The global tech scene is fast moving and demands the best skills available. Notably, the expenditure on enterprise software and cloud services are driving the skyrocketing expense within the global IT ecosystem. Most of the funds go into getting the best talent. While the US has remained the dominant player in the tech industry since its birth, signs point to a shifting landscape where tech booms are being witnessed in other areas like Canada’s Toronto.
The rise of tech ecosystems in Canada
For a long time, Canada has relied on commodities exports as the main engine of the economy. All this time, the country has been producing top brains in STEM subjects in droves. However, the University of Toronto established in a study that 66% of Canadian graduates in tech-focused programs were crossing the border southbound for Silicon Valley. Nonetheless, there is evidence of high skilled workers in the tech sector who are moving back north to fan a tech boom, which could soon be a massive pain in Silicon Valley’s side.
The rise of the tech scene in Canada can be fathomed through the number of tech-focused jobs created. According to a study by CBRE, Toronto employed 22,500 tech-focused workers in 2017. Compared to 5,370 workers employed in New York and 11,540 in San Francisco Bay Area, Toronto is the upcoming hotbed for technology jobs. In the overall annual ranking of tech hotbeds, Toronto jumped from position 12 to sixth.
Interestingly, not many people were surprised by the development. Canada might be lacking the huge VC support that is available to US entrepreneurs, but there is support nonetheless. In particular, there is government support where small businesses receive funding for business expansion, research and development, hiring and training staff, and capital investment.
Reasons for the booming tech space in Canada
Having introduced the issue of government support, it is critical that one understands the secret behind the apparent success. According to industry watchers, the developments in the US neighbor up North have been in the making for a long time. Analysts believe that the rising of tech ecosystems like Toronto is just beginning. There are cities like Vancouver, which are also registering increased activity focused on technology like AI. How did we come to this? Here are a few reasons.
- Tremendous government support for small businesses
Like earlier explained, small businesses receive a lot of support in terms of funding from the government. Interestingly, some of the funding is extended to small businesses in the form of grants which they do not have to pay back. In one instance, the government provides close to $4 million for projects which seek to improve knowledge and digital economy participation among people who live with disabilities. The funding is for a single project in a year.
- Availability of world-class universities
For the 66% of Canadian graduates who cross into the US for jobs in Silicon Valley, a massive chunk of that number comes from the University of Waterloo. Interestingly, the institution is increasingly being christened as the MIT up in the North. Other universities across Canada produce top talent, which is helping to accelerate technological innovations in the country. Further, the nation as sufficient resources to develop the ability which becomes apparent in school. Compared to the US, Canada can produce such topnotch skills cheaply, considering that a single unit of the US dollar is worth CAD 1.35.
- Robust immigration policy
Canada and the US could be describedas two neighbors who are facing in diametrically opposite directions when it comes to immigration. While the US is focused on employing Americans, which implies locking immigrants out of the labor force, Canada is embracing them.
Statistically, immigrants comprise just about 20% of the total population in Canada. Surprisingly, half of the jobs under STEM are taken up by these immigrants. It was made possible by the Express Entry visa program. Notably, the program has seen tech startups in the country receive an increased number of job applications from international skilled workers.
The Express Entry visa program was unveiled in 2015 to help to plug the talent gap left by emigrating Canadians. Under the program, skilled workers from abroad would take a short time to apply for immigration to Canada. Many have termed the program a game changer which, among other reasons discussed, is fueling the Toronto tech boom.
With the Express Entry visa program in place, skilled immigrants can accomplish the immigration process in two weeks or less. It sits well with the government’s ambition to let in around a quarter of a million immigrants between 2018 and 2020. The program has already demonstrated its capability to deliver the objective. In particular, this fast-track visa initiative saw 1,600 high-skilled immigrants get access to the country in the first ten weeks of its existence.
- Innovation hubs
Historically, tech booms have been preceded by infrastructures like innovation hubs and investment in marrying talent with capital. It is how Silicon Valley was born, and that is the same playbook which Toronto seems to be reading from. To be sure, Toronto has one innovation lab to thank for the bustling tech life, which is taking shape.
The Medical and Related Sciences (MaRS) is a non-profit organization which conceptualized the MaRS Discovery District which predicates its mission on facilitating the cross-pollination of ideas. Unlike the US tech scene, which seems to be drawn inwards, MaRS is building a vibrant community of talent and investors which freely interacts. The hope is that the chance meeting of two talents will spawn Canada’s first unicorn.
What MaRS is doing is not only the opposite of the US tech scene in terms of infrastructure. On the contrary, the innovation lab is leading a revolution in the business model of tech companies in the future. In particular, people freely talk about their novel business models, which is something no one will dare do in Silicon Valley. Already, there are companies in operation like Proteorex, which is a result of two founders who met in one of the open spaces within the MaRS Innovation Lab.
- Quality of life
It is not uncommon to find the best talent which enjoys the best life. Living in Toronto is quite affordable as compared to rival tech hotbeds like the San Francisco Bay Area. The CBRE study found that operating in Toronto would only cost one $26 million. In contrast, working in California gobbles up $57 million in costs which makes it not worthwhile even with a huge paycheck.
A 2017 report showed just how badly workers in Silicon Valley felt priced out by the expensive life in the booming tech area. According to one account, an Apple employee was living in a garage and used a compost bucket to defecate. Another report told of 12 engineers a coding boot camp in the area had to share a two bedroomed rented apartment to survive the unforgiving cost of housing in Silicon Valley. Interestingly, techies pay as much as $1,100 for a mere bunk bed in a room shared by five people. Another developer complained of parting with $1,400 to live in a closet designated as a private room.
A comment by an employee at a top telecoms company with offices in the San Francisco Bay Area summed up their experiences. She said,“We make over $1m between us (her partner is an engineer at a digital media company), but we can’t afford a house. This is part of where the American dream is not working out here.”
Therefore, the average pay for techies in Toronto might be way lower than what their Silicon Valley counterparts receive, but life is cheap. As such, the pay ends up being high in real terms when costs are factored in. However, industry watchers are more than convinced that as the tech scene continues to blaze, the salaries will rise and so will the cost of life.
The outlook of Canada’s tech space
Canada’s tech expansion looks like it is just getting started. One accelerator for this growth is the problems that skilled immigrant workers are facing in the US. In particular, a new bill in the US House of Representatives intends to introduce radical caps on the H-1B visa program which allows foreign nationals to work in the US. Following the developments, many tech workers are crossing the border into Canada.
According to business executives in Canada, they are seeing a trend where the country is no longer a source for talent for US tech companies. Instead, workers are flocking in. Notably, Canada based firms reported astronomic spikes, up to 300%, in interest from international workers. Interestingly, the firms also said that 82% of the international applicants are American, 55% are Indian, and 36% of Chinese applicants.
Further, megafirms in the tech space realize the significance of establishing outposts in Toronto and other major cities in Canada. For instance, Microsoft announced an expansion into Canada, which would cost the company over $570 million. The conglomerate expects to hire around 500 new employees and will be headquartered in Toronto.
The tech boom is set to become more vibrant in the coming days. As more companies scramble for space in the country, major VC firms will be attracted into the area, and this will send the boom cascading throughout Canada’s major cities.