Why you should care

As the U.S. shuts its borders, Toronto is attracting growing numbers of international tech professionals who would once have gone to Silicon Valley.  

“Nobody calls it Maple Valley,” says Yung Wu. What about Silicon Valley North? No, that nickname hasn’t caught on either, he replies amiably: “We’re not Silicon Valley.”

Toronto’s understated technology community has politely defied outsiders’ attempts to define its rapid growth in relation to California’s unmatched innovation engine. Yet veteran entrepreneurs such as Wu admit to taking some pride in last year’s discovery that Canada’s largest city had created more tech jobs than San Francisco — or any other U.S. metropolis — in the preceding five years.

Its population of software developers, engineers and programmers grew by more than half between 2012 and 2017, according to CBRE, the commercial real estate firm. The 82,100 technology jobs it added over that period made it North America’s fastest-growing tech center, CBRE calculated, to the surprise of many south of the border. Wu, who runs a hub for startups called MaRS Discovery District on the site of Toronto General Hospital, where the use of insulin was pioneered, sees several reasons for this “brain gain,” from the city’s relative affordability to the work being done on artificial intelligence at the University of Toronto.

But he and many of the entrepreneurs on his bustling 1.5-million-square-foot campus credit one new factor with helping Toronto attract ambitious foreign tech workers who would once have headed for Silicon Valley by default: Since the elections of Justin Trudeau in 2015 and Donald Trump in 2016, attitudes to immigration in Ottawa and Washington have diverged markedly.

There was always good tech talent across Canada, but it was largely going south. Now that’s changed.”

Gord Kurtenbach, senior director of research at design software group Autodesk

“There’s a chill going on south of the border,” says Toby Lennox, CEO of Toronto Global, the group tasked with attracting foreign investment to North America’s fourth-largest city. “Right now we’re positioning ourselves to be a lot more welcoming.”

America’s president has made it harder for even skilled foreigners to enter the U.S., where they could undercut the country’s homegrown workforce. His administration has tightened the requirements for granting H-1B visas – introduced to help bring in highly skilled talent – and threatened to ban spouses of people on such permits from working. 

 

Some U.S. executives concede that reforms are needed but say Trump’s actions and rhetoric have left white-collar employees, who once assumed a U.S. visa was almost a formality, feeling insecure and facing unexplained delays. In a tight labor market, corporate America has stepped up its lobbying for a more open regime.

The Business Roundtable (BRT), a group of CEOs from U.S. companies including Apple and Cisco, warned last summer that the Trump administration’s “buy American and hire American” policies were resulting in “arbitrary and inconsistent” visa adjudications. Since then the BRT has called for an increase in the number of H-1Bs granted, more predictability in the way skilled workers’ visas are assessed and greater efforts to retain international students with top science, technology, engineering and mathematics degrees from U.S. universities.

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The prescription has a distinctly Canadian ring to it. Canada already grants foreign students work permits for up to three years after graduation, and in June 2017 the country’s immigration and employment authorities launched a Global Skills Strategy with the goal of making it easier for employers to bring in highly skilled foreign workers.

Among its promises was that work permits for such individuals (and their families) would be processed within two weeks, subject to police and medical checks. Within little more than a year, more than 12,000 people had applied, and 95 percent were accepted.

Some had applied for H-1Bs and been turned down, says Irfhan Rawji, a Canadian venture capitalist who launched a nearshoring company called MobSquad last October to help U.S. tech companies fill vacancies with people based in Canada. “We cannot build this country without skilled workers, and we do not have enough of them,” he says. More than 200,000 people apply each year for the 85,000 H-1B visas the U.S. offers, he notes. “So we knew there were 115,000 people who didn’t win the lottery who were willing to come to North America.”

Canada’s openness to immigration isn’t new: 51 percent of Toronto’s residents were born in another country — more than New York’s 40 percent. But the strategy has given a new tech focus to Canada’s immigration policy: The most common professions among those admitted were developers, computer analysts, university professors and software engineers.

This is already having a tangible impact, according to Elissa Strome, executive director of the $125 million Pan-Canadian Artificial Intelligence Strategy at CIFAR, a research institute based in the MaRS building.

“I think where Canada has really benefited on immigration is the change in our own policy, not the change in U.S. policy,” she says. “When I talk to CEOs, that speed of decision-making is what’s made the difference.”

Toronto’s entrepreneurs say a tech-friendly immigration system is essential because there are some skills they simply cannot find locally. “It is hard to find enough people with experience of large-scale consumer tech companies anywhere other than Silicon Valley,” says Ray Reddy, CEO of Ritual, a food-ordering app for office workers picking up lunch from local restaurants. “We have to import them.”

Ben Zifkin, CEO of Hubba, is among the entrepreneurs to have taken advantage of the Global Skills Strategy. His online marketplace for small retailers is starting a recruitment program in Tel Aviv to bring soldiers leaving the army to Toronto for a year. “If you want to come up here, I will have you a visa in two weeks. The ability to say that was a pretty impactful thing,” he says.

Among Toronto’s recent arrivals is Protik Das. He moved to the U.S. from Bangladesh in 2012 to study aerospace engineering at Georgia Institute of Technology, but the defense companies he met made clear that they were not interested in hiring non-Americans.

He tried his own startup but discovered that he could not apply for an H-1B visa while working for himself and would have to leave the U.S. within a year of graduation unless he could find an employer in the field he had studied to sponsor him. So in September 2017 he moved to Canada, where he is now an engineer with a company applying digital technology to wound care.

Bangladeshi friends who opted for Canadian universities were “way more relaxed about the situation,” he says, adding that he now advises younger Bangladeshis to choose Canada over the U.S. 

Das struggles to understand why the U.S. accepts bright foreigners to its universities, trains them and then lets them slip away. “Very talented people are spending a lot of money to come and study in the U.S.,” he says. But the country’s visa process ensures U.S. companies “end up losing talent,” he argues.

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Canada’s more welcoming approach has not only helped pull in people from the other side of the world such as Das, Hubba’s Zifkin observes — it has also made it easier to attract Americans and coax back Canadians working in the U.S.

“When 2016 happened, everybody thought that every tech worker would be walking across the border from Buffalo,” he says. “It wasn’t going to happen, but we now have the ability to go to New York and the Valley and wiggle people out.”

Canada has long worried about a “brain drain,” and a recent study found that a quarter of the 2015 and 2016 STEM graduates from the Universities of Toronto, British Columbia and Waterloo were working outside the country, most of them in higher-paying U.S. tech clusters. But a growing domestic tech industry is persuading more Canadians to stay or to return.

Ian Logan is among those who have come back. He grew up in Toronto but moved to the U.S. after he graduated in 2008 because the biggest Canadian name he knew in technology was RIM, the company that brought the world the BlackBerry. He ended up working for Airbnb in San Francisco but wanted a more family-friendly city when he and his wife had a child.

He returned to Toronto in 2017 to “a dramatically different tech scene” from the one he left and a job as vice president of engineering at Drop, a 60-person company with a loyalty points app. Several former colleagues are now considering following him north, he says, “because they have real visa challenges” or because they are attracted by Toronto’s lower cost of living.

“There was always good tech talent across Canada, but it was largely going south. Now that’s changed,” says Gord Kurtenbach, senior director of research at design software group Autodesk, who worked at Apple and Xerox Parc a generation ago.

“I never believed in my lifetime I’d be back working in Toronto,” he says, sitting in his AI-designed office on the MaRS campus. A decade ago, he says, his computer science lab was the only one of its kind in Toronto. Now, there are more than a dozen: Uber set up a Toronto lab in 2017 to research self-driving cars, Samsung has an AI center in the MaRS building and Nvidia and Microsoft are among the U.S. companies that have hired researchers in the city.

Such companies once used Toronto only as “a holding pen” for international employees waiting for U.S. visas, says Ritual’s Reddy. “Now it’s starting to be the end destination.”

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Mary Louise Cohen, a Washington lawyer who set up a company with her husband to connect skilled refugees with employers around the world, recalls a meeting on immigration they attended in Ottawa in 2017.

“It really struck us how Canada saw that they were in a global talent competition and how they intended to win,” she says. ”Canada, I think, recognizes that they are a country of immigrants, that their strength is because of their diversity and that to grow and expand they have to bring in the best and brightest around the world.”

Trump surprised many in the U.S. business community with a tweet in January in which he promised reforms to the H-1B program “to encourage talented and highly skilled people to pursue career options in the U.S.” But CEOs have seen little action since, and their hopes for bipartisan immigration reform are ebbing as 2020 election campaigning kicks off.

The prospect of a change in Washington is one challenge Toronto Global’s Lennox sees on the horizon for his city. “At some point, Trump is no longer going to be president,” he says, and his successor could make it easier for those with tech skills to choose the U.S. Before that moment, he says, “the trick is for us to translate the momentum we’re seeing now into something that’s abiding and resilient.”

To do that, Toronto’s tech companies will have to show that they can compete with the best of Silicon Valley, says Hubba’s Zifkin. “The people we’re trying to attract to Toronto are world-class folks. All they care about is working for winning companies.”

Wu of MaRS insists that Toronto can create enough winners. “We have the opportunity to see our entrepreneurs like we see our hockey players,” he says. “We can always apologize after we’ve won.”

The Hunt for a Canadian Unicorn (Or Is It a Narwhal?)

Kerry Liu is not worried about Toronto running short of technology talent. “What we may have is a shortage of commercialization success,” says the CEO of Rubikloud, an AI company that helps retailers use their data.

Toronto’s tech scene has many assets other cities would envy: incubators, commercially minded academics and industry-friendly politicians. But it lacks a homegrown unicorn, a startup privately valued at $1 billion or more.

The reasons, industry leaders say, include funding shortages and a lack of big company experience. “We don’t have enough venture capitalists in Canada and we don’t have enough really talented leaders who have the experience of taking their companies to a bigger scale,” says CIFAR’s Elissa Strome.

VC investments in Canada jumped 35 percent to a record $3.5 billion in 2018, of which Toronto companies raised $1.3 billion, up from just $300 million in 2013, according to PwC and CB Insights MoneyTree. But this is still a fraction of the $99.5 billion VCs invested in the U.S. last year. Toronto also lacks senior leaders with experience in building companies to scale, Liu says. “What you won’t find here are too many people who’ve taken a company from the $100 million level to $1 billion.”

MaRS Discovery District’s Yung Wu believes his campus is breeding “the next 20 unicorns,” pointing to life sciences company Highland Therapeutics as a possible contender. Hubba’s Ben Zifkin agrees that 20 to 25 Toronto companies have that potential, naming Ritual and Drop among them, but thinks only two or three may realize it.

When they do, they may not be known as unicorns. In 2014, Brent Holliday, a Vancouver-based mergers and acquisitions adviser, decreed that Canada needed its own name for $1 billion startups: narwhals.

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By Andrew Edgecliffe-Johnson

OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2019.

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