OTTAWA IS A TECH HUB – DEAL WITH IT

By: Ryan Gibson | Aug 17, 2016

A few weeks ago, the firm Expert Market published a fantastic piece. The headline was “World’s Best Tech Hubs To Live and Work In.” It had lots of great data, great visuals and had two great Canadian cities on the list. A larger spotlight on what’s happening within the country’s innovation economy is always a good thing.

I see these lists week after week, month after month — whether it is “emerging hubs” or “top tech cities” or “where VC lives” or “top innovation cities your grandparents will approve of” (yes, I made that one up. You watch though, someone will write it)… and each list always leaves me wanting.

I’m tired of it.

Yes, these lists are subjective but the same cities show up time and time again. My patience has run out. People keep bypassing Canada’s Capital, dismissing its rich tech history and exciting tech future.

So instead of waiting, I’m going to break down the data and show you where Ottawa stacks up.

But first some background.

A TECH STAR IS BORN

Ahhh… the mid-nineties.

Ottawa’s own Alanis Morissette dominated the music charts, Canadian icons Mike Myers and Neve Campbell ruled the box office and young teens were spending every waking hour trying to keep their Tamagotchi alive.

Alanis Morissette, Mike Myers, Neve Campbell, Tamagotchi

Culture!

It was during this era that Ottawa was a global epicenter of high tech. Companies like JDS Uniphase, Cognos, Mitel and dozens more were riding the wave of the internet boom. It was led by Nortel, the crowning jewel of Ottawa’s tech landscape. At its peak, this global juggernaut employed approximately 60,000 people (Fun Fact: today Google employs 51,000 people worldwide). Overall, more than 11% of Ottawa’s workforce at the time had a job in technology (that’s one in ten friends).

Nortel HQ in Ottawa, Canada

Nortel HQ in Ottawa, Canada

Ottawa was part of an intense worldwide race to build out the infrastructure of the internet and our city was really good at it. Innovation flourished and money flowed. In fact, Michael Cowpland, the flamboyant CEO of Corel, built a multi-million dollar estate in swanky Rockliffe Park that was TINTED WITH GOLD!!!

Michael Cowpland's multi-million dollar estate in Rockliffe Park

Seriously. Gold.

Top this off with expensive cars, lavish parties hosted by newly cemented billionaires and Ottawa was bestowed the moniker of “Silicon Valley North.”

SILICON VALLEY NORTH IS DEAD. LONG LIVE SILICON VALLEY NORTH.

March 10, 2000 is the date modern historians (aka Wikipedia) say the dot-com bubble burst. The expensive cars were parked, the champagne corks stopped popping and dozens of companies battened down the hatches. Some large players like Mitel survived but many multi-billion dollar companies were bought at a fraction of their previous valuation or they simply hung a “closed” sign on the front door. Nortel, once king of the mountain, was the hardest hit with many losing their jobs.

As Globe and Mail reporter Sean Silicoff wrote recently,

That era is long gone and, for many here, best forgotten. Most of the city’s flagship tech companies of that time have downsized, disappeared or sold to foreign multinationals. Nortel is no more. There’s no direct flight from Ottawa to San Francisco.

It sucked.

There are no words to adequately express how much it sucked. People still bring it up to this day. Now the phrase “Silicon Valley North” has faded from people’s vocabulary when referencing Ottawa. Since then, cities across the country have been constantly trying to lay claim to the throne.

JEEZ DEBBIE DOWNER, WHY SO NEGATIVE?

Because here’s the thing:

SURE, Ottawa hit a bump in the road (as did the rest of the world). However, all that technology, infrastructure and most importantly top-level talent, didn’t just vanish. It simply reshaped and evolved. Nortel’s products were snapped up by firms like Ciena, which now rakes in $2.6 billion a year. Some talent left but most joined new companies or started their own. And finally, that thing that Ottawa had a hand in building (called the “Internet”), well it’s pretty darn important in today’s economy and still needs to be looked after.

Ottawa tech didn’t disappear, it matured.

FINISH THE POSTURING AND GET TO YOUR POINT…

Fair enough.

Like I said there are lists, lists and more lists.

So let’s focus on one in particular, “The Global Startup Ecosystem Report (GSEP)” by the firm Compass. Actually this report was the main source of the first story I highlighted at the beginning of this ranticle. Compass is a startup out of Silicon Valley that puts out these reports on a frequent basis. It’s well thought out and thoroughly researched. Frankly put: it’s awesome.

In the startup world the GSEP is highly respected and often quoted. Here is the list as it was published last year:

Global Startup Ecosystem Rankings

One list to rule them all….

I’m going to highlight some of the categories Compass uses to build its case and compare them to data points in Ottawa’s ecosystem.

CAVEAT: I don’t have access to all the same data as Compass and I am pulling from different organizations that most likely will have different methodologies; so it won’t be a perfect apples to apples comparison. I know that’s not exactly fair but I’m making the case that Ottawa should be part of the global tech hub conversation and a deeper dive by firms like Compass is warranted.

PERFORMANCE

GSEP: “The Performance Index is based on the Value of the Ecosystem, made of the sum of all valuations of startups at exits and at funding events (80%) and Startup Output, the number of startups (20%).”

Since 2012, Invest Ottawa has worked with approximately 1,100 startups and our knowledge-based industry database says there are approximately 580 companies in the city with less than four people. (We could use years founded but today the definition of a startup is very broad. Shopify is still referred to as a startup and they were founded in 2004). The GSEP report defines a startup as “(having) raised at least $10,000 USD in financing, and/or hired at least one employee.

So let’s say there are approximately 580 active startups in Ottawa (I think the number is higher but let’s run with this.) With a population of 1.2 million, that’s a startup density of 0.45; on par with Seattle, Berlin, Montreal and greater than Paris.

As for ecosystem value, Ottawa doesn’t have a strong presence on CrunchBase (and unfortunately I don’t have access to Orbit Intelligence). However, if Ottawa is on par with Montreal and attracting more IT VC investment than Waterloo (more on that in a bit) than it could be argued that the value of Ottawa’s startup community is in the ballpark of $3–5 billion.

FUNDING

According to Pitchbook, here is the amount of VC money that has flowed through Ottawa IT companies since 2013. You can see that Ottawa is ahead of Montreal and Waterloo:

Value of VC Investments in IT Industry (2013-2016)

And here is the number of venture capital deals over $10 million in the last three years:

Number of $10M+ VC Investments (2013-2016)

Finally here are the exits of IT companies in Canada over the last few years:

Technology M&A's in Canada from 2011-2015

Is Ottawa at the top? Nope. Is there a significant amount of capital being invested into Ottawa tech companies? Yep. And for the record, Ottawa punches above its weight in IPO’s:

In the last five years, Ottawa technology companies have raised more money in the public markets than every other city in Canada combined.

MARKET REACH

GSEP: “Access to customers allowing the startup to scale rapidly, based on its local and cultural markets, and its ability to scale globally to markets with different languages and needs.

Depending on the source, the annual GDP of Ottawa-Gatineau is somewhere between $58-$64 billion (USD). How much is driven by the innovation economy? Well, that number is not easy to get at; but if you isolate our technology park (Canada’s biggest btw), it accounts for just over $7 Billion in GDP. And that park houses JUST HALF of Ottawa’s tech sector. So tech in Ottawa is a significant economic driver. And as a predominately B2B tech town — most of the customers are outside the country.

Take a ground-shaking startup like CENX, which has grown its revenue by 500% since 2013. Their software isn’t helping your phone catch the latest Pokémon. CENX is helping giant international corporations like Ericsson and PCCW Global solve key problems.

Or if you’re QNX, your multi-award winning software runs:

  • Most of the slots and games in Las Vegas
  • The biggest routers in the world (aka backbone of the Internet)
  • The water table control systems in the Western United States
  • Rail Transit on two continents
  • The International Space Station
  • and much more.

The same can be said for You.I, Klipfolio, Pagecloud, Ross Video and the list keeps going. We have many great B2C companies but the lion’s share of Ottawa tech companies are B2B.

And by the way, Invest Ottawa also has partnerships signed with incubators in the Netherlands, China, Brazil and India, allowing Ottawa startups to get traction and scale in foreign markets. In fact, since 2012, we have helped nearly 500 companies grow globally. A big deal when you are voted the most business friendly, mid-sized city, in the WESTERN HEMISPHERE.

TALENT

68,000 and counting.

That’s how many people work in Ottawa’s tech sector today. How many have prior startup experience? Honestly, I can’t say. Compass has some great data points when it comes to tech hubs (other than Ottawa). And while my gut says Ottawa isn’t neck and neck with these cities, we’re definitely on the rise.

As for average salary, here’s the data we go by:

Avg salary for a senior software engineer (USD): Ottawa $61,000 - San Francisco $155,800

And when you look at the concentration of talent, Ottawa is bursting at the seams. Consider this:

  • Canada has the most educated workforce in world; Ottawa most educated in Canada
  • We are home to the second largest concentration of scientists and engineers in North America. Guess who’s first? Silicon Valley.
  • Four major post-secondary schools which have a combined student population of 138,000 people (and about 1 in 5 are STEM focused)

YADA, YADA, YADA…

There’s more: we enjoy one of the lowest costs of living in Canada, the quality of life is one of the highest, government support for entrepreneurs is strong, there are hundreds and hundreds of networking events, nearly two dozen incubators and co-working spaces, and so on and so on.

Is Ottawa king of the castle? Nope.

Is it still “Silicon Valley North?” The better question is “does it matter?” Many actually see the label of SVN as a hindrance rather than a term of endearment. In fact, many today say different ecosystems should focus on developing individual strengths and should outright “Stop Copying Silicon Valley.” One of Canada’s top CEO’s, Tobi Lutke of Shopify, agrees (And he calls the 613 home).

…But does Ottawa deserve a shout out when we are talking global tech hubs? AB-SO-LUTELY.

https://giphy.com/gifs/dealwithit-rseRYN6UZCDUQ?utm_source=iframe&utm_medium=embed&utm_campaign=tag_click

I’d love to actually drop all this data into the Compass list to see how it all shakes out. But as I said earlier, I don’t have access to all their data; so it wouldn’t be fair. So send Compass a message and let them know you want a rundown on Ottawa’s tech ecosystem.

If you want to know more about our fantastic city, then click the photo below for a smorgasbord of data and very pretty pictures.

Work in ottawa

Originally published August 9, 2016

Ryan Gibson

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