If You Can Make It There

For­get New York City and San Fran­cisco. The next great startup hub is ...

Inc. (USA) - - LAUNCH - By Felix Salmon

For a child­less 20-some­thing male pro­gram­mer, fu­eled by caf­feine and am­bi­tion and seek­ing mil­lions in VC fund­ing, the San Fran­cisco Bay Area is North Amer­ica’s startup hot spot. But if you’re look­ing for the most plau­si­ble con­tender to soon sup­plant it, look to a city a cou­ple thou­sand miles east. It’s home to com­pa­nies that might have a bit more hu­man­ity, run by wellad­justed en­trepreneurs build­ing sus­tain­able busi­nesses that em­ploy a tal­ented and di­verse work­force. Wel­come to Toronto.

World-beat­ing, peo­ple­cen­tered com­pa­nies have long been birthed and thrive in Toronto, in­clud­ing Four Sea­sons Ho­tels and Re­sorts and MAC Cos­met­ics. It’s a nat­u­ral home

for the kind of peo­ple who re­ally start com­pa­nies (rather than the peo­ple who start com­pa­nies in the movies): mid­ca­reer men and women, who care not only about their work but also about their fam­i­lies. Toronto’s health and fam­ily-leave ben­e­fits are more gen­er­ous than those found in the United States. That, cou­pled with its strong school sys­tem, does won­ders in terms of pro­vid­ing op­por­tu­ni­ties by tak­ing cer­tain key stresses out of the equa­tion.

It also acts as a gi­ant mag­net for the aca­dem­i­cally am­bi­tious, not only from within Canada but from all over the world. Its slew of world-class uni­ver­si­ties, in­clud­ing the Uni­ver­sity of Toronto, York Uni­ver­sity, and, just to the west, the Uni­ver­sity of Water­loo and the Uni­ver­sity of West­ern On­tario, at­tract tens of thou­sands of smart stu­dents ev­ery year. As they grad­u­ate and look to set­tle down and start fam­i­lies, many, happy with the life­style Canada’s largest city af­fords, stay in Toronto. As a re­sult, founders there can hire peo­ple they’d never be able to at­tract in Sil­i­con Val­ley.

“It’s good to be a big fish in a smaller pond, with ac­cess to all the A play­ers,” says Allen Lau, the co-founder and CEO of the Toronto-based on­line pub­lish­ing plat­form Wattpad. “In the Val­ley, Face­book and Google pay $10 mil­lion a year, and I would mostly have ac­cess to C and D play­ers. That’s why we chose not to open an of­fice there.” Of the rel­a­tively small num­ber of cities where there are lots of great en­gi­neers, Toronto is the one where it’s most re­al­is­tic to ex­pect that those peo­ple will ac­cept a job at a mid­size startup.

At the same time, adds Lau, Toronto of­fers a broad range of skills, in­dus­tries, and ameni­ties. “It’s a fi­nance cen­ter and a me­dia cen­ter,” he says. “There are a few things we are very good at. There’s a good pub­lic school sys­tem and uni­ver­sal health care. I don’t even need to think about whether I have health in­sur­ance. That helps me to be fo­cused on my com­pany.”

Canada is also one of the most im­mi­grant­friendly coun­tries in the world, an en­tic­ing al­ter­na­tive for the world’s in­creas­ingly mo­bile ed­u­cated classes. More than half of Toronto’s pop­u­la­tion was born out­side Canada. That has done won­ders for the city’s tal­ent pool. Along with the weak Cana­dian dol­lar, the steady in­flux of new work­ers has helped keep salaries from spi­ral­ing up to San Fran­cisco or New York City lev­els. And while U.S. com­pa­nies nat­u­rally start out with na­tional am­bi­tions and a sin­gle lan­guage, Cana­dian com­pa­nies think in­ter­na­tion­ally from the be­gin­ning (U.S. and Canada) and in at least two lan­guages (English and French). If your com­pany deals with mul­ti­ple coun­tries, cur­ren­cies, and lan­guages from the start, that makes it eas­ier to add new ones as it grows. Should your busi­ness re­quire fund­ing, Toronto’s di­ver­sity and in­ter­na­tional out­look make it easy to seek money any­where in the world. Wattpad, for in­stance, has raised money from Sil­i­con Val­ley VCs, Chi­nese con­glom­er­ates, and Filipino tele­coms.

Toronto is far from per­fect. Real es­tate isn’t cheap, com­mutes can be gru­el­ing, and any city that made the late Rob Ford its mayor is ca­pa­ble of idio­syn­cratic pol­i­tics. Still, when Google sub­sidiary Side­walk Labs wanted a lo­ca­tion to build the ur­ban cen­ter of the fu­ture, it chose Toronto. The ur­ban­ist Richard Florida, who moved to Toronto to take a job at the Mar­tin Pros­per­ity In­sti­tute, be­lieves that it “is even more of a tal­ent mag­net than New York City.” A case in point: Geoffrey Hin­ton, one of the top ma­chine-learn­ing sci­en­tists in the world, who could get a great job at any uni­ver­sity, was fi­nally poached from Carnegie Mel­lon by the Uni­ver­sity of Toronto. He now works part time for Google— largely out of Canada.

A rich base of po­ten­tial cus­tomers, big-city cul­tural ameni­ties, a dream work­force that can be hired at rea­son­able prices, and a so­cial cli­mate in which your (and their) kids won’t have to sit through ac­tive-shooter drills—we should get used to see­ing world-chang­ing com­pa­nies com­ing out of Toronto. It’s go­ing to hap­pen with in­creas­ing fre­quency—no mat­ter the ul­ti­mate fate of Nafta.

FELIX SALMON is a fi­nan­cial writer, ed­i­tor, and pod­caster based in New York City.

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