For those on the ground in Vancouver’s flourishing tech scene, there are a couple of causes for concern – and a pretty extensive list of reasons to be very encouraged.
After a decade of stunning transformation, there is talk of potential brain-drain. High real estate costs and wages relatively low for a global tech hub could slow progress, some say. But those that have witnessed the awesome evolution of Vancouver’s tech scene aren’t too deterred. Policymakers are tackling housing costs and there is hope that wages will rise in stride with the city’s rapidly growing reputation.
Vancouver poised to become a tech hub
Vancouverites, in fact, have to feel pretty positive about things. This isn’t just because their city has been consistently ranked among the world’s most liveable places. Juxtaposed with the constancy of British Columbia’s perennially sublime landscape, Vancouver’s tech ecosystem has for the last ten years been a place of persistent change. Vancouver is surging forward to become a global leader in blockchain, health and life sciences, AR and VR, cleantech, and gaming. Recently-ranked the #15 ecosystem in the world by Startup Genome, the city has actually seen the number of skilled tech workers in British Columbia grow by 27 percent over the last decade.
With easy access to the US and Chinese market and close proximity to Seattle and San Francisco, Vancouver has also ranked 7th in market reach, continually luring businesses for its strategic location. It woos entrepreneurs too for its startup costs, earning the distinction as the cheapest place in North America to launch a tech company.
But there’s more to the story. There are three factors contributing to the tech scene’s ascent. First of all, there is an exceptional pool of tech talent. Secondly, there is consistent government support. And lastly, Vancouver showcases a symbiotic system. Leftover expertise and capital following acquisitions are frequently recycled back into local ventures.
Government aid in Vancouver fuels tech growth
Not only does it cost less than half the amount to start a business in Vancouver as it does in San Francisco, but the city’s entrepreneurs have also benefited from a host of federal and local initiatives to foster growth in tech.
To begin with, companies can apply for a long list of federal funding options. Among them are the two Industrial Research Assistance Program (IRAP) funds. These funds add between $50,000 and $10 million to support technological improvement projects; as well as the Strategic Innovation Fund (SIF), covering up to 50% of technology transfer or R&D expenses. Additionally, the SR&ED Program provides 20,000 businesses of all sizes over $3 billion annually in tax incentives to assist with R&D.
On the local level, Vancouver introduced the BC Tech Fund in 2015. This fund earmarks $25 million for investment in early-stage companies. It also alocates an additional $75 million to venture capital funds that invest in regional startups.
Businesses arriving in Vancouver to set up shop can also count on federal support. Foreign businesses get help starting their companies through the Startup Visa Program, which offers permanent residency to entrepreneurs launching in Canada. And, in a bid to become the world’s leading virtual and augmented reality hub, the Province of British Columbia expanded tax credits for VR and AR companies in 2017.
Top-tier tech Talent in Vancouver
Vancouver’s tech scene has continually drawn strength from an abundance of homegrown and immigrating tech talent. This is in spite of the fact that wages have remained relatively low when compared to global tech centers. In addition to the gravitational pull of a burgeoning tech scene, Vancouver has kept and drawn tech professionals for its smart infrastructure, an emphasis on work-life balance, and vibrant cultural scene.
With the University of British Columbia, Simon Fraser University, the University of Victoria, Vancouver has a handful of globally recognized academic institutions offering prestigious programs in computer science, engineering, and other tech-related fields. University initiatives like Simon Fraser’s SFU Innovates, which has helped launch 400+ startups, invigorate a strong collegial tech culture.
But perhaps even more important of late is the pool of tech talent arriving in Vancouver from abroad. When the Trump administration introduced new restrictions on H-1B visas for skilled foreign workers, British Columbia led the way in inviting foreign tech professionals to instead migrate to America’s northern neighbor. The British Columbian government began providing US tech companies further incentives for opening offices in Canada. Simultaneously they also had the government to expedite visas for these skilled workers.
Implementing its Global Skills Strategy reforms, Canada’s federal government heeded the province’s example. Canada implemented a system for fast-tracking visas. The federal government also offered a concierge service to assist foreign companies open offices on Canadian soil.
The result has been an influx of highly qualified tech workers. By one count, the number of tech professionals grew by 30 percent from 2017-18.
The history of the Maple Syrup Mafia
In 2013, Ryan Holmes, the founder of Vancouver-based Hootsuite, laughingly imagined Vancouver’s emerging “maple syrup mafia,” likening the growing number of employees-turned-investors in Vancouver to the well-known ‘PayPal Mafia.’
Holmes envisioned a phenomenon whereby Vancouver startups would grow up, get acquired, and enrich employees. These employees would then reinvest their earnings and expertise into new ventures. Ultimately Vancouver would become its own PayPal Mafia. These newly wealthy individuals would famously reinvest earnings from their company’s sale into the next Facebook, YouTube, LinkedIn, and Yelp.
Soon after, the maple syrup mafia manifested. In 2015, when Vancouver-founded PlentyOfFish was acquired for $575 million by The Match Group (Tinder and OkCupid’s global operator), POF’s founder, Markus Frind, reinvested in the local tech scene. He put $9 million into online lender Grouplend and $18 million into online furniture retailer Cymax Stores Inc.
Reinvesting capital in Canada
The same reinjection of capital and expertise occurred with the acquisition of VPN provider Betternet in 2015. Our group of cofounders used the profits to launch the venture capital firm 7 Gate Ventures. Since then we have re-deployed that capital in the Vancouver digital health company Metaoptima. We’ve also invested in local drop shipping software company Sprocket. The latter recently raised $2 million in funding, while the former closed an $8.5 million fundraising round last year.
The phenomenon has occurred time and again. You can see this most famously through the local reinvestments of Ryan Holmes and Slack’s founder, Stewart Butterfield. Recycling capital and know-how from successful local companies into other hometown ventures generate a cascade effect. This effect is currently fueling the Vancouver ecosystem’s growth.
There is a good reason, then, to expect much from Canada’s Pacific tech capital. Without a doubt, every rising tech hub has its obstacles, and this city is no exception. But with prudent policy already improving housing costs, and the need to compete eventually pushing wages up, the buzz surrounding British Columbia looks well warranted.
Ramin Behzadi, Managing Partner of 7 Gate Ventures, an early stage venture capital firm based in San Francisco and Vancouver
