The Greater Toronto Area - Entrepreneurial capital of the world?

Aug 12 2013 by Sam Ifergan

Over the last 12 months, Greater Toronto (including Kitchener/Waterloo) has been in the spot light being ranked among the top 5 startup hubs globally and becoming the fourth-largest city in North America in terms of population. But, what does this all mean for Toronto’s entrepreneurial future?

Although still lagging the large start up communities like Silicon Valley, Toronto has all the necessary ingredients to become a part of this elite group. Let’s look at the factors that can help Toronto achieve this goal.

Over the past decade, the start up culture in Toronto has grown significantly. One of the biggest factors has been the push for entrepreneurship at the university level. Universities in Ontario are producing the deepest talent pools in business, engineering and science with many of these graduates choosing to start their own businesses. Additionally, Toronto is arguably the most multi-cultural city in the world and the diverse nature of its population gives its workforce a global perspective. Many immigrants come to Canada with entrepreneurship in their DNA and a desire to build.

Secondly, government policy has been strongly supportive of innovation. Government grants, R&D support and loans have been a critical element in the GTA’s success thus far. Programs like the start up visa initiative welcoming new entrepreneurs, and $500M in VC funding from government sources will further strengthen the ecosystem.

Thirdly, a recent positive development is the growth of accelerators nurturing young companies. The GTA has produced some of the best such establishments in North America and they are supporting hundreds of new start ups, some of which will achieve great things. Furthermore the world class universities in Ontario are themselves developing leading edge technologies, often spinning out into very successfully businesses.

Lastly, the access to capital for early stage companies has improved significantly. In 2012, Toronto captured the largest share of VC funding in Canada (approximately 25% - which is even higher when you include Kitchener/Waterloo). Canadian VC fund raising has increased and many US VCs are now investing significantly in Canadian companies. On the bright side of investing, one of the key items not imported from the US is the higher valuations for early stage companies. Canadian companies have much more reasonable valuations.

Toronto has a great ecosystem for building young companies. The local initiatives have gotten attention from investors and entrepreneurs globally. With a bit of further help, the start up culture can become entrenched in Toronto with the supporting ecosystem to build world class companies.