Downtown Toronto
Downtown Toronto © Getty Images/EyeEm

Until fairly recently, few outside of Canada had heard of the University of Waterloo in sleepy south-west Ontario. Today, it is widely regarded to be a breeding-ground for world-class tech talent.

“Waterloo is like saying you went to Harvard Law,” says Lauren Haw, chief executive of Toronto-based real estate platform Zoocasa, one of the fastest growing companies in the Americas. Among the university’s alumni are Hussein Fazal and Henry Shi, founders of Super, which is 11th in this year’s FT growth ranking. The fintech recorded 2021 revenue of $153mn and compound annual growth of 261 per cent, and has itself hired scores of staff from the university.

Waterloo’s rise echoes that of Toronto itself. As former president Donald Trump tightened America’s immigration rules after 2017, Canada’s largest city added more tech jobs than anywhere else in North America, bringing a deluge of capital.

Now, the windswept Canadian city, once known more for its brutal winters, boasts the continent’s third-best tech scene, according to an index compiled by real estate group CBRE. The city​ also has the third​ most companies in the FT ranking with 12, after New York and San Francisco.

Co-founders Henry Shi and Hussein Fazal of Super
Hussein Fazal (right) and Henry Shi, founders of Super

After all these years of dizzying growth, the Toronto scene is maturing and changing, driven by the shift to remote work and economic headwinds. But, having established critical mass, investors and entrepreneurs say Toronto’s future is bright. “Many people liken the ecosystem to where New York was five years ago,” notes Ameet Shah, partner at Toronto VC fund Golden Ventures. “If you look at recent momentum, there’s been significant M&A and venture activity, establishing the next cohort of unicorns.”

Yung Wu, chief executive of the MaRS Discovery District, an innovation hub that helps start-ups with advice, office space and networking, says: “When you think about Canada, you think about oil and gas, lumber, rocks, mud.” However, he argues that in Toronto there are the seeds of a tech revolution that could catalyse growth for the wider Canadian economy.

Toronto’s downtown used to be dominated by Canada’s big banks, but its skyscrapers now host a who’s who of Big Tech.

In February, Microsoft opened a large office a stone’s throw from both Apple and Amazon, while Google has announced plans for a 400,000 sq ft building. Twitter, Pinterest, eBay and DoorDash are also present. Many large American companies came to Canada for lower labour costs but found themselves being swept up in a tech boom.

The city owes its growth to investment from universities, businesses and government agencies, and welcoming immigration policies. While Trump was cracking down on US immigration, Justin Trudeau’s government launched programmes allowing companies to quickly draft in skilled workers. Toronto’s new arrivals were mostly developers, programmers and engineers who helped fill the 88,900 tech jobs created in the city between 2016 and 2021, according to CBRE. Today, half its residents were born abroad.

Hussein chose Toronto six years ago to launch Super — then a chatbot for booking hotels — because of its “cheaper real estate, lower cost-of-living and world-class engineering talent.” Today, Super’s prepaid cards are used by millions of Americans to save and build credit.

Having secured investment from the likes of basketball star Steph Curry, and with a mostly American customer base, Super has gone fully remote and switched its headquarters to San Francisco, but with Hussein and most of its engineers staying in Toronto.

Prime Minister Justin Trudeau tours Velocity, a entrepreneurship program, at the University of Waterloo
The government of Justin Trudeau, pictured at Waterloo university, launched programmes allowing companies to quickly draft in skilled workers © Nathan Denette/The Canadian Press/Alamy

Growing tech talent has not gone unnoticed by VCs. According to tracker, Toronto saw tech investment and deals jump from $1.5bn in 2019 to $5.6bn in 2021, before slipping to $3.7bn in 2022 as the market cooled. Haw says fundraising has been harder since Covid-19, but “if you’ve got a great company that actually makes sense, there are still funds that have a lot of cash they are willing to deploy.” Canadian firms are increasingly making large investments as well, she says, even if “there are not as many dumb-money cheques”.

Zoocasa is another of Toronto’s success stories. The company ranked 244th on this year’s ranking with compound annual growth of 48 per cent and 2021 revenue of C$17mn. Last year, Zoocasa was bought by American group EXP Realty, although Haw will continue at the helm.

Challenges persist for Toronto’s start-ups. The shift to remote work has enabled promising engineers to live in Canada and work for Silicon Valley firms paying higher wages. Super has recruited US executives and Haw says recruiting professionals with 5-15 years of experience is tricky. “We don’t have a very easy picking of a kind of high-level manager,” she says. Investment is still dwarfed by San Francisco. “We are never going to be Silicon Valley,” says Hussein, “but we are seeing more and more successes, growth stories and a development of the ecosystem.”

Crucially, entrepreneurs and engineers are opting to stay in Toronto long term, rather than heading south, according to Toronto’s boosters. And sectors including AI, data, clean tech, quantum computing and life sciences are finally taking off, a decade after University of Toronto professor Geoffrey Hinton’s “neural networks” research fired the AI starting gun.

Yung, who claims MaRS-assisted companies have contributed $22bn to Canadian GDP in five years, says these sectors are countercyclical, shielding them from the effects of interest rate hikes.

“I’ve lived through more cycles than I’d want to admit but, over a couple of decades, this is the time when the most valuable and powerful companies in the world are being built,” Yung added. Some of them, he is certain, will call Toronto home.

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