The Innovation Economy in Canada is composed of many sectors and verticals. Many of these sectors are comprised of small but rapidly growing companies. These firms are known as start-ups, which is a term for innovative early formation companies coined in Silicon Valley in California in the 1960’s and 1970s. Canadian start-ups are clustered in a few specific geographies in Canada. Toronto has the largest absolute number of start-ups but they tend to get lost/mixed in to the general business environment in TO. The largest standalone group of start-ups in Canada is in Kitchener/Waterloo. These start-ups congregate there in part because of proximity to the University of Waterloo and its renowned engineering and computer science staff, graduates and alumnae. Waterloo is also start-up friendly because housing costs and commercial real estate costs are about half those of Toronto. This makes it easier for start-ups to retract and retain talent without having to pay them Toronto-sized wages just so the employees can afford rental accommodations. Waterloo also benefits from a strong alumnae effect from large, successful tech firms like Research in Motion/RIM/Blackberry, COMDEV and OpenText.
Three more hubs of start-up activity in Canada are Montreal, Ottawa and Vancouver. Each of these cities, just like Toronto and Vancouver, are blessed with excellent universities and colleges which produce a continuous stream of STEM graduates every year. Many of these grads have been exposed to start-up life/culture in summer jobs and work terms and they do not want to go work in a large corporate environment with lots of HR, hierarchy and slow-moving access to roles with autonomy and responsibility. Montreal has a large innovation ecosystem centered around telecom. There are hundreds of isp’s, calling card providers, wholesalers, rebillers, telecom overlays etc in Montreal. This is partly because of the large immigrant population in Montreal. These people are entrepreneurial, plus they form businesses to serve the unique requirements of their customers for communication services to North Africa, Europe and Asia. Ottawa is an innovation hub with many firms spun out of Nortel, BNR, Cognos and other large software shops. Vancouver has large numbers of communications and software companies. Vancouver is a gateway city for Canada to Asia. It also draws on large pools of technical talent from UBC and other universities in BC.
The Canadian innovation economy is nurtured greatly by Canada’s unique SR&ED program. One of the things which makes Canada’s SRED program so powerful is its focus on small firms. Small companies, called Canadian controlled private corporations (CCPCs) can take advantage of funding rates that attract credits at over the double the rate of those received by large, public corporations participating in the SRED program. This funding model is wise. It’s easy to see that nurturing 2, 5 or 50 person start-ups can lead to business growth where company headcounts double triple or grow 5x over a periods of only a few years. Firms are emboldened to take on technology risk and attempt cutting edge innovation when they know they can rely on up to 65% funding from the Canadian government for qualifying STEM salary expenditures.