The last 18 months have been tough for Canada’s tech sector broadly, as soaring inflation and heightened investor caution led to aggressive cost-cutting measures that have cast long shadows over the industry’s growth.
Canada’s tech sector is navigating a period of significant change, and Montréal is no exception. This year has seen considerable shifts in the city’s tech landscape, including new legislation that could impact its ability to attract talent and major shifts within some of the region’s most cherished support organizations.
Laflamme believes Montréal’s large and diverse talent pool “naturally attracts” world-class tech companies.
In many ways, Montréal epitomizes a Canadian tech sector in transition, with the sector meeting these changes head-on and continuing to carve out its value proposition in a rapidly changing market.
According to data from Réseau Capital, Québec was the top Canadian province for VC investments in the first quarter of 2024, with 29 deals totalling $583 million CAD and nearly three-quarters of total investments taking place in Montréal.
Eric Laflamme, Managing Director of Innovation Banking for Québec at CIBC, said the city has a “perfect mix” of diverse talent and culture, paired with a strong network of universities, investors, and research institutes, making Montréal a launchpad to the world.
Despite the introduction of new French language laws, which have sparked concerns about the province’s ability to attract and retain talent, Montréal’s lower cost of living and high quality of life remain a draw.
Greater Montréal boasts more than 10 higher education institutions, is home to approximately 155,000 students, and hosts the largest concentration of university researchers in Canada.
In addition to generating talent for local startups, Laflamme said these institutions produce cutting-edge research in fields like life sciences and AI, thanks to hubs like Mila, the research institute created by AI godfather Yoshua Bengio.
Laflamme believes that the high concentration of researchers and the wealth of knowledge in the city have helped attract multinationals such as Google, Samsung, and others who have set up their own research hubs in the city.
Citing figures from Montréal International, Laflamme noted that the city has 35,000 AI experts, as well as over 24,000 university students enrolled in AI-related programs across Québec.
“That’s a lot of people, and it creates an ecosystem that naturally attracts these companies,” said Laflamme.
Local investors are in for the long haul
Often hailed as North America’s most European city, Montréal is where a rich cultural heritage meets a thriving tech scene, with more than 2,500 tech companies and 30 incubators and accelerators.
But 2024 appears to be a year of change for the local ecosystem. The city lost its beloved Notman House startup space in the spring, and Startup Montréal rebranded to Québec Tech, broadening its focus from Montréal to scale-ups throughout the province. Time will tell how the later-stage and export-ready provincial focus will impact the region, but for now, business in the city’s tech sector continues to thrive.
Laflamme said the city’s continued performance compared to other Canadian ecosystems is the result of a strong presence of investors and capital providers, with CIBC Innovation Banking being among the most active in the city.
He noted that entities such as the Business Development Bank of Canada, Investissement Québec, and the workers funds (Fonds de solidarité FTQ and Fondaction) serve both as LPs and later-stage direct investors, and this dual role contributes to a more stable venture capital market in Québec compared to other provinces. He added that these efforts are highly complementary to the private capital available through firms like White Star Capital and Inovia or specialized funds like CTI Life Science in health or Portage in FinTech.
A substantial pool of institutional limited partners mandate that a portion of their funds be reinvested locally, said Laflamme, which is helping drive success.
“These types of investors are in the ecosystem long-term. Some even provide evergreen money to support companies throughout their lifespan,” Laflamme added. “So when the market is going down a little bit, those guys are patient.”
A European launchpad
In addition to drawing some of the largest global tech companies, Montréal also boasts a number of homegrown success stories. Consider Lightspeed, which began in a small office its founder rented above his apartment. The payments platform, which is a CIBC Innovation Banking portfolio company, has since completed a $397-million initial public offering on the New York Stock Exchange.
Other local heroes include those looking to innovate the healthcare sector, such as AlayaCare, whose most recent funding round topped $225 million, as well as Dialogue (which went public through an initial public offering underwritten in part by CIBC World Markets, before being acquired by Sun Life in 2023), and Medfar.
Laflamme said Montréal’s deep cultural heritage makes it a gateway city for many European tech companies large and small looking to anchor their North American headquarters. According to Montréal International, a significant number of French companies have looked to Montréal as their first North American or international location.
Montréal-based Potloc is one example of a company that started in Québec and France and is now expanding its activities into the United States. Similarly, French investors like Jolt Capital have looked to the city to create their North American foothold in Montréal. Given that 20 percent of the city’s population speaks three languages, Montréal is also an ideal launchpad for companies planning to expand into Europe.
For Laflamme, this blend creates an ecosystem that caters to a wide range of tech interests, and reflects the cosmopolitan ethos of Montréalers more broadly, which combines local pride with uniquely global influences.
Laflamme said this approach is apparent with Québec-based investors as well, who keep regional deal-making steady, but also thrive on collaboration.
He pointed out Espace CDPQ as a prime example, where investors are brought together in one building to share their networks, expertise, and resources, all to the benefit of local startups.
Although CIBC Innovation Banking is not a tenant, Laflamme said the venue and community provides important insights as they work to offer venture debt to startups as well as banking and financing services to investors across Québec.
“They created an area where all the investors can sit side by side, which you don’t see much in Canada,” he added. “When all the investors are sitting in the same place, it creates a really robust ecosystem.”
Feature image courtesy Matthias Mullie via Unsplash / BetaKit illustration.
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