Deep in the snowy region of Ontario, there’s an unsung tech hub that has slowly been warming the hearts of many high-profile investors.
Small and generally unknown to the rest of the world, Waterloo has a population of just 550,000, yet it is now home to 1,100 new ventures. (Apart from the Silicon Valley, the region the highest startup density of any area globally).
A recent report from research firm Compass highlights the advantages of starting up in Waterloo, ranking it the No. 25 best startup ecosystem in the world. The report considered factors like growth, performance, funding, and exit values. (Silicon Valley, unsurprisingly, grabbed the top spot, followed by New York City and Los Angeles.)
Waterloo is best-known as the birthplace of smartphone maker BlackBerry — which, during its heyday in 2008, boasted a market cap of over $80 billion and nearly 20,000 employees.
Today, promising companies in the area include Thalmic Labs, the wearable tech startup that has already raised roughly $15 million in venture capital from investors like Intel Capital and Spark Capital.
Here are a few reasons this active business hub is a solid location for companies to start, grow and succeed:
1. A collaborative environment.
Startups in Waterloo benefit from a number of key resources, such as the Communitech coalition, and the Accelerator Center. Both offer in-house mentorship from entrepreneurs and venture capitalists, educational courses, and funding access.
Velocity, a program created by the University of Waterloo, helps students in the early stages of growing their companies. Wilfrid Laurier University, one of the fastest-growing universities in Canada, runs a similar program called Launchpad.
Many entrepreneurs in Waterloo cite the friendly atmosphere as being a major business asset. “It’s a lot easier to find non-pretentious, effective people here with whom you can interact constructively and get things done,” said Alex Leyn, the founder of the digital health startup Aterica Health, in an interview with Compass.
2. The entrepreneurial community is highly supported by the local government.
Many startups in the region have access to government grants, which allow them to get off the ground without forking over equity to investors.
The government of Ontario also supports the Entrepreneurs in Residence program, whereby accomplished entrepreneurs are made available to new founders, as well as the MaRS Market Intelligence program, which provides industry research to startups. The government has also donated $25 million over five years to the Communitech building project.
Overall, venture capital in Canada is on the rise. More than $2.3 billion was invested in Canadian startups over 522 deals in 2014, which was the highest amount invested since 2002, according to data from Thompson Reuters.
A shortage in home-grown VCs, however, ultimately makes securing funding beyond the early stages a challenge for Waterloo companies. Foreign VCs do invest in Waterloo companies, but only to a degree.
“There are many high-quality startups in Silicon Valley, so when you think about the decision to invest in a company outside of the country, the bar is higher because it will be harder,” noted Matt Murphy, a partner at Menlo Ventures, in the Compass report.
3. Plenty of tech talent.
As a whole, the Toronto-Waterloo region has roughly 280,000 tech workers, which is comparable to Silicon Valley’s estimated 380,000.
The University of Waterloo has more than 30,000 undergraduates, with an internationally admired engineering program. Students at Waterloo are given the option of participating in its co-op program, meaning that they would graduate with one to two years of work experience already under their belt, and that’s attractive to Silicon Valley employers.
“If you ask around Silicon Valley, all the top companies will have had an intern from Waterloo, so that’s how they know about the region,” added Kevin Carter, a general partner at SV Angel, in the report.
Indeed, as many as 864 Silicon Valley employers recruited talent from the University of Waterloo in 2015.