Adam Chowaniec, founding chairman of the nonprofit network Startup Canada, which last year conducted a cross-country consultation on how to build Canada’s entrepreneurial economy, said Montreal and Vancouver are both known for their gaming and media industries, while Ottawa is kind of reinventing itself from its telecom-focused days, when Nortel Networks Corp. had centre stage. The city has recovered from the tech crash of the early 2000s with a broader technology landscape, he said. “Interestingly enough, Ottawa is where the new BlackBerry 10 operating system is being built,” Chowaniec said, referring to QNX Software Systems, an Ottawa company that Harman International Industries acquired in 2004 and RIM Ltd. purchased in 2010 to use its operating system on its new BlackBerry mobile devices. Chowaniec said one thing he learned from Startup Canada’s cross-country consultation is that every community wants to build a tech hub. “Pretty much every city was looking at how to get some kind of a hub started,” he said, “but a lot of it is still focused on the physical stuff like the places to go and the places to meet, as opposed what I think is really important, which is how do you get these companies financed?” Ontario’s Kitchener-Waterloo area, made famous by Canada’s once-leading RIM, maintains a tech ecosystem of startups and offices of major companies like Google Inc. Steve Currie, vice-president of venture services at the Communitech Hub incubation centre in Kitchener, said in a phone interview that the community is characterized by everyone helping one another. “Through the years, there have been very strong entrepreneurs that have called this region their home, and it’s kind of this built-in sense of entrepreneurs helping each other,” he said. Currie said several universities and Brescia University College surround Waterloo, which provides the hub with ideas and young talent. He said the University of Waterloo, founded in the 1950s, is a “critical component” of the talent entering the local tech ecosystem. The region also benefits from the presence of larger, even non-technology players, like Manulife Financial, that help nurture growth and a startup environment, he said. “We have a very strong angel investment network here that is very supportive of the startup community, and then, individually, we have a lot of people that want to contribute and want to give their time back or add their expertise to help companies be successful,” Currie said. “The focus, or the mantra, is to really help the startups become successful as quickly as possible and as effectively as possible.” Fifteen-year-old Communitech, whose founders include Tom Jenkins, former CEO of Open Text Corp. and now its executive chairman, as well as Jim Balsillie, former CEO of RIM, work in the community to help companies attract and retain talent, Currie said. Communitech has a total of 1,000 members, including 500 startups. “It’s pretty well doubled over the last couple of years,” he said. Currie said a few recent startup success stories emerging from Waterloo include social media analytics service PostRank and BufferBox, both of which were acquired by Google in the past two years. About seven Waterloo-based companies that went through the Y Combinator accelerator program in Silicon Valley have returned to Waterloo, he said. “The allure of California is a great connecting, networking learning opportunity, but they feel that there’s some very good business advantages to being located in the Waterloo region as well,” he said. Currie said Communitech sees startup activity all over the country, and “not just in the usual places,” referring to Halifax, Edmonton, Winnipeg, Saskatoon, and British Columbia’s Okanagan Valley. “It’s really encouraging to see the activity that’s going on,” he said, “even outside the major startup hubs.” —With reporting by Danika Grenier at dgrenier@thewirereport.ca and editing by Simon Doyle at sdoyle@thewirereport.ca. This is the third and final part of a series on Canada’s tech startups. The first was on funding and the second was on takeovers.

Where are Canada’s startups? The second tier, emerging tech hubs

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