Want Your Startup to Succeed? Move to Toronto

FELIX SALMON, INC. MAGAZINE (JUNE EDITION)

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

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 well-adjusted entrepreneurs building sustainable businesses that employ a talented and diverse workforce. Welcome to Toronto.

World-beating, people-centered 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.

Credit: Adam Simpson

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 immigrant-friendly 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.