Canada’s Silicon Valley The Vital Importance of Advancing The Toronto-Waterloo Tech Corridor

By Angus Gillespie

Driverless vehicles, artificial intelligence and the continuation of the advancement of technological innovation – at what seems to be progressing at the speed of light – makes it absolutely essential that Canada maintains its foothold as one of the world leaders moving through the 21st century. It is this type of innovation that is expected to drive global economies.

In Canada our version of Silicon Valley is located in southern Ontario in what has become known as the Toronto-Waterloo Tech Corridor – or Innovation Corridor, if you prefer. For those unfamiliar with the geography, it’s a distance of 112km and typically takes about two hours to drive by car. Waterloo originally became a tech hub back in the 1980s and has expanded upon that reputation over the past 35 years. Within the Corridor are more than 200,000 employees working for about 15,000 tech companies, 5,000 of which are startups within the past three years. The growth has been impressive, but it must continue if Canada hopes to remain on the top wrung with other leading tech hubs and it’s not just the United States. Countries such as China, Japan, Taiwan and Russia are all putting vast amounts of resources into their national tech sectors.

Companies are always on the lookout for bright young individuals to help our tech ecosystem go from startup to global player. It’s no longer good enough to be the best in your particular country or region. Technology has made the world a much smaller place, meaning that the innovations brought forth in other parts of the world are easily accessible in this digital era. All physical barriers to communication over appreciable distances have been resolved with the internet.

The Waterloo Region has the second highest density of tech startups in the world, along with the headquarters of some of this country’s biggest technology companies and development offices for leading global brands. BlackBerry – formerly Research in Motion – introduced the world to smartphones from Waterloo. Toronto is Canada’s corporate headquarters and the centre of finance and venture capital, so it’s a natural marriage to have these two regions connect together in tandem to create a world-class tech corridor. Ontario wants to accelerate the success of its startup technology companies through strategic investments in infrastructure and support programs.

The diverse ecosystem being developed in the Toronto-Waterloo tech corridor has shown great potential to be a leading hub for high-growth companies that are developing breakthrough discoveries that will help to shape the future of the world’s economy. The key word there is world. Not Canada – but the world.

McKinsey & Company says the supercluster in the Toronto-Waterloo region has the potential to become one of the world’s top innovation ecosystems. The innovation Corridor already contributes a substantial amount to the country’s GDP. Now the question becomes how does it take that potential to can it be one of the world’s true technology superclusters?

In March the federal government announced more than $752 million for infrastructure upgrades to the GO Train line between Kitchener and Toronto as part of an effort to create a greater link between the two regions. About 6 million people live within the Toronto-Waterloo corridor, which amounts to nearly half of Ontario’s entire population. It is an invaluable part of North America’s second largest ICT cluster, after Silicon Valley in California and is often referred to as Silicon Valley North. The corridor is home to 30% of the country’s university students and 21% of the national population.

It would seem as if all the prerequisite ingredients are in place in order to have a successful supercluster including: talent, quality of life, education, the ability to scale up, cost efficiencies and the increasing influence that Toronto has on the international stage as a leading business centre. The southern Ontario tech hub has helped Ontario improve from 14th to eighth in attraction of venture capital, while capturing more foreign capital investment than any other North American jurisdiction in recent years.

Although the Toronto-Waterloo corridor has access to a talented pool of professionals and new graduates from some of the best universities in the world such as the University of Waterloo and University of Toronto, it is still not substantial enough to meet the demands of a growing regional, national and international economy. For this cluster to be a world leader in emerging technologies it must attract and retain top talent to address the ongoing skills shortage.

The topic of the importance of this tech innovation corridor was recently discussed at the Toronto Region Board of Trade by an expert panel that included John Ruffolo, CEO, OMERS Ventures; Sally Daub, Founder & Managing Partner, Pool Global Partners & CEO, Enlitic; and Sean Silcoff, Reporter, Globe & Mail Report on Business & Co-Author of Losing the Signal.

“I was here in 2011 to do a presentation about the future of innovation and we were nowhere near where we are today and the whole idea was based on cluster theory, which I fully endorse. The difference now is the physicality of the geography, which has changed the entire dynamic,” says Ruffolo.

Once you have a physical cluster within a city then you can connect clusters together. In the case of Waterloo you can begin to grow the cluster through transportation and building assets along the cluster to create density.

The Toronto-Waterloo Corridor needs to keep up with other international cities and not allow itself to be leap-frogged as new technologies are created and developed.

“There is a lot of procurement dollars needed for startups, which is a provincial and national problem. Our policy leaders in government should be presenting a testbed for new technologies especially in areas where we are leaders,” says Silcoff.

Daub, who lives in Silicon Valley, has traveled all around the world and has seen first-hand what is being developed elsewhere.

“We are now competing worldwide and the idea of superclusters is not new. I’m not certain that there needs to be more government involvement. Artificial Intelligence (AI) is being made more important and will drive technology. We have an opportunity here to start to put our data in place that the companies can then advance worldwide,” says Daub.

“Every city that I travel to in the world says that innovation is the future,” says Ruffolo. “I think every country has a different strategy. I was in London recently and we’re looking to build OMERS Ventures out of London and two weeks before that I was in Singapore building OMERS Ventures Innovation. The strategies are different but both cities but it is the future for both cities.”

“In Singapore it is a single cluster. Because it is very regulated they basically have forced the banks to work with the FinTechs and they’ve created an entire governance and regulatory structure not to prevent innovation but to force the incumbents to open up their API,” says Ruffolo.

“The United States is very unique because they have a multitude of clusters. In South Korea they actually sub-divided the entire country and forced a cluster strategy based on where a big company is located and they forced a supply chain around it,” says Ruffolo.

In Canada it’s not about creating multiple superclusters, for now it’s best to concentrate on the one main cluster that has taken hold, and that’s the Toronto-Waterloo Corridor. Clusters naturally form. They can’t be forced.

“The role of government is to clear the field. Get rid of the leaves and put down some fertilizer. The entrepreneur determines the seeds that get planted,” says Ruffolo.

The message seems to be that the government should take away any and all obstacles that prevent growth but should not select the seeds that are planted.

The U.S. and Silicon Valley in particular, is much more mature and is essentially driving itself, without the assistance of the American federal government.

“There are so many big companies there that it’s growing organically,” says Daub. “But in Silicon Valley the traffic is terrible and the cost of labour is very high. However, when it comes to companies that tend to dominate worldwide they often get their start there.”

Silicon Valley is marketed worldwide. People will give money to companies there far quicker than anywhere else in the world,” continues Daub. “We have a long way to be like Silicon Valley but we definitely need to do a better job of marketing Toronto.”

Companies in Canada still remain largely underfunded and that does not help in the expectation of being at the front end of the innovation curve.

According to the Brookfield Institute for Innovation + Entrepreneurship’s State of Canada’s Tech Sector 2016 report, Canada’s tech industry consists of 71,000 companies operating coast-to-coast, and employing 864,000 Canadians, which accounts for nearly 6% of the country’s workforce. Those figures are going to continue moving in an upward trend because it’s the way the world is moving.

Information and communications technology (ICT) companies account for the majority of the tech sector’s national economic output, contributing 61% of the total, while employing 55% of all Canadian tech sector employees.

International technology powerhouses such as Apple, Google and Amazon have stocks that are valued much higher than those of many long-time industrial companies. The economic volume of the tech sector is valued at $6 trillion per year. To put that into perspective, if the global tech industry were a country, it would be the world’s third-largest economy, behind only the U.S. and China, but ahead of Japan. Canada ranks 10th on the list.

The disruption of the technology industry on the global economy is just now scratching the surface. It’s going to expand at a far more rapid pace moving forward and for that reason alone it is essential that Canada remains a predominant player.