K-W, Cambridge best for startups

Report by U.K. firm puts this area ahead of Toronto, Montreal for startup founders

WATERLOO REGION — This is the best place in Canada for new startups, says a report prepared by Expert Market.

The U.K.-based firm surveyed 25 cities across Canada comparing the availability of tech talent, entrepreneurial spirit, venture capital, internet speeds and cost of living. The report called The Canadian Tech Startup Cities Index: Where to Launch Your Tech Business puts Kitchener-Waterloo-Cambridge in first place.

“The cities rank in the top 10 for every factor, with particularly strong scores in terms of the cost of living, the availability of venture capital funding and tech talent,” says the Expert Market report. “In fact the Tri-Cities are the third most affordable area in the study.”

The amount of venture capital invested in this region’s startups is $15.5 million per 100,000 people, nearly twice the rate of investment among Toronto’s startups.

“Starting a business there is a savvy financial choice,” says the report.

For years this region was ranked second only to Silicon Valley for the density of startups — that is the number of buddying tech firms per 100,000 population. As part of the Toronto Waterloo Corridor, this region was ranked among the top 20 startup ecosystems in the world. But the Expert Market report is the first to put this region’s startup scene ahead of those in Toronto and Montreal.

“We are happy to be ranked so high, happy to have the top position,” said Greg Barratt, the head of startup services at Communitech.

Venture capital is rocket fuel for startups. During the 2010-17 period, venture capital investments in this region increased from $22 million in 2010 to $274.3 million last year. Private sector investment in that period peaked

in 2016 at $364 million.

“We are making huge strides to attract Canadian venture capital, and even more importantly the vast resources on both the west and east coasts in the U.S.,” said Barratt.

The VCs active in this region include Sequoia, NEA, Union Square Capital, Bessemer, OMERS Ventures, Real Ventures, Georgian Partners and iNovia Capital. The Chinese online entertainment giant Tencent invested $50 million in Kik Interactive, which is the only startup in this region valued at $1 billion or more, and among only four startups in Canada to achieve that status.

“We are not done yet on capital attraction,” said Barratt.

Earlier this year, Communitech organized a Demo Day that saw 50 local startups pitch to a group of 180 investment firms.

“We will continue to do at least two of those a year,” said Barratt. “The next one is coming up in New York in late January.”

The lower cost of living in this area compared to Toronto and Montreal is among the key reasons for the top ranking.

“This is just a great place to live, work and play,” said Barratt.

And Communitech, which is based in the Tannery in downtown Kitchener, has worked for more than 20 years on supporting both startups and big tech companies. It was doing that long before the startup rush spread around North America and much of the developed world. There are more than 1,100 tech companies in this region employing more than 30,000 people and generating more than $30 billion a year in goods and services.

“I think we have been really blessed to be ahead of the curve,” said Barratt.

While he’s happy about the Expert Market report, Barratt knows there are three ways to expand the talent pool for startups. More people from other sectors of the economy must be brought into tech. More recent graduates must be enticed to remain here. And there are many from this region working for tech companies in the U.S. who should be convinced to return, he said.