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How Canadian tech morphed from laggard to leader

Rapid expansions, billions in capital, progressive immigration policies driving growth
The Centre for Digital Media in Vancouver is the home to extensive collaboration between private tech firms and educational institutes | Chung Chow

For years, Angela Mondou had to stand on stage lamenting the Canadian tech sector’s “laggard” status versus global competitors.

“We had moved downward on many scales,” said the CEO of the Technation, whose industry association represents technology firms across Canada from its head office in Mississauga, Ontario.

For instance, a decade ago Canada ranked No. 3 in the United Nations’ e-government survey, which tracks technology adoption within different countries’ governments. By 2018, Canada had dropped to No. 23.

But after a pandemic that saw billions of dollars in capital injected into the tech ecosystem, a string of multinational giants expand rapidly in the Great White North to tap local talent, and renewed efforts to improve government procurement practices to adopt made-in-Canada tech, Mondou believes the country’s tech industry is at a point where “we’re actually turning things around.”

“It’s amazing to look back. In a very short 12 years, Canada went from really flat-lined in our tech sector,” said Communitech CEO Chris Albinson, whose technology hub in Kitchener, Ontario, is best known for supplying startups with expertise on everything from securing capital to recruiting talent.

“If you remember, Blackberry had gone down, Nortel had gone bankrupt. There really was no private venture capital in the country. “Flash forward 12 years later and Canada’s now the second-largest innovation hub on the planet … and that creates both challenges and opportunities for us.”

Canadian firms raised a record $13.6 billion in venture capital last year, with the broader tech industry accounting for 88 per cent of that, according to data from CPE Analytics.

That’s nearly double the $7.5 billion raised in 2019, prior to the economic uncertainty initially brought on by the pandemic.

“The last few years has been very good – I mean before that, not so much,” Mondou said. “I ran a scale-up myself, I have colleagues that did, and we always found it extremely difficult.”

The country also experienced a record year for initial public offerings. Canadian companies raised $10.2 billion in 2021, including the likes of Vancouver’s Telus International Cda Inc. (TSX:TIXT) and Copperleaf Technologies Inc. (TSX:CPLF).

But Mondou cautioned that investor capital is becoming increasingly hard to find as the Bank of Canada attempts to slow inflation through overnight rate hikes.

CPE Analytics data shows the record $4.8 billion in venture capital raised in 2021’s second quarter has now dropped to $3.8 billion as of 2022’s first quarter.

Globally, Mondou said Canada has cultivated a reputation as a hub for quantum computing and cybersecurity, while Albinson said the country is taking off when it comes to applying machine learning and artificial intelligence (AI) to medicine and agri-tech.

Vancouver, which boasts a unique mix of gaming, visual effects and technology firms, has made a name for itself as a top hub for virtual reality development.

And Mondou said Quebec is widely known as a major centre for gaming and AI.

However, Mondou acknowledged that Canada tends to be “lagging in patents.”

Canada ranked No. 32 in the world last year in producing patents based on purchasing power parity, according to the Global Innovation Index (GII).

The GII tracks everything from countries’ access to capital to the amount of money they invest into research and development, and calculates global rankings for innovation.

Canada ranks No. 16 overall.

While the country performs well in categories such as software spending as a percentage of GDP (No. 5) and business environment (No. 4), it has fallen behind in other important categories such as access to information and communications technologies (No. 31) and growth in labour productivity (No. 61).

Despite those deficiencies, American tech giants have almost reflexively been coming to Canada in recent years to open new offices to support their global operations.

Facebook parent Meta Platforms Inc. (Nasdaq:FB) announced in March it was launching a new engineering hub in Toronto, while Microsoft Corp. (Nasdaq:MSFT) and Inc. (Nasdaq:AMZN) have both revealed major hiring plans in recent months for offices in the same city as well as Vancouver.

A July 2021 Scoring Tech Talent report, released by real estate services firm CBRE Group Inc., pegged Toronto as North America’s No. 4 tech sector hub, followed by Ottawa (No. 10), Vancouver (No. 11] and Montreal (No. 16).

Part of the draw for American tech giants has been the ability to tap jurisdictions where wages are lower and immigration policies are more progressive than in the U.S., which has seen two successive administrations cool to bringing in newcomers.

Canada is in the midst of one of its largest immigration pushes in recent memory, with Ottawa planning on bringing 1.2 million newcomers into the country over three years. It’s on target so far after bringing in 400,000 immigrants last year.

Mondou said Canada is “renowned” globally for its immigration policies that have made it easier to recruit top foreign workers for the tech sector.

“I used to run a scale-up predictive analytics company and we could not compete with Google and some of the larger companies in town,” Mondou said. 

“However, we were able to rely on our government with Global [Talent] Stream and some great immigration policies to bring in the kinds of talent we needed in terms of things like data science.”

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