What’s behind Toronto's banner year of success and its hugely lucrative final quarter? We took a closer look at why this city has been "feeling the love."
2019: Toronto Year in Review
After years of unprecedented progress in Toronto’s tech scene, 2019 brought Canada’s biggest city yet another year of breakneck growth, big-money deals, and major-league startup success.
As we get set to ring in 2020, we thought it was a good time to reflect on the year that was.
Here are some of the most important trends and stories from a busy 2019 in Toronto tech.
Big VC Funding and Big Exits
Even in a record-setting year for Canadian tech deals, Toronto stood tall with $1.4 billion in venture capital funding across 119 deals in the first three quarters of the year. That means Toronto companies received 30 percent of total dollars disbursed in Canada, with Montreal and Vancouver both coming in at 17 percent each.
The biggest deal of the year in Toronto was $300 million in new funding for Clearbanc. Borne out of an idea co-founder Michele Romanow had while on the set of Canada’s reality TV series Dragons’ Den – which is similar to the American Shark Tank – Clearbanc is disrupting startup funding by funding from $5,000 to $10 million in exchange for a steady revenue share of their earnings until it’s paid back.
The company is a major local success story, with this recent round of funding – which breaks down into $50 million Series B and $250 million for Clearbanc’s third fund, which it uses to invest – following a $50 million funding round in December and another $70 million round in November 2018.
“[This] clearly indicates that the model is working. We’re finding a ton of customers where [revenue share] is a good fit,” Romanow recently told BetaKit.
Other Toronto companies raising nine-digit funding rounds included Vena Solutions, a cloud-based financial planning and analysis provider that raised $115 million in equity financing in January, and local success story Wealthsimple, which raised C$100 million in May in one of Canada’s largest-ever investment rounds for a fintech company, one that CEO Michael Katchen teased could help the company get into mortgages.
“It’s a pretty meaningful milestone for Wealthsimple,” he said. “It will go toward making our business better, our software better and simpler and more powerful, toward growing our team, and getting more clients.
“But we also have this vision about becoming a financial institution of choice for our clients that can help them over the course of their lifetimes. Ultimately, I’d love to replace banks as our clients’ primary financial relationship. It’s going to take us a long time to get there, but that’s our vision. It’s the next-generation financial institution.”
What stands out about VC activity in Toronto in 2019, beyond those major deals, was the diversity of companies earning funding. Here are some of the other noteworthy 2019 investments in Toronto tech:
- Mobile rewards startup Drop closed a $44 million Series B round that was earmarked for accelerating growth and entering new markets
- Maintenance and asset management software provider Fiix closed a $40 million Series C investment
- Positioning itself as an alternative to traditional banks, fintech startup Koho announced an additional $25 million Series B funding round in November just six months after the initial close of the round at $42 million
- Chipset startup Peraso raised $42 million in February
- Digital media company TheScore announced the closing of a $40 million strategic investment that will be used to grow and develop the company’s media and sports betting businesses
- Contextual data intelligence company Flybits raised $35 million in a Series C round, bringing its total to-date funding up to $50 million
- Fintech lending and payments provider PayBright raised $34 million in growth equity, bringing its total equity raised since late 2018 to $60 million
- Another fintech company, Sensibill, raised $31.5 million in Series B to advance its A.I.-assisted decisioning and to unlock the value of purchase data
Even later into the year, funding remained robust.
In fact, in November the Toronto-based startup 1Password – a previously bootstrapped password manager that grew over 14 years the old-fashioned way, without a penny from venture capital – announced a $200 million Series A round from Accel, the largest single investment in the firm’s 35-year history.
Given all this activity, it’s not surprising that Startup Genome’s 2019 Global Startup Ecosystem Report ranked Toronto in the Top 3 worldwide among cities for global reach and for early-stage funding per startup. And a new report by relocation experts Movinga ranked Toronto as the eight-best city for entrepreneurs moving abroad to start a business (it was the only Canadian city to make the list).
There were major exits and acquisitions making news, too. In June, Toronto-based Intelex Technologies – an Environmental, Health, Safety and Quality SaaS company – was acquired for $570 million by Industrial Scientific. In the same month, Onex Corporation acquired Toronto-based wealth management firm Glusken Sheff + Associates for $445 million.
Also in June, Wave Financial – founded in 2009 in the Leslieville neighborhood – was acquired by H&R Block for a reported $537 million, marking one of the largest-ever Canadian tech exits.
“It just shows that you can scale business (in Canada), you can drive incredible customer value here, you can build big business here,” said Kirk Simpson, Wave’s Co-Founder and CEO. “Our hope is that obviously, this kind of exit and liquidity means that our early venture capital partners will be deploying capital into the next round of startups, and some of our early angels will take that liquidity and once again reinvest into tech startups, and some of our employees will do the same.
“I think that’s really good for the ecosystem.”
In 2019, the rapid growth of Toronto’s tech scene was again aided by new partnerships and collaborations between the public and private sectors. And again, it was a variety of industries that benefited from these initiatives.
In July, the federal government announced $40 million in funding for the Atmospheric Fund to support low-carbon solutions in the Greater Toronto and Hamilton Area, doubling the program’s endowment contributions.
“With this significant and strategic investment from the Government of Canada, TAF can do much more to accelerate urban climate solutions in a way that also builds resilience, creates jobs, and improves public health,” TAF CEO Julia Langer said.
Toronto’s innovation hub MaRS Discovery District was also frequently in the news.
MaRS announced, alongside Microsoft for Startups, plans to open a new space for startups to receive business and technical training in the Discovery District building. MaRS also unveiled a new partnership with Export Development Canada to help Canadian science and tech companies expand internationally, and also benefited from the federal government’s $52.4 million investment into a growth and innovation network to help businesses scale up in the Waterloo-Toronto-Ottawa area. Of that funding, $17.5 million was earmarked for MaRS. That news was especially important given some controversial funding cuts from the provincial government.
“Canada is now a destination for the world’s best and the world’s brightest, due to many of the policies that we have seen from (the federal) government. Top international talent is finally flowing north,” said MaRS Discovery District CEO Yung Wu.
“Top investors, international companies, new companies that could be this generation’s Google or Apple – they’re making their home here now. They’re all creating this unique ecosystem.”
In other news, FedDev Ontario announced a commitment of more than $1 billion to foster startup and not-for-profit growth in Southern Ontario, while North America’s fastest-growing technology conference, Collision, further cemented Toronto’s tech hub status by moving north of the border for the first time. The 2020 and 2021 iterations will be also be held in the Ontario capital.
“Right now feels like a special moment for Canada, and for Toronto,” said Paddy Cosgrave, Collision CEO. “There is such energy in the city, such an open, cosmopolitan and global atmosphere. Great companies are being started and incredible talent is coming out of the region.”
Major Real Estate Deals From Major Tech Companies
Toronto has the lowest office vacancy rate in North America, with a vacancy rate of just 2.6 percent. Over a third of downtown Toronto office demand is coming from tech companies, so it’s not surprising that some of the biggest names in tech have become quite competitive when it comes to putting down roots in Canada’s biggest city.
One company enthusiastically snatching up real estate in Toronto is Shopify, which opened its second Toronto office in May. The sprawling 180,000 square-foot space includes a roomy cafeteria with bleacher seating, a games room, a yoga studio, a wellness room, themed meeting rooms (including a Picasso boardroom and a Banksy phone booth) and two terraces.
With 700 employees in Toronto – and plans to double that number by 2022 – Shopify already has an office at Spadina and Wellington and plans to add a third location at The Well once that building is complete.
“What excites us about continuing to grow in Toronto is that as one of our centers of research and development, our employees have the opportunity to build and shape products from scratch; our local teams can make an impact on our entire product portfolio for 800,000-plus business owners and their millions of consumers,” the company said.
“The best part is that their global impact can originate from North America’s fastest-growing tech center and most multicultural city in the world, Toronto.”
In other news, Google snatched up 24,000 square feet more office space in Royal Bank Plaza – as sister company Sidewalk Labs released its controversial $1.3 billion master development plan for the Toronto waterfront – Amazon announced plans for a new fulfillment center in Scarborough that would bring 600 more full-time jobs to the city, and work continued on the brand-new Canadian headquarters for Microsoft Canada, which will occupy 132,000 square feet of a new CIBC Square tower when it opens in September 2020. That’s part of a $570 million investment from Microsoft in its Canadian operations that is expected to help grow its staff here by more than 500 full-time employees with an additional 500 co-ops/internships by 2022.
Other companies with new Toronto offices in development include Accenture, which is in the midst of creating an innovation hub in Scotia Plaza expected to add 800 new jobs; NVIDIA, which is investing in a new AI research lab; and Uber, which will vacate three spaces in the city to move most of its Toronto workforce to a five-floor office that will eventually house 400 employees and the company’s first engineering hub in Canada.
“The Toronto tech office is going to build software that is going to be used by Uber worldwide,” Engineering Hub Site Lead Kare Kjelstrom told the Toronto Star. “We are creating a synergy effect … and opportunity here, so I am pretty sure that as soon as it’s known that Uber has a strong tech presence in Toronto, it will attract Canadians abroad to come home.”
We’ve covered the startups receiving major influxes of cash in 2019, but aside from the financial good news, there were other encouraging signs for Toronto startups this past year.
It’s worth again noting the diversity of the city’s startup ecosystem. Startup Genome’s report singled out Toronto’s Life Sciences and A.I., Big Data and Analytics industries as being particularly robust, but truthfully, Toronto startups are succeeding across all sectors.
Out of LinkedIn’s 25 Top Startups in Canada for 2019, 21 were based in the Toronto area – or 84 percent of the companies listed. Those startups included the aforementioned giants Wealthsimple, Clearbanc, and Drop as well as employee benefits platform League, customer intelligence platform Integrate.AI, and fine jewelry retailer Mejuri, which raised $23 million Series B in April.
Toronto startups were also well-represented in the Canadian Business Growth 500 index of the country’s fastest-growing companies, led by mobile ad platform Cluep and its astonishing five-year growth rate of 11,433 percent. IT service management company Prodigy Ventures (8,372 percent growth), digital marketing platform Maropost (7,668 percent), and rate comparison platform LowestRates.ca (5,230 percent) were also represented in the Top 15 companies.
Further, Toronto also had by far the most startups of any Canadian city make the cut of Deloitte’s 2019 Technology Fast 500 Ranking, including:
- Ecopia Tech, an A.I. company that specializes in extracting insight from geospatial big data, which Deloitte said grew by 6,186 percent
- Product roadmap software Roadmunk
- RFP software company Loopio
- Retail platform Tulip, a mobile app that helps retail employees look up products, manage customer information, and check out shoppers
- Rumble, a digital media company that helps website owners and content creators with rights-cleared content
- And programmatic native advertising platform StackAdapt
Opportunities Abound in Toronto
Toronto is North America’s third-best market for tech talent according to CBRE’s 2019 Scoring Tech Talent report. Even more impressive than that result is how quickly it happened; Toronto’s pool of tech talent grew faster than any of the 50 markets measured, adding an astounding 80,100 tech jobs in the past five years for a 54 percent increase. Toronto nearly equaled the number of jobs created in the Bay Area over that period.
It’s worth pointing out that those are good jobs being created, too; CBRE’s breakdown found that Toronto’s tech workforce brought home an average wage of $81,828, compared to $57,212 for the city’s non-tech occupations.
“We hear about tech more and more, but in a thriving city like Toronto, the impact of tech companies and the growing influence of tech talent cannot be overstated,” said CBRE Canada Vice Chairman Paul Morassutti. “Tech job growth has a multiplier effect in the economy and the influence of tech is re-shaping virtually every sector of real estate (in Toronto).”
Notably, CBRE’s breakdown also found that Toronto provided the best value when it comes to cost and quality.
That’s certainly held true for Regan McGee, CEO and Co-Founder of Toronto startup Nobul – an online marketplace that helps link home buyers and sellers – who says that Toronto’s tech talent is simply second-to-none.
“It’s a good environment when you are trying to do something that requires engineering and tech,” McGee said. “The skillset of the people here is first-rate. You get the best from the best around the world.”