Archive for the ‘Focus’ Category

Newer Entries »

Ideal Has a Solution for Hours Wasted on Sales Recruitment

Thursday, June 16th, 2016

That friendly email in your inbox inviting you to interview for the highly-contested sales position you applied for may not have been written by a recruiter. Same for the text message to follow up if you forgot to respond.

It’s all part of a recruitment platform from Toronto startup Ideal.com, which uses algorithms, artificial intelligence, and IBM Watson in an attempt to relieve the recruiters’ burden from matching and contacting candidates.

Ideal is co-founders’ Shaun Ricci and Somen Mondal’s second startup. The first was Field ID, a safety compliance management firm. As the sales team grew, explains Ricci, they noticed inefficiencies with the way they were hiring.

“We looked at all the pieces of our business–the sales, the development, everything was very data-driven, very metrics-heavy, except when it came to recruiting,” says Ricci.

techPortfolio_Quote_June 16

They often found themselves hiring people who would not last more than six months. “We ended up with a lot of people that we liked, personally, but who weren’t necessarily a fit for the role.”

Ideal was later born out of a need to solve the problem of wasted time while recruiting for sales staff – both by automating the mechanics of the recruitment process and by using surveys and cognitive technology to assist matching.

When Ideal sets up an automated sales recruitment system for a company, they build a benchmark of what works – the values that team holds, such as integrity or leadership – as well as detail the company’s perks, such as flexible working.

idealcom-image

On the other side, sales professionals signing up for the platform are asked their priorities. “Some people want to work from home,” says Ricci. “Some people want free espresso. There are pretty different attitudes towards culture.”

The data is then processed and matched in an algorithm, and recruiters are given a list of top candidates on the Ideal platform to choose from. The software e-mails and texts the chosen candidates; if there is no response, the recruiter is notified.

Job descriptions and resumes are all broadly similar in structure, which means the content can be brought out, organized, and interpreted.

“A boring job description is pretty data rich,” says Ricci.

Watson can compare how close the resume is to the job description, more quickly and with far more granularity than a human.

Better Decisions

“We can process a lot more efficiently. Our goal at the end of the day is to make better decisions when screening acquisitions, so the people who do talent acquisition can spend more time on high-value tasks, such as interviewing,” Ricci adds.

Ideal.com has raised $2.5 million in funding, from a combination of angel investors and self-funding from the sale of the founders’ first startup to Master Lock in 2012. Customers include Context Media and Top Hat.

As for the future, Ideal is looking at increasing their scope beyond sales to other professions, and opening direct use of their platform to their customers. As for more potential use of the Watson technology Ideal is considering is considering using the voice services on phone screening.

“What if we can have those phone reviews recorded, and you can send those voice recordings to Watson, and you get text of the conversation as well as analysis of the voice. Can you detect if a candidate is passionate?”

Tags: , ,
Posted in Focus, Profiles, Technology | Comments Off on Ideal Has a Solution for Hours Wasted on Sales Recruitment

Analytics4Life Takes The Stress Out Of Coronary Artery Disease Tests

Wednesday, June 8th, 2016

For a disease recognized as the most common global cause of death – 8.14 million worldwide in 2013 – coronary artery disease is extremely laborious to diagnose. A Canadian firm, Analytics4Life, is looking to cut out a large part of the labor involved – and the danger posed to patients – by leveraging data in new ways.

In a nuclear stress test, patients must exercise on a treadmill to measure blood flow after radioactive dye is injected. Physicians and hospital workers need to spend resources on managing radioactive nuclei. The test can take up to five hours and is only 75% accurate.

Analytics4Life, a startup based in Kingston, Ontario, is attempting to develop a much more straightforward method, using machine learning through neural networks and genetic analysis, with physiological information conventionally considered valueless.

“We’ve been able to demonstrate a very simple test that takes about three minutes to do where you don’t have to stress the patients,” says Shyam Ramchandani, co-founder and Director of Marketing and Business Development at A4L. “It’s just surface electrodes that go on patches on the body: seven of them. Three minutes later, they’re done, and then by the time their patches are off and their shirt’s on the result is on the doctor’s portal.”

Tech Portfolio Fact

This month, A4L is running its first machine learning tests with recruited patients already diagnosed with coronary artery disease, a condition where the vessels that supply oxygenated blood to the heart are obstructed by plaque; if the plaque builds up excessively and hardens, the condition leads to blood clots, angina and cardiac arrest.

After crunching what A4L calls “phase energy” data – which draws on a wide array of physiological signals – from the electrodes, and generating a formula based on the results, the company will then test blind on another selection of patients to see if their formula is an effective predictor.

“‘Phase energy’ is purely a mathematical concept,” explains Ramchandani. “There is no current physiological description of this. We will be the first to demonstrate this.”

The test itself can be administered from a “phase energy signal recorder”, an iPad Mini adapted with proprietary technology to connect to the electrode input. The recorder transfers the data to the cloud. The front-end software and the data processing lives on IBM Cloud, and important code infrastructure is hosted on IBM’s Bluemix platform.

This setup makes it all portable. “You technically can take our test anywhere you have a 3G signal,” says Ramchandani. “You wouldn’t have to fly people in from remote areas to a place that has a special camera.”

According to Ramchandani, IBM infrastructure is ideal for handling healthcare data. “We have an almost off-the-shelf HIPAA compliant tool. When you’re collecting medical information, you have to either de-identify it in a way that it can’t connect it back to the patient, or it needs to be hosted on and transmitted on infrastructure that’s been validated for security purposes.”

A4L completed series A funding last August for CA$10 million, and is hoping to complete series B at the beginning of 2017 to help it fund commercialization activity and a pivotal clinical trial.

Tech Portfolio Fact

That pivotal clinical trial will support their next key step: the FDA approval process. “If you can’t get through regulatory affairs in an efficient manner and get the kind of reimbursement you need, it’s not going to be a business,” Ramchandani says. The company has made senior level hires in order to facilitate interaction with the FDA.

Another option for A4L is expanding in Europe. (They will not start with Canada initially, because the market is too small.)

Although a price for the test hasn’t been set, A4L says that the overheads for its new system, once approved and functioning, are going to be astronomically less than the status quo. “We have no regulated nuclei that needs to be injected, purchased, or handled,” says Ramchandani. “You don’t need a specialized technician, or a specialized camera.”

And no more running on a treadmill, either.

For a free trial of IBM Bluemix click here.

Tags: , , ,
Posted in Featured, Focus, IBM, Technology | Comments Off on Analytics4Life Takes The Stress Out Of Coronary Artery Disease Tests

Progress for Women in Canada Doesn’t Show up in Tech

Wednesday, June 1st, 2016

“Most of the people making decisions about venture capital are still men,” Julie Steiner, CEO and founder of Percy3D explains. “As a result, I know many women in the startup tech industry here in Canada who have struggled to get venture capital.”

Steiner is one of the lucky ones. She has an angel investor for her personalized video start-up, and has not had to go the VC route.

Venture capital investments for Canadian companies hit a record high in the first quarter of 2016 according to the latest report by the Canadian Venture Capital & Private Equity Association, nearly doubling 2015’s Q1 numbers. Of 40 confirmed speakers at the industry association and advocacy group’s recent annual conference, less than 30 percent are women.

That is actually a high number compared to the number of venture capitalists who are women in Canada. According to a recent article in Canadian Business, less than 15 percent of venture capitalists in Canada are women. Meanwhile, women hold one-third of senior management positions overall in Canada.

In a country where the prime minister has made a concerted effort to equalize the genders in his cabinet and restructure government ministries to link innovation, science and economic development, the continued gender imbalance in tech stands out.

techPortfolio_Quote_May_31 - 1

The connection between the gender of the VC and the gender of the person looking for financial support is important, according to Dr. Diana Parry, an associate professor and campus lead for the University of Waterloo’s ‘HeForShe’ campaign. “Part of the problem is connected to unconscious biases, the biases that people bring to the table that they are unaware of.”

The ‘HeForShe’ campaign is a global initiative launched by UN women and seeks to engage males in the fight for gender equality on many fronts. In early 2015, University of Waterloo’s President Feridun Hamdullahpur accepted an invitation from the campaign to participate in their Impact 10x10x10 framework, a pilot project involving universities, governments and corporations.

“It’s sometimes just a matter of like investing in like,” says Cathy Connett, one of five women managing the Sofia Fund – an angel investment fund in the U.S. that aims to get more women investing in startups.

“One of our potential investors actually asked us how many of the companies we invested in before establishing the Sofia Fund were women-led. Out of curiosity, we went back and looked at the data and found that out of our 37 personal investments, 52 per cent were women-led. As private investors, the five of us had not purposely set out to invest in women-led companies, but we had, which supports that whole like-invests-in-like idea.”

It’s not just women who recognize the value of female leadership in tech.

techPortfolio_Quote_May_31 - 2

“I’ve worked with both female and male entrepreneurs, and in terms of skills and experience, there’s no differences between them. This level of entrepreneurs are driven, focused, visionaries,” says Mark Evans, a start-up marketing consultant with 20 years of experience in the industry.

“One of the realities of dealing with venture capitalists is that it’s all about the money. A lot of them want to nurture and support entrepreneurs, sure, but at the end of the day, they are investing to make a return for their investors. Whether you’re a man or a woman, that’s the way the game is played.”

“A lot of the time, it comes down to the fact that women aren’t asked ‘to play,’ in both the venture capital and angel investment worlds” says Connett, “you have to make an effort to reach out to women, and when you do, you see results.”

Evans says that change can’t come too soon. “Canada really needs to double-down on becoming an innovation-driven economy, we need more people at the table to drive growth, and that means we need to be pulling from the whole population rather than just half of it.”

Tags:
Posted in Featured, Focus | Comments Off on Progress for Women in Canada Doesn’t Show up in Tech

Demand for Fintech Innovation Creates Cooperation Ecosystems

Tuesday, May 17th, 2016

Pushed by surging demand for tap-and-go everything, banks are embracing fintech startups as channels to innovation instead of engaging in an all-out war to shut them down. This race for fintech solutions doesn’t stop at specific partnerships; it’s leading to fintech ecosystems.

Bill Jacobson, CEO and Founder of Workbar, a coworking network across the Greater Boston area, has created a relationship with Digital Credit Union, one of the largest credit unions in the US. They have a space that hosts fintech companies for six months.

The arrangement is a quid pro quo.

“The [startups] get to work with DCU and see real problems. It’s a great way for them to develop beta customers, accelerate the effort to work on real issues. It gives them space and access to the Digital Credit Union management team as well,” Jacobson says. Meanwhile, Digital Credit Union is “doing this to get closer to startups and new ideas..”

Google, Apple, Amazon Service

According to PwC’s March 2016 report, Blurred lines: How FinTech is shaping financial services, consumers expect the same service and innovation from banks as they do Google, Apple, and Amazon.

The fintech division of Toronto’s MaRS Discovery District – a startup incubator – is another example of the cooperation growing between banks and startups.

“There’s not necessarily a threat, or friend-or-foe sort of mentality” among banks sponsoring programs at MaRS, says Adam Nanjee, head of MaRS’s fintech division.  “They want to work with the startups.”

Financial institutions are wrestling with the competitive implications of fintech. The PwC report says 20% of their business is at risk by 2020, so many are already partnering with more nimble, innovative startups. Funding of fintech startups last year reached $12.2 billion.

Gregory Melchior, a startup co-founder who previously worked at Bank of Montreal and Merrill Lynch, says: “If you’re standalone you’re not going to survive. You need to have a white-labeled solution and work with the banks.”

For more on the fintech threat facing financial institution, read Startups Eat Into the $4.7 Trillion Financial Services Industry.

Tags: , , ,
Posted in Focus, Funding, Technology | Comments Off on Demand for Fintech Innovation Creates Cooperation Ecosystems

Most-Read Stories About Funding for Canadian Startups

Monday, May 16th, 2016

One year has made a big difference in terms of funding for tech startups as unicorn worship has given way to cockroach austerity. While tech ecosystems don’t seem to be heading for a collapse along the lines of 2000, the money isn’t flowing like it was in mid-2015.

Funding for U.S. startups in this year’s first quarter fell 25 percent from the fourth quarter of 2015 to $13.9 billion, the largest quarterly decline on record since the dot-com bust, according to (warning: paywall) data from Dow Jones VentureSource. The numbers of Q1 deals hit a four-year low of 884.

Also in the first quarter, the median value of U.S. startups plummeted to $18.5 million after hitting a peak of $61.5 million in last year’s third quarter, according to the same report. Comparable data aren’t available for Canada, but the trend is clear.

techPortfolio_Fact_May_15

Still, the weak patch doesn’t mean the well has gone dry. Here are some of the most-read stories of the past month about funding for Canadian startups:

Vancouver’s Bench Raises $20 Million Series B Round

You might well use Bench for in your own organization, so this is good news for the future. Ian Crosby, CEO of Bench, says that the Series B funding will remove constraints and allow them to “undergo rapid employee growth.”

Thirdshelf Moves Out Of Stealth Mode After Raising $800,000, partnering with Lightspeed

Meanwhile, you’ve probably already used ThirdShelf without realizing it. ThirdShelf’s USP is that they allow independent retailers to retain their own customer data, rather than making them partner or share their lists. If you want a glimpse of the future of the checkout line, the article also talks about ThirdShelf’s work with developing bots that can gauge how and when to engage each customer.

With New Seed Funding, Hockeystick Looks To Compete With CB Insights For Startup Data

More than just the latest contender for ‘most Canadian startup name ever’, Hockeystick helps link startups with their investors, enabling a free flow of financial data. This interview with Raymond Luk, the company’s founder, shows how startups need to get over with their hesitance to share, and the advantage Hockeystick has over competitors that rely on surveys alone.

24 Canadian Startups Raised $152 Million in April

Lastly, here’s a list of hard data. Startups from Vancouver to the Maritimes (that’s PEI and Fredericton in there) are pulling in a good deal of angel and venture capital. Topping the list is Etobicoke-based Flipp at $61 million, who create digital versions of flyers and in their well-rated app.

Posted in Focus, Profiles, Technology | Comments Off on Most-Read Stories About Funding for Canadian Startups

What Do You Call a Canadian Unicorn?

Thursday, May 12th, 2016

The ups and downs of unicorn valuations have dominated the Twitter conversation around tech for much of the past year, both in Canada and elsewhere. How does Canada differentiate itself when referring to startups valued at $1 billion or more?

The mighty narwhal.

While this carnivorous whale – distinguished by its single tusk – is an actual creature as opposed to a mythical one, try to find someone who’s seen a narwhal in the flesh. The animal’s scarcity makes it an appropriate metaphor.

There have been more than 1.8 million impressions from 175 mentions by 124 users between October 31 and April 30. Here’s what the conversation looks like:

 

techPortolio_chiclet_Cloud2_May_12

 

Narwhals Are the Unicorns of the North

 

Carl Franzen, Online director at Popular Science, likely found that paragraph of text in a syndicated version of this story from the Canadian Press: Evolving B.C. Tech Startups Threaten to disrupt ‘dinosaur’ industries. Indeed, one of Canada’s most famous unicorns narwhals is Vancouver, B.C.-based Hootsuite.

Who are the other narwhals? Check out Visual Capitalist’s handy infographic from October 2015:

Unicorns & VCs

Unicorns haven’t been completely sidelined in Canada, though. The unicorn conversation often includes talk of venture capital. One example is this tweet from Startup Canada, which appears in the Twitter conversation:

The episode featured here is an interview with David Nault, a principal at  iNovia. You can listen to it here:

[soundcloud url=”https://api.soundcloud.com/tracks/242734638″ params=”auto_play=false&hide_related=false&show_comments=true&show_user=true&show_reposts=false&visual=true” width=”100%” height=”450″ iframe=”true” /]

VCs are not only talking about the industry on podcasts. Another story that bubbled up in the Twitter conversation was this PE Hub Network’s article on 2016 predictions for Canadian tech startups and venture capital.

Written by Jim Orlando, the piece explores IPOs, virtual reality and augmented reality, and an increase in activity from U.S. venture investors.  

For more on startup monikers, check out our piece here on how the cockroach crawled into tech sector parlance.

Tags: ,
Posted in Focus, Funding, In Brief | Comments Off on What Do You Call a Canadian Unicorn?

The Downside of Jobs in the Startup Era

Wednesday, April 27th, 2016

Enthusiasm over the economic benefit of tech startups needs some grounding, particularly when it comes to jobs.

While we argue in TechPORTFOLIO that startups have ended the industrial era, we should also acknowledge that many of the jobs startups create are fleeting and short on benefits. Moreover, the sheer number of traditional jobs in industries that grew throughout the 20th century make them a vital component of most economies even if their numbers are in decline.

The following stats help put the importance of startups as employment drivers into perspective:

Startups can create a large number of jobs, but can also lose a large number too.

In a 2015 study, Stanford Graduate School of Business professor George Foster examined more than 158,000 startups across the world, looking at each for five years. He found that jobs shed by companies in their fifth year equal 65 percent of that year’s new hires. This number, which shows the difficulty many companies have transitioning out of their startup phase, doesn’t account for jobs shed by startups that go bust. Nor does it count jobs lost as a result of startups disrupting a traditional industry.

techPortfolio_Quote_1_April 27 (2)

In years three, four, and five, only 8 percent added new jobs. Foster shows startup job graphs less like a slapshot — with rapid year-on-year growth starting from zero – and more like “a high-speed game of snakes and ladders.”

A minority of startups account for the majority of startup revenue and job creation.

The Stanford study also shows that among five-year-old companies, the most successful 10 percent account for 80 percent of revenue and job creation. That successful 10 percent also accounts for a lot of job loss, because companies can only lose money and jobs if they make it in the first place.

Though startups are creating jobs, companies like Google and Amazon aren’t even among the top 50 largest U.S. employers.

As Tech Republic notes, tech giants like Google and Amazon touch many facets of our lives, however they don’t come even close to companies like Wal-Mart (2.2 million employees in 2015), McDonald’s (420,000 employees in 2015) and Home Depot (371,000 employees in 2015) in job creation.

Less than 1% of the U.S. labour force is employed in companies established after 2000.

In a study by Oxford economists Thor Berger and Carl Benedikt Frey cited by Re/code, startups aren’t necessarily the job-creation engines they’re supposed to be. While IBM employs more than 400,000 people, Facebook has barely  7,000 employees. Part of the reason startups don’t hire as many people is because they often have software taking care of many human tasks.

According to a prediction by Carl Benedikt Frey and Michael A. Osborne from Oxford Martin School & Faculty of Philosophy in the UK, “47 percent of total US employment is in the high risk category, meaning that associated occupations are potentially automatable over some unspecified number of years, perhaps a decade or two.”

Startup jobs are often riskier to take than a job at a mid-size or large firm.

According to a 2014 Robert Half Technology survey of 2,300 IT professionals, a combined 84 percent said they would prefer to work at a mid-size or large firm. As Sarah McMullin of Camino Information Services explains in an article for Monster, one can expect lower pay, fewer benefits, and working longer hours. Startup employees are often on their own in saving for retirement.

But, you won’t find job prospects improving in the industrial sector.

For the past decade, growth in the U.S. industrial sector has lagged its average growth rate tracked since 1920. Growth topped the historic average of 3.79 percent in only 15 out of 120 months ending March 2016, and has been in negative territory since August 2015, according to U.S. Federal Reserve data. Industrial output in China, Europe and other regions has either seen declining growth rates, or outright decline.

techPortfolio_Fact_April_27

The factors behind these numbers, including slower population growth, make it unlikely that industrial production will return to robust increases seen in earlier decades. Bring automation into the equation, and prospects for well-paying, full-time jobs with full benefits in the industrial sector weaken further.

While tech startup jobs still only account for a small portion of the labor pool, and might not offer the ideal in terms of job security and benefits, they will only grow relative to employment in the industrial sector.

Moreover, as technology developed by startups continues to occupy larger areas of our lives – from social networking to environmental remediation – jobs associated with these companies will become as important as assembly line work from a century ago, if not more.  

 

Tags:
Posted in Focus, Government, In Brief | Comments Off on The Downside of Jobs in the Startup Era

Jeopardy-Winning Supercomputer Could Be Toronto Raptors’ MVP

Thursday, March 31st, 2016

Big data and artificial intelligence have become game-changers for major league sports — an industry that drives more than $10 billion in economic value — by giving managers increasingly effective tools to bring their teams into the finals.

In “Big Data Analysis is Changing the Nature of Sports Science,” MIT Technology Review analyzed how those with the largest vested interests in sports are trying to use data “to gain a competitive advantage, whether in real time during the game or to help in training, preparation, or recruitment.”

As part of the data race in professional sports, the Toronto Raptors partnered with IBM to leverage the tech giant’s Watson technology platform. The computer – well known for its appearance on Jeopardy! – can parse huge amounts of unstructured data, and learn from these data sets, to answer questions accurately in a variety of fields. In the world of sports, Watson can collect statistics, medical records, video, and social network sentiment, and use them to help the team decide if a given player fits the team’s needs (physically or mentally), can stay healthy and looks likely to succeed.

Where scouts can analyze a player’s performance in the moment, Watson’s cognitive abilities can examine more of the intangibles — for example, if a player’s attitude aligns with the team’s competitive atmosphere. Big data can theoretically stop toxic player relations before they start.

Sponsorship Returns

Teams that perform well generate more viewer interest, and thus get a bigger cut of the $24 billion in TV broadcasting deals that the NBA clinched for the nine years starting in 2014. Sponsorship agreements with brands like Pepsi and Anheuser-Busch raise the stakes even higher.

The Raptors-IBM partnership is still in its early days, and Watson’s data may, in the future, include medical data — perhaps players will even use wearables to track their health in real time. The idea isn’t to completely replace coaching staff and other advisors; it’s to build on the human element.

Athletes, coaches and front office staff have in the past had difficulty communicating their needs, but big data seems to be changing that with easier-to-interpret and more meaningful data.

“The biggest transformation in the world of sports isn’t simply the fact that there is so much more data available — it’s the fact that it’s breaking down barriers between groups that were historically distinct and sometimes struggled to communicate,” sports analyst Dash Davidson wrote for VentureBeat.

Catch of the Year

Meanwhile, baseball fans now have more statistics to look at than ever, in a sport where statistics are king. In April 2015, MLB Advanced Media (MLBAM) launched StatCast, which allows for deeper looks at every hit, defensive play and pitch, using an array of radars and hi-res optical cameras.

To herald the launch, MLBAM demonstrated StatCast’s abilities by analyzing the Blue Jays’ most jaw-dropping catch of the year, courtesy of outfielder Kevin Pillar. Last year, the Tampa Bay Rays’ Tim Beckham hammered a pitch deep into left field. Running out of room, Pillar used the left-field wall as a brace and sprung himself high enough to catch the ball. StatCast tracked Pillar’s top running speed (15.2 miles an hour), his distance covered (81.3 feet) and even his route efficiency (97.9%).

Since then, StatCast has given fans an endless array of data to further measure performance. It can give a deeper look at home runs, for example. On September 6, 2015, the Chicago Cub’s Kris Bryant hit the longest home run of the season. StatCast revealed just how impressive it was: It left Bryant’s bat at a scorching 111.5 miles per hour at a launch angle of 33 degrees and was projected to fly 495 feet.

StatCast’s petabytes of data can help general managers compare hits and defensive plays against players’ previous records. Players themselves, in turn, have better video to learn from.

On September 16, 2015, former Jays pitcher David Price wanted more insight into how Ryan Goins got an out on what looked to be an infield single from the Atlanta Braves’ Nick Markakis. Price asked StatCast on Twitter to analyze the play, and eventually analysis showed Goins took his first step just 0.24 seconds after the ball left Markakis’ bat. He covered 24.8 feet and threw the ball at 66.5 mph to achieve the out at first base.

Just as with the Raptors-Watson partnership, StatCast will no doubt become an important tool for front offices in their draft-pick decisions. Digital enhancements look to become as important as home runs and three-point shots.

Tags: , ,
Posted in Focus, IBM, Technology | Comments Off on Jeopardy-Winning Supercomputer Could Be Toronto Raptors’ MVP

Shopify Takes Vacant BlackBerry Throne—And What’s Next for Ontario

Thursday, March 31st, 2016

Analysts tempered their expectations in early 2015 when Shopify announced an IPO to raise $100 million. At the time, the e-commerce software company had 165,000 clients ranging from press-on tattoo retailer Tattly to Tesla Motors. If share prices held during the IPO and Shopify retained its $713 million valuation, the offering would be deemed a success.

After the implosion of Nortel and the missteps of BlackBerry, Canada wasn’t exactly a symbol of tech success. Ottawa-based Shopify’s IPO offered a chance to restore some faith in the country’s innovation capability. A free-fall in the price of oil, which was about wipe out tens of thousands of jobs in the energy sector, raised the stakes even higher.

Shopify’s valuation didn’t just hold, share price soared. By the time the IPO was over, the company was valued at $1.9 billion — more than double initial expectations.

Success stories like Shopify underscore the importance of Ontario’s startup ecosystems of Kitchener-Waterloo, Ottawa, and Toronto to the economic growth and innovation of the province and nation. They generate wealth and attract foreign investment.

In 2015, Canadian venture capital investments hit a 10-year high thanks to 536 deals totalling $2.3 billion (Canadian). Of that amount, $1.25 billion was invested in Ontario, according to the Ministry of Research and Innovation.

Direct Economic Returns and Job Creation

Ontario tech ecosystems also provide significant, direct economic returns and spur job creation. According to the Kauffman report, The Importance of Young Firms for Economic Growth, new businesses account for 20% of gross job creation in the U.S., while research findings from Nesta in the U.K. indicate that 6% of young, high-growth firms create half of all jobs in that country.

These patterns align with the economic impact seen in Ontario, as noted by the Ministry. Within the Ontario Network of Entrepreneurs (ONE), 5,899 new jobs were created and an additional 8,970 jobs/year were retained over the last two years. Furthermore, through the risk capital programs currently in place, the ministry expects a return of $10 for every dollar invested.

While startups make substantial contributions to Ontario’s economy, the province also has much to offer tech startups. Software engineers making less than half of what their Silicon Valley counterparts do are abundant, and this will help keep the operating costs of startups down.

Cultural diversity within the province brings different perspectives and skill sets to the table. Federal and provincial R&D tax credits are generous – a company spending $210,000 (Canadian) on R&D could receive a refund of $135,000 in investment tax credits.

Given the increasing desire by the national government to support Canadian tech, and the province’s recent investment in the IBM Innovation Incubator Initiative, the Kitchener-Waterloo, Ottawa, and Toronto tech ecosystems may improve their global clout.

While tech companies are spread out throughout the province, clusters of high-performing startups exist within the Kitchener-Waterloo, Ottawa, and Toronto areas. These regions are producing internationally recognized tech companies with high valuations other than Shopify, including Freshbooks, Open Text, Kik Interactive, and Wattpad.

The characteristics of Ontario’s main tech ecosystems, and their respective economic impacts, are outlined below.

Kitchener-Waterloo:

Shopify was not the only Canadian tech company in the spotlight in 2015. Kitchener-Waterloo’s Kik secured unicorn status, and is one of two Canadian companies currently holding that title. Altogether, the Kitchener-Waterloo ecosystem has produced 1,845 new tech startups, thanks to the era ushered into the region by BlackBerry.

Communitech, an innovation centre, home to 1,000 startups, was co-founded by regional entrepreneurs including Jim Balsillie, former of CEO of RIM, the makers of BlackBerry. Today, BlackBerry’s former employees fill the workspaces of the region’s most successful tech startups including D2L and Freshbooks.

From 2014 to 2015, financing in Kitchener-Waterloo grew 97%, compared to the Canadian average of 5%. Although Kitchener-Waterloo is no longer considered a top 20 tech ecosystem, its drop from the ranking follows the removal of “startup output per capita” as a performance metric, not poor performance. It retains a growth index of 2.45, higher than half of the world’s top 20 ecosystems.

A 2013 PriceWaterhouseCoopers survey attributes more than 20,000 jobs to tech companies located in Kitchener-Waterloo. One of the biggest components of its success is the University of Waterloo, which accounts for $2.614 billion (Canadian) in annual “economic impact,” according to the study. The university’s comprehensive co-op program churns out top entrepreneurs and engineers sought by Silicon Valley’s tech giants, and its incubator, Velocity, has contributed to the success of startups like Kik and Vidyard.

Despite its impressive overall performance, a number of factors prevent Kitchener-Waterloo from fulfilling its potential. Techvibes notes that startups in the region raise a quarter of the funding received by their U.S. counterparts, and are four times less likely to obtain financing. In Silicon Valley, the bulk of angel investors are former startup CEOs who reinvest in the ecosystem.

In the Kitchener-Waterloo region, only 20% of former CEOs are investing in 80% of the companies, suggesting that an underlying fear of failure is hampering the region’s success.

In addition, its small size and relative isolation from Toronto is preventing the region’s startups from connecting with funding and resources. Infrequent, one-way trains hinder easy transit between Kitchener-Waterloo and Toronto, and a high-speed rail initiative connecting the two tech ecosystems will take 10 years to build and cost $2-3 billion (Canadian).

By contrast, Slovakia has entered discussions with Hyperloop Transportation Technologies to build a high-tech train that will carry passengers from Bratislava and Vienna or Budapest in 10 minutes or less for $200-300 million by 2020.

Ottawa:

Shopify’s success has revived some of the recognition that Canada’s capital city once received as a tech ecosystem, and the area buzzes with hopes of potential IPOs in the coming years. Ottawa hosts 1,700 tech companies, ranging from startups such as Series B, funded Kilpfolio, as well as being the location for the regional offices of multinationals including Apple and Facebook.

Ottawa also has the highest concentration of science and engineering employment in North America, outside of Silicon Valley, perhaps due to the numerous multinationals that also make Ottawa their Canadian headquarters, including IBM, Cisco, and Ericsson.

The Conference Board of Canada estimates Ottawa’s tech industry enjoyed a robust 8% annual growth over the past 5 years, higher than the global annual tech market growth rates. Aside from Shopify, its most notable and successful startup, Ottawa companies brought in upwards of $100 million (Canadian) in VC financing in 2015, including Corsa Technology, GaN Systems and You.i TV.

While the Ottawa tech ecosystem has experienced a recent bout of success, it still has a long way to go. Ottawa enjoyed its ‘Silicon Valley of the North’ status for number of years with notable examples including Nortel.

When the dotcom bubble burst in 2000, Ottawa’s pedigree fell. To date, there are no direct flights from Ottawa to San Francisco, an unnecessary obstacle between startups and Silicon Valley VCs. During the 2000s, Ottawa experienced dozens of venture-backed startup failures and former giant tech companies were either downsized, sold off, or disappeared.

For the most part, recovery has been slow and bootstrapped. If Ottawa wants to regain its global status in the sector, it needs to capitalize on recent success by pursuing venture capital both within and outside the city. At the very least, it needs a direct flight to San Francisco.

Toronto:

According to the 2015 Global Startup Ecosystem Ranking report, Toronto ranks 17th among the top 20 global tech ecosystems, the highest of any Canadian city. Canada’s most- (and North America’s fourth most-) populous city hosts between 2,500 to 4,000 active tech startups, with notable examples including Nymi and Chematria.

Efforts to cluster startups in the downtown core are underway. Increased support for incubators and accelerators such as Ryerson DMZ, home to IBM’s Bluemix Garage, has created 1,833 jobs. Foreign investments, driven by the elimination of taxes on capital gains, are bringing more money into the province. In 2015, Toronto saw a 30% increase in total venture deals from 2014. These are all signals that the city’s tech ecosystem is headed in the right direction.

However, unlike Kitchener-Waterloo and Ottawa, Toronto has yet to produce a unicorn. Despite efforts to cluster startups, tech companies are still dispersed throughout the city and its surrounding suburbs. An underdeveloped transit infrastructure is seen as an obstacle.

Unlike other global tech ecosystems such as Tel Aviv, Toronto lacks founders with hypergrowth-company experience, an important factor in scaling up. Toronto dropped 9 spots in the 2015 Global Startup Ecosystem Ranking report, largely due to a slow growth rate, which lagged behind Berlin, Sao Paulo and Bangalore, among others.

Support for billion-dollar companies:

In the near future, the current decline of the Canadian dollar could make Ontario’s tech ecosystems more lucrative in the eyes of foreign investors who contributed $591 million in venture capital in 2015, as reported by the Research and Innovation Ministry. Disruptive tech startups in emerging industries such as fintech, connected cars, artificial intelligence, IoT, and smart city technologies will have a critical economic impact in the next 5 to 10 years.

In response, Canada’s federal government has identified the need to attract large corporations to participate in incubators and accelerators as one of six key priorities to ensure Canadian tech startups become billion dollar companies. This could translate into more strategic partnerships that would yield benefits experienced in other global tech ecosystems, such as Singapore.

There’s one wildcard for the health of Ontario tech innovation: how the province’s basic income pilot program could impact startups and entrepreneurs.

In the meantime, Ontario’s entrepreneurs face the same headwinds hitting those in the U.S. and elsewhere in terms of funding. The volume of venture capital investment in North America dropped off sharply in the last quarter of 2015. A joint report released by KPMG International and CB Insights pointed out that a number of IPOs fell short of expectations. It also stated,“VC investors could be less willing to invest in innovative companies without a far stronger business case for how their new business models should create profit over the longer term.”

Tags: , , , ,
Posted in Academia, Focus, Government, IBM | Comments Off on Shopify Takes Vacant BlackBerry Throne—And What’s Next for Ontario

Newer Entries »