Startups might not be the buzziest word anymore, but Toronto’s tech community is still vibrant, and more so now than ever before. That was clear when meet-up and networking group TechToronto held a celebratory best-of event at city hall in honour of its third birthday.
On Monday night, TechToronto featured Mike Katchen as one of its speakers. Katchen founded WealthSimple; you may have seen the company’s ad starring Tony Revolori (or Lobby Boy in the Grand Budapest Hotel) during the Super Bowl.
The commercial serves to illustrate how much Toronto’s tech scene has evolved, even within the past five years. And many think it’s still growing. “The belief is you can build a big business in Toronto now,” says TechToronto founder Alex Norman.
He, along with others, say that five or 10 years ago, small Toronto startups were bought out by bigger American companies and many Canadian founders and employees would head to work in places such as Silicon Valley and New York City.
But people are coming back and now have the experience to build big companies here, notes Top Hat‘s chief marketing officer Nick Stein.
He, along with Norman, spent time south of the border before moving home. “And that’s kind of allowing for a talent pool in the city to grow that wasn’t really there before,” Stein continues.
Top Hat, which creates cloud-based teaching platforms for university students and professors, recently raised $22.5 million (U.S.) from Union Square Ventures, one of the biggest venture capital firms in the world – it was an early investor in Twitter, Etsy and Kickstarter.
“I think it’s a really a sign that people are starting to look to Toronto as a place where really world class companies can emerge,” says Stein of USV’s interest in Toronto.
In USV’s portfolio of companies, Toronto is the third most well-represented city behind San Francisco and New York. (USV also put money into local startups such as Figure1 and Wattpad.)
Toronto startups also have more support from corporations, such as RBC, as well as access to incubators and accelerators including MaRS, Ryerson University’s DMZ and now, TechStars, an American company that just announced it was opening here.
OneEleven, which helps commercialize startups, opened a 50,000 square foot space on Front Street and companies like Top Hat are growing too – Stein says it’s moving into a bigger office at Avenue and Bloor and has plans to double its current team of 200.
The DMZ has also increased, in both size and clout, in the seven years since it started. “In the first year of opening up, we were essentially bringing on anyone and everyone that would come to our door,” he says.
“Fast forward seven years later, and now we’re looking at a space where we only accept one in every 10 people that come to the DMZ,” he continues.
Not only is the cost of living in Toronto cheaper than tech hubs like San Francisco and New York, notes TechTO’s Alex Norman, but the quality of life and amenities here are better or equal to those cities.
He also think the city’s diversity is a key asset to tech here – Snobar agrees. Toronto has a talent pool from its local universities as well as from the University of Waterloo just down the 401.
Stein, however, says that as more and more companies get bigger here, it’s harder and harder to find talent. Though that can be a good thing for new graduates looking to get into tech.
And as someone who’s repatriated, he thinks Toronto is finally coming into its own, which works in the tech industry’s favour.
“I think now people have really embraced the identity of just being from Toronto and being proud of it. It seems like sort of a soft way at looking at it, but I think that it actually does make a difference that people have developed this pride for Toronto in and of itself.” he says.
“And I think part of that translates to what’s happening in the tech community.”
NBCUniversal is now the only U.S. media company that has an official stake in Snap. Today, NBC Universal (which is a unit of Comcast) revealed that it invested $500 million in Snap as a strategic investment partnership during yesterday’s IPO.
Snap shares popped 44 percent in the first day of trading.
NBCUniversal has been pursuing digital media aggressively in the past year, including investments in Buzzfeed, Vox, and acquisitions of SportsEngine and Awesomeness TV. According to CNBC, NBC has spent approximately $1.5 billion on digital media assets in the last 18 months.
While Snapchat has continued to grow in popularity among teens and young adults — partially through funny photo filters and stylish recording sunglasses called Spectacles — the company’s content push hasn’t been quite as well-received.
Discover, Snapchat’s ‘news’ platform, requires publishers to write and format content specifically for Snapchat, and all of these stories have only 24 hours to live on the platform before disappearing.
The investment from NBC Universal may signal changes to Snap’s media strategy.
Given the current climate around the media — cough Fake News! cough — it would be interesting to see Snapchat position itself against Facebook as the place for ‘verified’ news information. Imagine if Discover focused on giving you direct access to journalists and broadcasters for their professional take on today’s breaking news.
Of course, NBCUniversal could have invested in Snap as a way to move forward its entertainment businesses, such as NBC programming and Universal Studios films.
That seems far more likely than the news play, considering that NBC has already worked with Snap for projects like the Rio Olympics, with other series (such as SNL, The Voice, and more), which are in the works to air on Snapchat.
Update: Re/code has obtained a memo from NBCU CEO Steve Burke sent to employees regarding the investment:
I am writing to share some exciting news. Yesterday, NBCUniversal made a strategic investment of $500 million in Snap as part of its initial public offering. This is a significant milestone in our growing partnership with Snap, and we look forward to participating in Snap’s success as an investor and continuing to work closely with them for years to come.
Evan Spiegel and his talented team have done an outstanding job building Snap into an extremely innovative and relevant company, attracting a massive, dedicated and young audience. Over the last year, we have partnered with Snap frequently. Most notably, we produced a pop-up Discover channel which featured Olympic content produced by BuzzFeed. Throughout the Rio Games, this content generated over two billion views. On the heels of that success, we are already planning an expanded partnership with Snapchat and BuzzFeed for the 2018 Winter Games in South Korea. Our entertainment programs have been among the first shows to launch a Snapchat series, including The Voice, SNL and E! News’ The Rundown. We expect to launch even more Snapchat shows with additional NBCU brands in the coming weeks.
Our partnership with Snap builds on our strategy to drive digital growth for our business, both organically and through investments and acquisitions. In the last year and a half, we have invested $400 million in BuzzFeed, $200 million in Vox, and launched key initiatives with both companies. We also acquired SportsEngine, a digital business that is revolutionizing the way youth sports are managed online.
Through our acquisition of DreamWorks, we became a majority owner of Awesomeness TV, a popular entertainment brand with one of the top channels on YouTube. Fandango has acquired Flixster, Rotten Tomatoes and several ticketing and video on-demand services.
In addition to these investments, in the last year we have launched two OTT channels — Seeso and Hayu — broadening our reach among passionate, niche audiences. We also formed the Digital Enterprises group under Maggie Suniewick. Maggie and her team are helping us forge deeper partnerships with major platforms, as well as looking for opportunities to invest and create new businesses.
Many of our existing digital businesses associated with our TV brands are also showing strong growth, such as NBC Entertainment, NBC News, E!, CNBC, NBC Sports and the Golf Channel’s GolfNow. Finally, we have participated in the rapid growth of Hulu through our 30 percent ownership stake.
I am proud of the strides we have made in the digital space recently. With the Snap investment, we have invested over $1.5 billion in promising digital businesses in the last 18 months. Importantly, we have become a better, more digitally-focused company as a result.
Looking forward, we will continue to be aggressive as digital content consumption increases. Investing in Snap is a key step in that direction, and I am pleased to share this exciting news with you. It is rare to have the opportunity to invest at this stage in a company as visionary and dynamic as Snap, and it is a compliment that they chose NBCU as a partner.
While running Yardsale, a previous Y Combinator startup based around essentially making it easy to sell your old stuff, Ryan Mickle had the benefit of talking to alumni and colleagues to figure out what to use to build it. But one of the basic services he used to run it ended up costing more in the long run as the app ran into critical problems when it came to some transactions — forcing Mickle and his team to essentially duct tape fixes on top of it.
He and his co-founders needed a more consensus decision as to which services to use for their startup. So he’s now started a small project called Founderkit, which is designed to tap the Y Combinator community, as well as other communities like Techstars, to dig into whether a service is good enough or not to deploy when starting up a company. The products you’ll find on it are often the ones you’d expect — Slack and Stripe are highly rated, because of course they are popular in Silicon Valley. But the goal for Founderkit is to get people to give honest opinions and keep things carefully curated, Mickle said.
“There are 20 to 30 decisions you have to make in an instant before you have to get started,” Mickle said. “A lot of that info is trapped in tribal knowledge. At Y Combinator I was lucky, I could ask questions — what bank should I use, what servers. There’s dozens of these questions. The funny part is the right answer to these questions means there’s no benefit, you use the best tool and get back to work and your startup has a shot. But if you make a mistake it could cost you months.”
Instead of just using services within their own cohort, for example, Founderkit aims to get startups in accelerators suggestions for the best possible services to get their projects off the ground. Even for a service like Stripe, which may be widely adopted and popular, the hope is that people will be upfront about what’s good and what’s bad. What works for one startup might not work for another, and Mickle wants Founderkit to try to offer suggestions that are more useful and not necessarily just popular within networks. Startup founders are invited into Founderkit to offer their suggestions through invitations from other members in the kind of typical early-stage heavy networks you’d expect.
“To ensure the bar is high enough, people who contribute are active founders running their startups,” Mickle said. “The people and investors and advisors who had the most relevant advice were people operating their own startups. They faced that problem you had, but faced it yesterday or maybe three months ago.”
There are a couple of big ifs here for a project like this, however. First off, it’s pretty niche — which Mickle acknowledged over the phone. It could end up in a similar direction to Product Hunt. He says he wants to continue working on it and adding new features, but starting off with such a narrow focus and closed community is something that’ll get the ball rolling. Mickle said he doesn’t intend to raise any financing for this one, though you can always take that with a grain of salt as people can always change their minds.
“It’s totally a niche, but I see it growing,” he said. “I definitely don’t see us taking funding unless it made sense from the perspective of scaling something.”
There are some other companies that try to surface up the best stacks for startups that are getting off the ground. Siftery is one example, which aims to help eliminate the kind of choice-paralysis that happens when there are so many back-end tools that are available. That startup has raised $4 million, so there seems to be demand here, though Mickle said he wants Founderkit to take an approach that’s centered around founder recommendations more than anything else.
Whether that’s a successful strategy and turns into something bigger is anyone’s guess. It could be that the side project remains just a side project, and only adopted and enjoyed by a sort of self-selected community of accelerator founders from Y Combinator and the like. But trying to unlock all that information — which may be stuck in someone’s brain or scattered across the internet — in one place may also prove useful enough for founders that it’ll end up being a utility for the broader startup community.
In its next budget, the Canadian federal government is expected to increase funding for startup incubators and accelerators – organizations that provide resources and advice to help young companies grow. Yet the head of an organization that represents startup accelerators and incubators says there’s already too much government money going to programs that support tech startups.
“It’s time to really take stock of how much funding has been put into supporting entrepreneurs in Canada and really measure it against the outcomes that we should have been able to show by now,” says Sunil Sharma, the chair of the board of the Canadian Acceleration and Business Incubation Association, which represents 13 organizations across the country.
Mr. Sharma, who is also a managing partner at Extreme Venture Partners, a venture capital firm in Toronto, says he worries that incubators and innovation hubs are too focused on overhead – paying to provide startups with office space and mentorship, something that the private sector could do without government help.
Private investors “may feel that this work is being done for them and that their involvement isn’t as needed,” says Mr. Sharma, who is also a co-director of the Toronto chapter of the Founder Institute, a private idea-stage accelerator program. “I think a lot of people believe that the box has been ticked.”
But Salim Teja, the executive vice-president for Ventures at Toronto’s MaRS Development District, Canada’s largest innovation hub, says the scale of MaRS itself shows how important government support is.
“It would have been hard to fund something like this purely from the private sector, so I think the government has been a really great partner to get it going,” he says.
MaRS is home to the offices of around a dozen venture capital firms and the Canadian headquarters of Facebook and PayPal, evidence, Mr. Teja says, that government-supported programs are partnering with the private sector – rather than crowding it out.
But it’s hard to tell what impact startup support programs are having as each one tracks success differently.
“I’m actually surprised that there hasn’t been a rigorous amount of analysis done into exactly the outcomes of entrepreneurship support programs to really be confident that the outcomes that an organization may claim are a result of their involvement in fact are a result of their involvement,” Mr. Sharma says.
Most organizations track the number of jobs created by startups that have gone through their programs, as well as investment dollars raised, but how they do it can vary dramatically.
Some, like the DMZ, an incubator at Ryerson University, track a much broader range of metrics, including conversion rates and customer churn.
InnoCité, a startup accelerator in Montreal that is supported in part by the municipal government, also tracks public funding that its startups receive.
Others take a more limited look.
The University of Toronto’s Creative Destruction Lab accelerator only tracks the value of companies that have gone through its programs – looking at valuations when they raise money from investors or go through a liquidity event, like an acquisition or an initial public offering.
Programs also vary in their approach to updating job-creation numbers if a “graduate” lays people off or goes out of business.
Compounding the measurement problem is the fact that many startups go through multiple programs.
At Concordia University’s District 3 Innovation Centre, for example, around 30 per cent of startups entering its programs have previously gone through another accelerator or incubator, or been part of an innovation hub. At the DMZ that number is around 70 per cent.
That means inadvertent double-counting is an issue, says Raymond Luk, the co-founder and CEO of Hockeystick, a Toronto-based company that gathers data on privately-held companies.
“I don’t think it’s on purpose. It’s an administrative nightmare to actually collect this data,” he says. “Companies change names, they move, maybe the first accelerator doesn’t even know they went to a second accelerator.”
Mr. Luk says around half of Hockeystick’s business comes from programs that support startups. His company has also worked with several federal departments and Crown corporations, such as the BDC.
The federal government says it’s now working to develop a common approach to measure the success of these programs.
Discussions between the government and representatives from incubators and accelerators around a “national performance measurement framework” began in the fall, Hans Parmar, a spokesperson for the Department of Innovation, Science and Economic Development, wrote in an e-mail. “If accelerators and incubators are successful in selecting and nurturing business ideas, incubated firms should generally have higher survival rates, grow revenues faster, employ more people and attract more capital than non-incubated firms.”
MaRS has also begun tracking standardized metrics for startups that go through programs affiliated with the Ontario Network of Entrepreneurs, an initiative created by Ontario’s provincial government.
Mr. Sharma says he believes this wide network of government-supported programs has led to a lack of what he calls “authentic tech accelerators” – intensive, time-limited, programs that take an equity stake in participating companies.
Programs like that are more common in the United States, he says, but rare in Canada.
“Without that pressure environment and the quid-pro-quo of investment dollars and the responsibility that these founders have to their investors, I do worry that we are more likely to create a high number of lifestyle-type companies, where the sense of urgency isn’t there,” Mr. Sharma says.
Some startups, though, say it takes time to get things right.
Alexandre Laberge, the CEO and co-founder of Fleexer, a skills-based social network intended to connect people with projects, says it can take years for a startup to build a good team and find product-market fit.
“Everyone wants to go fast,” Mr. Laberge says, “but you need to learn about the market.”
His company has gone through two 12-week accelerator programs at different Montreal universities since it was founded in 2013.
Mr. Laberge says his company plans to launch its product officially this coming spring.
Kitchener-based Thalamic Labs, which makes an armband that allows users to control electronic devices with gestures, went through three programs – two at Canadian universities and one in Silicon Valley.
Stephen Lake, the company’s CEO, says each one helped his company with different challenges at different stages of its growth.
“Traditionally the government’s approach, and this is true of most governments, is to sort of spread the peanut butter around,” he says.
He says this approach – putting money into a wide variety of programs and sectors across the country – doesn’t work.
“What happens when you do that is you don’t get enough scale anywhere to really have a major impact,” he says. “So I think we have to pick the couple areas where we can be world class at, both geographically and in terms of sectors, and really double-down on putting significant resources into making those great.”
One thing he doesn’t see a need for, though, is more programs.
“I think there’s so many incubator programs already, not just here in Canada, but across the world,” he says.