Except, of course, at a hockey game. And, increasingly, in Ontario, where startups, government, industry, universities, angels, and venture capitalists are working aggressively to try to create the world’s leading technology hub.

Source: John Koetsier

Inside Waterloo, Ontario’s new $160M center for quantum computing.

“We want the world’s next biggest tech company to be built in Ontario,” the most populous Canadian province’s minister of research and innovation, Reza Moridi, told a small group of journalists recently in Toronto.

That’s aggression — even if spoken in a kinder, gentler way by an urbane, mild-mannered politician.

It also might strike some as hubris, given that Ontario’s biggest technology story to date is that of a dying smartphone manufacturer, BlackBerry (formerly known as Research In Motion).

But it’s not just words, and it’s not just the government that’s behind this effort.

Ontario’s reverse brain drain

Ontario is home to about 40 percent of Canada’s population and accounts for 48 percent of Canada’s gross domestic product. It’s the fourth-largest population center in North America, after Mexico City, New York, and Los Angeles, and it produces more cars than any other region in North America, including Michigan. Ontario also has the Americas’ second-biggest financial services sector, after New York.

More to the point, it’s North America’s second-leading cluster for technology companies, after California, and has the third-largest concentration of life sciences companies on the continent.

Source: John Koetsier

Google bought local startup BufferBox in late 2012

The government has invested $3.6 billion in those sectors, primarily, over the last decade, with two-thirds going to research and development, and one-third focused on building the entrepreneurship ecosystem.

That money has had an impact.

For years, countries like Canada and the U.K. have complained about a brain drain, with the best talent heading stateside for more options and better pay. Not anymore. In fact, quite the reverse.

“My co-founder left Silicon Valley to come here,” Cream.hr CEO Kateline McGregor told me.

She’s starting her company at Communitech, a thriving, almost frenetic community of startups, accelerators, massive technology companies, students, and coworkers in Waterloo, Ontario. An hour’s drive up the 401 from Toronto, Waterloo is a city of 98,000 that saw more than 500 startups take root in 2012. And the massive burst of innovation has not gone unnoticed.

“Something very interesting is happening here,” Google’s top Canadian employee, Steve Woods, told me. “This area has a very high proportion of startups to population. Google loves startups … and we love to hire entrepreneurial people.”

Woods himself is a Silicon Valley refugee, returning home to Canada after building several companies in the Valley. Google recruited him over the course of several years to lead its Canadian operations.

He points directly to U.S. immigration policies that pose a critical problem for both startups and large, wealthy corporations such as Google. Getting into the U.S. to build a company or join a startup is notoriously difficult and expensive.

Where Woods works: This Google office has a real fireman’s pole, slide, cattle walkway, and more (gallery)

Meanwhile, Canada has just recently taken even more steps — such as the Startup Visa — to make it simpler, quicker, and cheaper to come to Canada.

“Because of visa situations, Canada has received a disproportionate amount of the talent that is coming into North America,” Woods said.

All of that translates into a significant competitive advantage for Canadian startups and tech companies.

More education, more startups

Another competitive advantage, particularly in the Waterloo region, is the constant stream of high-quality students coming out of engineering, math, and computer science schools. I heard this ad nauseam from government representatives I met with, and credible sources in the industry confirmed it.

Source: John Koetsier

University of Waterloo students build startups at Velocity Garage, a for-credit accelerator-like program.

“Waterloo University produces an amazing kind of talent,” Woods told me. “It gives students a great grounding in computer science, but also by the time they graduate they’ve passed through four summers of co-op programs, so they’ve worked at Facebook, at Google, Microsoft, BlackBerry, or other companies.”

Ontario’s 44 universities produce about 30,000 computer science and engineering graduates each year, a steady flow of new talent for the province’s startups as well as established IT, life sciences, and aerospace companies.

By contrast, California — a state with about three times the population of Ontario — produces only 21,000 STEM graduates per year. The results are clear, at least for Woods.

“People that come into Google from the University of Waterloo do disproportionately well,” Woods says.

Source: John Koetsier

One of the meeting rooms at Communitech, a startup mecca in Waterloo, Ontario. Google also has an office here.

Rob Crowe, executive-in-residence for Waterloo-based Institute for Quantum Computing, the second-largest quantum computing research center in the world, agrees.  And he points out another advantage that translates to more startups coming out of key Canadian universities.

According to Crowe, a key difference between the U.S. and Canada is that many Canadian universities have followed the European model of education-funded research and development. Essentially, professors and researchers at the University of Waterloo own any intellectual property they develop, not the institution they work and teach for. That’s an incentive for academics to put their best foot forward while on faculty, and to kickstart companies when their ideas result in a viable product or company.

“This is the university that throws off more startups than any other university in the country,” Crowe told me.

Less tax, more benefits, more investment

All of the above regional traits are excellent for students, researchers, and startups, but there’s also good news for investors. Moridi’s ministry of research and innovation has helped reduce corporate tax, while also providing significant tax credits for companies doing innovative work.

“Ontario has one of the lowest corporate tax rates in North America, at 22 percent,” says John Marshall, president and CEO of the Ontario Capital Growth Corp., Ontario’s voice in two venture funds totaling about $500 million. The funds were raised partially by government, which recently announced intentions to pump in another $50 million, but mostly by venture capitalists and institutional investors.

Source: John Koetsier

Google has invested significantly in Waterloo, Ontario, hiring 200 engineers for its Canadian engineering headquarters.

The goal is simple: Invest in potential high-growth venture-stage startups in Ontario via a fund-of-funds approach that ensures industry participation and leadership in every specific investment. In other words, Marshall puts money into funds assembled by local VCs such as Omers, Northleaf Capital Partners, and Rho Canada. Those VCs in turn drive the actual investments into companies like Shopify, Desire2Learn (which recently closed an $80 million round), Polar Mobile, and BlueCat Networks.

“Our overall aim is to build the ecosystem for innovation,” Marshall says. “That includes the demand side, with accelerators and startups, and the supply side: seed funding, angel investors, and venture capitalists.”

The fund-of-funds strategy appears to be working. Two years ago the average fund size in Canada was $60 million, compared to $180 million in the U.S., but now the average Canadian VC fund is $90 million. Other venture entities, such as Intel Capital and Samsung Venture Investment, are following the money and making their own investments.

When that money gets into the hands of actual startups, it goes further, according to the companies I talked to. The reason is Canada’s federal and provincial research and development credits, which the Ontario government says are “among the most generous of the OECD countries.”

Source: John Koetsier

Ontario had 500 startups in 2012 in Waterloo alone.

Taken as a whole, those credits can reduce the after-tax cost of $100 worth of R&D to just $57 for corporations and just $39 for startups.

Fixmo CEO Rick Segal, an ex-patriate American, says those tax credits are one of the key reasons he chose Toronto as the location for his latest mobile security startup. The CEO of online advertising startup Chango, Chris Sukornyk, told me the same thing.

Marshall says that the credits simply add on to a startup environment that has long stretched every single dollar as far as it can go.

“Our entrepreneurs have already been so capital efficient by necessity,” he says, adding that now that Ontario’s entrepreneurs have access to more money, they’re still using it wisely.

That capital is starting to flow more freely lately, with VC investment up in Ontario in the past few years. But startups, who benefit most from the R&D tax credits, also have additional benefits. Almost every startup that graduates from a major Canadian accelerator such as Hyperdrive and Extreme Startups in Ontario, FounderFuel in Montréal, and GrowLabs in Vancouver, gets offered a $500,000 convertible note by the Business Development Bank of Canada.

That’s cheap and none-dilutive money, and provides more runway for startups. Most of which, realistically, need more than a three-month stint in an accelerator program to become real companies.

Ambition, meet reality

There’s no doubt that Ontario is taking smart steps with the ultimate goal of dominating the business of technology. But can it really out-innovate the innovation capital of the world, Silicon Valley?

Toronto currently ranks eighth on the Startup Genome’s list of global startup ecosystems, just above another Canadian technology hub, Vancouver. Tiny Waterloo ranks 16th with its population of just under 100,000, bringing to mind Tel Aviv, the super-fertile startup ecosystem of 400,000 people that currently holds third place.

Source: John Koetsier

Toronto’s CN Tower

In addition, Ontario officials quietly let me know that they believe Ottawa would have won a spot in the top 20 as well, if Startup Genome had analyzed the data just a bit differently. That would, of course, have given Ontario three cities in the global top 20.

But even considering the province’s leading contender, there’s still a long way between eighth and first. And every country in the world, seemingly, wants to follow the Silicon Valley model to the yellow brick road of employment and riches.

Few succeed.

VC investment in Canada overall is still just a fraction of that in the U.S., with about $1.5 billion invested in the entire country over all sectors in 2012, compared to $8.3 billion invested in the U.S.  in software alone, and another $6.7 billion just in web-based startups. In Ontario specifically, VC investment was just $603 million, compared to California’s U.S.-leading $14.1 billion.

And RIM, with revenues of $18 billion in fiscal 2012 dropping to $11.1 billion in fiscal 2013, is still probably the province’s biggest tech company.

That’s not a good sign.

Turning to BlackBerry for inspiration

Despite the small numbers, startups are increasingly choosing Ontario as home. Taxation and immigration policies as well as investments from blue-chip funds like Union Square and Kleiner Perkins are having a massive cumulative effect.

Even BlackBerry is feeding the culture of innovation in Ontario, despite being in what are perhaps its death throes.

Fixmo CEO Segal says BlackBerry has been an amazing influence in Ontario, and continues to be influential. “There are lots of alumni from RIM, both voluntary and involuntary,” he says with a wry grin.

Marshall says the growth of BlackBerry from nothing to its heights as the first key innovator of the smartphone revolution has had its own impact, regardless of the company’s current situation.

“Now you’ve got kids coming up who saw their parents do it,” he says. “So they believe they can do it too.”

500 new startups in Waterloo in 2012 alone attest to that fact.

In the against-all-odds world of the startup, belief is the key ingredient of success.

Image credits: John Koetsier

Disclosure: Ontario’s ministry of economic development invited VentureBeat to visit the province, and paid my expenses. My reporting, however, remains my own.

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And ePACT co-founder Christine Summers says such a network has a fairly impressive viral component.

Summers calls the company, which graduated from the GrowLab accelerator in Vancouver tonight, the “LinkedIn of emergencies,” because it’s a cloud connector of individuals’ emergency notification information that also functions as an alert system for organizations like schools, clubs, daycares, and youth sports teams.

“The vast majority of organizations put their emergency [contact] information on paper,” Summers says. “This is an opportunity to leverage networking technology for safety.”

The second co-founder, Kirsten Telford, saw that need firsthand. She was living in Japan when the massive tsunami of 2011 wreaked havoc on the coast, killing 15,000, and devastating the country’s infrastructure. And based on what she saw there, Telford recognized that we’re completely unprepared for a similar-size emergency in the US.

ePACT works by operating as a single source of emergency contact information. Everyone puts their data in, including allergies and medications, and organizations and people that need to access it request your permission. You grant permission to authorized organizations, like schools your children attend, or companies you work for, and they now know what to do and who to contact in case of emergency.

“If there’s an emergency, they can blast messages to the whole network,” Summers says. “Schools, for instance, can communicate out to families through text messages, a mobile app, email, and the web, and families can communicate with their network.”

That sounds like a prototypical good thing, but hard to monetize. But in fact, according to Summers, many types of organizations are federally mandated to maintain emergency contact lists. Schools head the list, but community organizations, sports teams, some clubs, fitness centers, and other organizations also need emergency contact information. According to ePACT, organizations in North America alone ask for emergency contact information 900 million times a year.

And it’s all on paper right now. Which means the emergency contact “industry” is ripe for disruption.

“The Toronto School Board, which we’re talking to right now, would save $1.75 million using our system,” Summers says. “Right now it costs them $10 per student to manage via a paper process.”

The co-founders had already raised $800,000 from angel investors before entering GrowLab. The company has five full-time employees, and Summers says it’s on track for 2,500,000 users within its very first year. And each user who joins, spreads the message.

“For every family that joins, we get another three families joining,” Summers told me.

So why join an accelerator?

“GrowLab held our feet to the fire,” she says. “It upped the ante for us … they made us think big and pushed the message: go hard or go home.”

photo credit: selva via photopin cc

It’s startup accelerator GrowLab’s demo day tonight in Vancouver, Canada, and I’m live, on location intrepidly reporting before I dash off to my phone booth tonight to transform into my regular office-bound oafish existence. Demo Day is at District 319, an abandoned Asian movie house-turned funky event space, with ominous No Minors Allowed signs decorating the entrance, and the magic starts in just two and a half hours.

There are seven startups presenting today, all of which received $20-25,000 in preliminary funding from GrowLab in exchange for five to nine percent equity. The founders are currently in their holy-mother-it’s-our-last-chance-to-practice mode, but I’ll be chatting with each in about an hour.

“I’m excited, there’s a lot of energy here … it’s definitely been a journey with GrowLab,” said KarmaHire’s James Clift “I’m super-proud of my team and what we’ve accomplished, and excited for the future.”

All of them spent the last three months working around the clock preparing for this moment:

• ePACT is the emergency network that connects families, organizations and entire communities via web and mobile access to critical information, communication and support in any crisis.
• KarmaHire revolutionizes the 9B recruitment advertising market. It is an optimized hiring platform for fast growing companies to create high converting recruiting pages in minutes, attract better talents, and increase their ROI.
• Procurify is a spend management solution for organization of all sizes. It is an online software that is easy-to-use, secure, and cost effective.
• Spacelist is the MLS for commercial real estate.  With over 16 million square feet of available space, businesses can clearly see all their options, setup a tour and move into a great space with less stress and less confusion than ever before.
• Nanu Interactive develops applications that add sharing and magic to family activities. We want to enrich the things you do by using technology to make them magical.
• OOHLALA is the must have collage app that helps you connect with your campus life.
• Will Pwn 4 Food makes fast-action 3D games that you can play on their website, anytime, anywhere for actual cash and prizes!

Today’s a big day and a lot is riding on the startups’ pitches. Investors and mentors will be in the crowd watching, and up to five of the most successful graduates will receive a convertible note for $150,000 from the Business Development Bank of Canada.

Former GrowLab grads include Skyscraper, which just raised a $500,000 seed round in December of 2012, and Mover.io, which is looking to be be the default mover of data — everywhere.

More a little later today.

Image credit: John Koetsier

Probably something like the video that Debbie Landa just produced. She’s the founder of GROWlab accelerator and GROW conference, and Landa asked the speakers from the recent GROW Vancouver event to contribute their nuggets of startup wisdom.

Who’s in it?

Just Dave McClure of 500 Startups, Box chief operating officer Dan Levin, Zendesk founder Mikkel Svane, the always-entertaining Ben Huh of Cheezburger Network, Sam Zaid of GetAround, and Urban Airship’s Scott Kveton, among several other notables.

Some of the best quotes are below, but here’s the actual video:

Some of the best quotes:

“The challenge with most startups is just dealing with the emotional ups and downs, which can be huge.”

500 Startups’s Dave McClure

“You worry all of the time.”

Zendesk founder Mikkel Svane

“I hit this wall of fear when we were about 30 people.”

Julia Hartz of EventBrite

“I’ve had my share of failures. That’s kinda what makes a person ready for success.”

Scott Kveton of Urban Airship, who pitched VCs unsuccessfully 30 times before hitting pay dirt

“You’re gonna screw up.”

Dan Levin, COO of Box

“Not all of us can lead. But this is a special type of sport.”

Ben Huh, CEO of Cheezburger Network

“If we don’t allow ourselves to make mistakes, we will never invest in things that are radical.”

Jeff Clavier, VC, Soft Tech

“Be brazen, but don’t be arrogant.”

Kate Rutter, cofounder of LUXr

After spending the first ten years of her working life in the fashion industry, Landa moved from fashion to technology. She’s become one of the most influential connectors in Silicon Valley, and has helped, invested in, or worked with over a thousand startups.

We caught up with her at the recent Grow Conference in Vancouver.

VentureBeat: You moved from fashion to technology. Why?

Landa: Fashion’s boring (laughing). Ok, it’s not boring, it’s just … it became monotonous, I did for ten years, and, when you’re in the fashion industry, it’s all about trends and seeing around corners and knowing what’s coming in the next year to two to three years, and it just became repetitive after a while, and the internet came around, and I started seeing that and thinking, OMG, my mind was just blown.

And it was moving so fast, and that was the next cool thing.

VentureBeat: Best funding decision you ever made?

Landa: I think it — DAHHH — putting money into my own company (laughing).

VentureBeat: Best thing about producing conferences?

Landa: The result at the end of the conference: how happy people are, and how you’ve changed their lives.

VentureBeat: Company you helped that you were most proud of?

Landa: Oh, whoa, there’s no way, I’ve helped over a thousand companies … there’s too many to choose from.

VentureBeat: Worst thing about producing a conference?

Landa: It’s like your birthday party that you threw … as many friends as you have you’re never positive they’re all going to come to your party!

VentureBeat: Most regretted funding decision?

Landa: That’s NOT going to happen (laughing).

VentureBeat: GrowLab is in Vancouver. What’s good about Vancouver?

Landa: Let’s be clear. GrowLab is also in San Francisco, and to me what’s most important is the bridge that’s being created between those two cities because I don’t think an accelerator should exist in only one city.

You have to have a bridge to the valley.

VentureBeat: The latest grads from GrowLab: Better than last year?

Landa: Older, more sophisticated, and further along …

VentureBeat: One that’s most likely to go huge?

Landa: It’s between two. I’m going to say Mover.io.

VentureBeat: Investing preference: consumer or enterprise?

Landa: Actually it’s more in the middle zone of SaaS applications. Infrastructure is how I see enterprise, and I want to lean more toward business applications as opposed to straight consumer … I like business applications or developer tools.

VentureBeat: Biggest challenge for first-time entrepreneurs?

Landa: They don’t know what they don’t know.

VentureBeat: One thing you wish every startup CEO would know.

Landa: How to sell.

Photo credit: Debbie Landa