Is Canada finally developing a sustainable startup ecosystem?

Insiders believe a slew of big-money exits will strengthen the scene by funding new tech entrepreneurship

Achievers founder Razor Suleman

Achievers founder Razor Suleman. (Portrait by Peter Power/Globe and Mail/CP)

Four years ago, Razor Suleman moved to Silicon Valley. The founder and then-CEO of employee recognition platform Achievers was following a path that many Canadian tech entrepreneurs had taken before him. With a $25 million funding round from Sequoia Capital and a growing international base of customers, California’s tech ecosystem seemed like the logical place to scale Suleman’s company.

A few months ago, Suleman sold Achievers to Blackhawk Network for $140 million and moved back to Toronto. But he’s not returning to enjoy a comfortable retirement in his hometown. As he explained in a Huffington Post article and then again at the Spotlight Awards hosted at his home recently, Suleman came back because he believes Toronto—and Canada—is the best place to build his next business.

The Spotlight Awards, organized in conjunction with tech entrepreneurship booster groups The Next 36 and C100, recognized eight Canada-based companies that crossed the nine-figure valuation mark this year (Achievers, Stingray, Chango, Recon Instruments, VerticalScope, PlentyOfFish, Shopify, Slack). Suleman believes those sales and IPOs are a mark of the new Canadian tech reality. “What I learned in Silicon Valley is that those exits fuel the ecosystem,” he explains. Buyouts and public offerings liquidate stock options, allowing talent to move on to other opportunities or start their own ventures, and releasing investor capital for other companies. “We’ve never had eight companies that achieved that level of success ever—we’ve had the RIMs and Nortels, but one company doesn’t make an ecosystem,” says Suleman. “That’s why I’m so bullish on Canada.”

Success begets success according to Angela Strange, a partner at Silicon Valley super-VC Andresseen Horowitz and co-chair of the C100. “What you get are second-time founders starting companies, more founders that become angel investors, more founders that decide they’re going to mentor newer founders,” she explains. “You really get this flywheel going that just makes it easier and easier and faster to build really great companies.”

Suleman is among a number of recently-enriched tech entrepreneurs putting money back into the system. He’s now a partner at Alignvest Management Corp., and is dedicating “a couple of million dollars” to invest in startups, while PlentyOfFish founder Markus Frind recently put $18 million into Burnaby-based furniture e-tailer Cymax.

The availability of venture capital in Canada has changed dramatically since Achievers (then dubbed I Love Rewards) raised its first U.S. round in 2010. “In 2010, Relay Venture was J.L. Albright, a small fund. There were a few labour-sponsored funds, but not a lot of options,” he recalls. “Since then Georgian Partners has raised a big round, OMERS [Ventures] is now at $500 million, Relay Ventures is at $580 million.” Seed funding is readily available on this side of the border, and funds like OMERS are now writing $20 million-plus cheques to participate in growth rounds. 

But it’s not just about how much money is available, it’s about who’s giving it out, says Reza Satchu. The former serial entrepreneur and current managing director of Alignvest has long been a brash presence on the Canadian tech scene making the case for promoting entrepreneurship. “Where I’d say we have massive opportunity for improvement is to actually get the right people here allocating that capital, the most sophisticated investors—the Sequoias and Andreessen Horowitzs of the world—to actually come here and care,” he says. Some of that is already happening—at the C100’s Venture North conference in Toronto earlier this month, 25 U.S. VCs took in presentations from Canadian startups. “What you get with the Sequoias of the world isn’t just capital, you get expertise and increased probability of success.” 

All three tech insiders called encouraging innovation and entrepreneurship an economic imperative for Canada. “Our reliance on the petrodollar and the resource economy—that’s all going to change in the next 10 years,” says Suleman. “If we can’t lead with innovation that the rest of the world wants, it’s going to be really hard to keep up our position in the global economy.” One potential problem is that Canadian companies often have a myopic view of the world, according to Satchu. “Those companies that are focused globally invariably are focused on the United States [and Europe],” he says. “These are countries that are growing at -1% to 2.5% per year. The countries that are growing at 7–10% per year—China, India and others—we have no strategy around.”

The Spotlight Awards is Suleman’s way of encouraging that kind of outward-looking entrepreneurial spirit. “As Canadians, we’re not great marketers. We rarely brag about ourselves, and that’s one thing that I took away from Silicon Valley—it’s a propaganda machine,” he says. “They are waving the flag and blowing their own horn, and I think we need to do that in Canada because then it creates that energy and enthusiasm, and it hopefully inspires young entrepreneurs.”