Which Canadian City Will Be 2012’s Silicon Valley North?

In early 2009, Ottawa held the front-runner position for that infamously elusive title of “Silicon Valley North.” But in the summer of that year, tech sector anchor Nortel started selling itself off, piece by piece, following bankruptcy in one of Canada’s most massive company collapses ever. Ottawa’s technology sector was already down by a stunning 5,000 people from 2008, and the future looked dim. CBC effectively stripped Ottawa of the title, one it suggested Ottawa had owned rather decidedly for several years…

Denzil Doyle, chairman of Doyletech, says Ottawa’s technology industry is in rough shape these days. “To put it harshly, it’s not just in decline. It’s in decay.”

…before hinting at Waterloo as a potential successor:

Doyle suggests Waterloo might now be in a position to overtake Ottawa and claim its former title. “They’re still smaller than Ottawa, but they’re moving at such a clip. The whole Waterloo area, there’s something about it that they seem to have local angels there now that will take companies to a size.”

Since then, Canada’s capital has failed to resurrect its glory days. These days, Vancouver’s vibrant video games space and tight-knit community—not to mention remarkably favourable proximity to the real Valley—render it a real contender. But it is not alone: Waterloo, with its top-notch entrepreneur-focused education and tech anchors Open Text and RIM—who is gradually becoming less associated with innovation and success, but still offers up-and-comers valuable resources and opportunities—is also a legitimate candidate, despite a small population. And then there’s Toronto, with Canada’s biggest population and most large company headquarters.

In March, EyeWeekly published a lengthy piece detailing Toronto’s tech scene and published a graphic rating five major Canadian cities by “signal strength” on a scale of one to five. Controversy spilled when the graphic included Calgary but not Montreal, and Vancouverites were shocked that their city was awarded a mediocre three bars, the same as the prarie city. Waterloo’s solid, stable, and consistently growing entrepeneurial tech sector was awarded the only five-bar rating, with Toronto earning a respectable four bars. No one earned two, but Ottawa managed to score the lowest possible: one out of five, cementing the once innovative city as a laggard in the tech space.

Techvibes columnist Andrea Wahbe offered her own thoughts on the matter earlier this year, positioning Toronto as Canada’s next Silicon Valley North. 

Toronto is also becoming a breeding ground for innovators in Social Media. There are a numerous players in this space in Toronto including RyppleSysomos and Syncapse. All of these companies have earned accolades in the past year or so for their innovation and leadership in the industry. […] Toronto’s proximity to world-class universities and colleges, that offer innovative Technology curriculums, is the second reason why we have an edge over competing cities. […] I mentioned in a previous post that the GO Train will soon take you straight from Waterloo to Toronto. This will tie the two cities together in a similar fashion to San Francisco and Palo Alto. […] There are also a number of incubator programs and a new round of investors emerging on the scene in Toronto. 

Some agreed and some didn’t. But we must ask ourselves, how do we define the criteria for this honourable title? As the year wraps up, it’s worth studying one metric that many consider one of the few tangible measurements of success: startup exits.

Now, startup exit count is only a single metric and there is debate on how to weight quality versus quantity. There is also debate over the definition of being a tech company, the definition of a startup, and the definition of being considered a part an actual city. Techvibes, to its own standards, tracked tech startup exits across Canada throughout 2011 and the results are, at the very least, quite interesting. First of all, Toronto blew away the competition in this regard, with 15 successful exits this year alone—more than the total number of Canadian exits in 2007 or 2008. Taking into account Vancouver’s smaller population, its count of seven exits is also impressive. Montreal, with just four, disappoints—as does Ottawa, with just one. Waterloo clocked in at three: respectable for its size, but not exactly a number one can claim the title with.

Toronto was humming for all of 2011. The city saw at least one acquisition in almost every month of the year, starting in January and ending with two in December. Some were small, like CoverItLive selling to Demand Media for $5 million and DealFrenzy selling to Intertainment Media for $700,000. And some were big, like Adenyo selling to Motricity for $100 million and Rypple selling to Salesforce for $65 million. However, Toronto didn’t score the year’s biggest exit; that went to New Brunswick’s Radian6, who was acquired by Salesforce in March for an outstanding $326 million. Waterloo also made headlines when Parametric Technology bought MKS for just under $300 million only a week later.

As Toronto zooms along, gathering momentum like a great snowball down a steep white hill—with Vancouver and Waterloo closely nipping at its tail—Ottawa struggles to find its footing. The Financial Post today ran a piece highlighting Ottawa’s fall from grace, citing such factors as how many of those who strike to rich in the city’s tech sector fail to reinvest in the area, a key component of Silicon Valley’s sustained success.

There’s also a cultural dimension to the tech downturn. Although firms have minted hundreds of millionaires, surprisingly few of those who cashed out have contributed meaningfully to the development of new startups. This is in sharp contrast to California’s Silicon Valley, where the wealth in startups tends not to be so concentrated in the hands of a few founders, and there is a strong tradition of entrepreneurs funding new firms. […] Some of Ottawa’s wealthiest former tech titans are practically invisible.

With all of this in mind, it seems unlikely that Ottawa can climb out of its hole fast enough to reclaim its crown in 2012. Toronto appears to already be grasping it, if not firmly gripping it, though much of Canada remains hesitsant to see the thing atop the city’s head. After all, Waterloo wants it. Vancouver wants it. Everyone wants it.

And as long as they don’t have it, they’ll keep trying their hardest. Which has been making Canada’s tech space and entrepreneurial space a thriving environment in recent times. So is it perhaps best that the carrot continues to dangle? There’s certainly little doubt that Ottawa’s stumble gave others cities the window of opportunity to realize any city can achieve great things. And it’s also safe to say that the resulting benefit to our country as a whole has been fantastic.

Who do you think will be most deserving of the title of Silicon Valley North in 2012?