One cloudy Tuesday in April, a Canadian VC logged on to BetaKit and had his mind blown.
The reason for the cranial contusion was the confluence of Canadian funding news that day. I won’t name the day in question, nor the relevant funding rounds, because, in 2021, the day doesn’t seem to matter: eye-popping funding rounds have become a daily occurrence.
For those who have tracked this ecosystem during its quieter periods, it’s not the rounds themselves that stand out, it’s their commonplace nature. They’re one of several signals that the ground is shifting right under our feet (gradually, then suddenly).
Canadian tech is having a moment.
Every smart person I’ve spoken with over the last several weeks has a different indicator that something special is happening in the ecosystem.
The Globe and Mail’s Sean Silcoff would point you to the surge in Canadian public tech companies. At the beginning of 2020, Silcoff was lamenting “Canada’s Lost Tech IPO Boom.” By the end of the year, Silcoff was joining BetaKit on our podcast to explain how 2020 became a year for them. Following several notable tech IPOs to kick off 2021, Silcoff expects at least 15 more tech companies to go public in the next few months.
Talk to the venture capitalists and their focus, naturally, is on the funding.
“The podium is ours to own, if we truly want it.”
– Chris Albinson
Damien Steel, Managing Partner at OMERS Ventures, highlighted a report from financial data provider Refinitiv, which claims that Canadian VC firms raised a total of $1.5 billion in the first quarter of the year, putting 2021 on pace with 2019 to raise approximately $5 billion by year’s end. The previous record high in the past ten years? Just $2 billion.
That influx of venture capital is finding its way into Canadian tech companies at a pace that, frankly, most VCs are having difficulty keeping up with. Over $3 billion CAD was invested in Canadian tech companies in Q1 2021, breaking previous records, and raising round sizes across the spectrum. SVB’s State of the Markets report shows that average deal sizes at the early and late stage have jumped 137 percent and 63 percent in 2021, respectively.
“We’ve seen this gradual increase of each stage of financing, and now it’s not so gradual,” Matt Golden, Managing Partner at Golden Ventures, told me. “You’re seeing a step function in terms of dollar amounts and the quantum definitions of the various series of stages of financing.”
The explosion of money going in is also matched by the money coming out. Canadian venture-backed exits in 2021 hit $5.7 billion in Q1 2021, per Refinitiv, with the next highest year in the last ten barely surpassing $2 billion.
Like Steel, OMERS Ventures Partner and Canada Lead Laura Lenz agreed that the explosion of funding and exits has finally created that often-dreamt “flywheel” effect required for a true and self-sustaining ecosystem. While she expressed a need to see more Canadian companies acquiring Canadian companies, Lenz noted that the evolution of foreign acquisitions speaks to an ongoing sophistication of Canadian businesses.
“Ten years ago, we used to talk about tech talent acquisitions – acquihires,” she said. “Then we started to talk about product hires, like when Instacart bought Unata. Now we’re starting to see commercialization acquisitions, like Xero and Hubdoc – they’re buying them for product, sales, customers, all of that.”
This moment is not exclusive to the founders and investors taking big swings and money off the table. Melissa Nightingale, co-founder of business management consultancy Raw Signal Group, expressed excitement to see Canadian salaries also rising, calling it an “important part of the maturation of the ecosystem.”
While some may wring their hands over the notion of building a deep tech talent pool at the exact moment COVID-19 and remote work made it easy for foreign giants to swoop in with better offers, Nightingale said that “part of competing in a global landscape means you have to be competitive.”
“I don’t want to be your farm team,” she added. “I don’t want to be your cheap talent because I’m paid in Canadian dollars.”
Even such grumbling over the price of competition is a novelty. While much of what is outlined above seems inevitable in retrospect, that’s not the case.
In his own op-ed on the state of Canadian tech, incoming Communitech CEO Chris Albinson recounts the story of a well-known Valley VC telling a group of Canadian entrepreneurs in 2016 that it was flatly impossible to build a billion-dollar company in Canada.
This wasn’t inevitable, but change comes at you fast.
“Is Canada in line to be the next Silicon Valley?” Albinson asks. “The podium is ours to own, if we truly want it.”
Now, Albinson is himself a reformed Valley VC, so he can be forgiven for pushing tired Silicon Valley North tropes when BetaKit declared them dead months ago with some clever (and comfortable) attire. But Silicon Valley doesn’t provide the proper archetype for Canadian tech.
It’s not just the ongoing issues with Valley-originated Big Tech like Google and Facebook on privacy, competition, and coherent policy. As Kara Swisher has noted, the need for action on those fronts has been obvious for a long time.
It’s also the more recent decisions by companies such as Basecamp and Coinbase to eschew the political considerations of its employees in favour of becoming purely “mission-focused.”
“‘We’re not Silicon Valley North’ is just Canadian exceptionalism again, and it’s not based in anything.”
As I tweeted at the time of Basecamp’s public announcement (which resulted in the voluntary departure of one-third of its employees), saying your company will now only advocate for political issues that impact the business means your company is unwilling to advocate for political issues that impact your employees.
This approach to (or abdication of) leadership doesn’t seem to match with the diverse and diversity-focused tech ecosystem that BetaKit writes about every day. But given that Canada’s largest tech company by market cap adopted a similar approach last year during its own period of internal strife, articulating the difference between Silicon Valley and Canadian tech seems more important than ever.
(I will be writing more about Shopify in the future. For now, I ask you to reflect on the fact that these words came from the same CEO who, little more than four years ago, signed an open letter from the Canadian tech community claiming diversity is our strength.)
But here’s the rub: Silicon Valley Nope is a negative definition. It contains no positive identity to aspire to.
Or as Raw Signal Group’s other co-founder, Johnathan Nightingale, put it to me: “‘We’re not Silicon Valley North’ is just Canadian exceptionalism again, and it’s not based in anything.”
For the record, Nightingale loves the T-shirt. But giving the T-shirt meaning requires something more.
“The story that we tell ourselves, that we’re a different kind of country, I want that to be true,” he said. “But where it is true, it’s true because people are doing hard work. It’s not true by default.”
So despite the growth, the accolades, the money, the attention, there is still work to be done. Because the ground is shifting right under our feet, but we get to choose where we next step.
The podium is ours to own if we want it. How do we want to win? Canadian tech is having a moment. How best to seize it?
Feature image courtesy Unsplash.