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."
Though it sometimes seems like it, Toronto didn’t become a worldwide tech hub overnight.
In fact, it was a years-long process that led to Canada’s biggest city being mentioned alongside tech markets like New York and Silicon Valley. Still, things have undoubtedly accelerated as more and more companies launch or shift to the lakeside metropolis.
“The Toronto Region has never seen momentum like it’s experiencing right now,” said Toby Lennox, CEO of Toronto Global. “In September alone, the city drew over $1.4 billion in investment from U.S. and Canadian companies, ranging from global tech giants to local startups.”
“There has been a build up for at least 20 years,” added Alexander Norman, executive director at Tech Toronto. “There have been many small changes over the last decade, which has now made us an emerging hub.”
So, what are the factors underpinning that supersonic growth? Let’s take a closer look at how Toronto got here.
The City Has a Deep Pool of Tech Talent
Toronto’s status as a destination for tech companies is first and foremost down to its people.
The city has been adding tech talent at a breakneck pace, with a recent report from the CBRE Group concluding that Toronto added 82,100 tech jobs between 2012 and 2017, the most of any North American city. Toronto’s tech talent pool grew 50 percent to 240,000 workers over that five-year span.
“Where talent goes, investment will follow,” Lennox said. “We grow, attract, and retain local and international talent like no other location on the continent.”
The CBRE study found that Toronto offered the best value when it comes to cost and quality of tech talent. Lennox points out that an important reason Toronto talent is so highly valued is due to its diversity.
“Our growth has been built on immigration,” he said. “Forty-three percent of the Toronto region – and 51 percent of Toronto proper – were born outside of Canada. We speak 170 languages and dialects and Toronto is heralded as the most multicultural city in the world. Our labor force and economy benefit directly from our diversity and inclusivity.”
Toronto is Well Positioned for AI and Blockchain Growth
In the fast-moving world of tech, timing is everything; in that sense, Toronto’s companies were blessed by both foresight and fortune.
“A lot of the early fundamental technology for AI and blockchain was built by local scientists, developers, and teams, which has given us credibility and attention,” Norman said.
Along similar lines, Toronto could now be poised to become a hub for artificial intelligence.
“The launch of the Vector Institute for Artificial Intelligence has put a spotlight on the outstanding quality of globally recognized AI talent that lives right here in the Toronto region,” Lennox said. “Major international companies are establishing R&D labs in the Toronto region to take advantage of this deep pool of knowledge to develop new commercial applications.”
Governments Have Been Supportive
Toronto’s quick progress has been helped immensely by the efforts of municipal, provincial, and national governments.
“Our three levels of government are committed to offering businesses a cost competitive atmosphere and unprecedented access to a highly skilled talent pool,” Lennox said. “Investments in hubs like the Vector Institute are examples of strategic commitments to ensure the Toronto region’s success and prosperity are sustainable.”
Norman points to favorable changes to tax laws for U.S. investors and a global search for investment as two important factors. Further, he says that the aforementioned influx of immigrant talent has been made possible by good government policies.
“While other countries are closing doors to international talent, we have opened ours with the Start-Up Visa Program,” Norman said. “We also have programs, like the Creative Destruction Lab, that actively encourage non-Canadians to come to Toronto and learn about the ecosystem.”
It’s not just governments that have been supportive. Different tech companies also seem open to working together.
“The tech ecosystem is much more collaborative than ever before,” Norman said. “The general business environment is supportive of tech and more talent want to work in tech.”
Toronto is Affordable (Relatively Speaking)
Part of the reason Toronto is a reasonably affordable place to set up shop is the aforementioned government assistance and tax incentive. But there’s more to it than that.
CBRE’s study revealed that a 500-employee firm using a 75,000 square-foot space in Toronto would face operating costs of $30,224,259 annually, cheaper than all of the American cities included in the survey. By comparison, the Bay Area was one of the most expensive places to operate, with annual estimated costs of $59,124,612.
It’s also been a given in recent years that talent was cheaper in Canada – largely because of the difference in currencies – but there’s good news for Toronto-based tech workers. Norman says Toronto salaries are “quickly rising to global standards.”
Toronto’s Tech Industry is Future Proof
There’s a lot of reason to believe Toronto can sustain its momentum.
According to research by JLL’s Cities Research Center and its City Momentum Index, Toronto ranked ninth on a list of global cities that “have the future-proofing capacity for longer-term success.”
Norman points out that the ecosystem will become truly sustainable when the city produces a few high-profile exits – or IPOs – that make investors and employees alike very wealthy. But he sees promising developments.
“There are signs, as companies are growing, able to raise large rounds without moving, and generally more talent are choosing tech companies over traditional firms as the place of employment,” he said. “We also see foreign capital excited to fund our new companies either via AngelList at the early stages or via large venture capital firms at later stages.”
Toronto certainly seems to have the tech world’s attention now. It was recently announced that Collision, regarded as North America’s fastest-growing tech conference, will call Toronto home from 2019-21.
“With over 100,000 people moving to the Toronto region every year, we have the momentum going forward to sustain our position as a leading and dynamic tech hub in North America,” Lennox said.
“We offer unlimited opportunity for all businesses, from startups to established firms, with our talent leading the way for continued growth.”