Why Toronto is the Best City for B2B Startups

startupsWithout patting ourselves on the back too much, Toronto is starting to emerge as one of the world’s leading and most vibrant startup communities.

In particular, Toronto has become one of the best places to launch a B2B startup.  If I could be so bold, Toronto may be the best place to launch a B2B startup.

Here’s why:

1. A great pool of talent, particularly developers whose skills and experience are as good as anywhere and, as important, reasonably priced compared with places such as Silicon Valley. We’re also seeing a growing number of repeat entrepreneurs and more executives with solid marketing and sales experience. In other words, there’s plenty of startup bench strength in Toronto.

2. There are many large enterprise companies who can become customers of early-stage B2B startups. This includes Canadian companies, as well as foreign companies with Canadian operations. A Canadian startup, for example, could sell its product to a U.S. company based in Toronto, which would give it a great foothold to sell into the U.S. parent. An entrepreneur recently told me that Toronto is a great place to start a B2B business because the first five customers can be easily attracted to provide product market validation.

3. A strong and tight community of investors, entrepreneurs, service providers, incubators, accelerators and schools that make it easy to make connections and get the support needed to establish and grow a B2B startup. This is probably one of the biggest assets of Toronto’s startup community, although we may not completely appreciate it. You only have to look at the number of startup events to realize the vibrancy and activity of the startup landscape. I would argue the community has been nurtured over the past five years, and it is now starting to bear fruit.

4. There is growing access to capital, although there is room for improvement. Over the past few years, more capital has become available to B2B startups to make it easier for startups to get going. One of the reasons why B2B startups are attractive to investors is they can go after specific markets, driving development, marketing and sales efficiency. That said, there is still more series A money needed to accelerate growth once a B2B startup gains solid traction. The big thing that has to happen is the return of institutional investors, who have been on the sidelines for far too long. In the meantime, Toronto is a short flight from New York and Boston, making it easy for U.S. investors to invest in Canadian startups.

5. The rise of incubators and accelerators such as Jolt, InCubes, Extreme Startups, Ryerson DMZ, Drive and Hyperdrive that are developing, nurturing and developers entrepreneurs, while turning their ideas and projects into viable businesses. Many of the startups involved in these programs will fail but the experience gained by entrepreneurs along the way will be invaluable.

What do you think? Is Toronto a B2B startup haven?

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  • Brian Hartlen

    Great Article, I couldn’t agree more that Toronto is a great place for a startup.

    On access to capital – I have noticed companies like Grand Banks Capital recently investing in a couple of companies in Toronto. I imagine if they have a couple of opportunities there may be more. What do you think about more US based VCs recognizing the opportunities here and looking specifically to invest in Toronto?

    On selling to lots of big companies in Toronto – While it’s true there are a big companies here to sell to, I caution that the buying process for enterprise software in Canada is different than in the US. I will probably get slammed for this but I find that Canadian enterprises are much more risk adverse and much slower to adopt newer technology. I would consider a tactical entry to the US early in the process.

    • Mark Evans

      Brian: I think a growing number of US VCs are looking at Canadian startups because there are more good ideas and a great talent pool. It’s interesting to get your insight into the risk appetite of Canadian enterprise customers – thanks for that and the comment.

  • Adam Jarczyn

    Really enjoyed reading the article Mark. It’s a close community too – only 1 to 2 degrees of separation which means there is a lot of great support in the city. Access to capital is a tough one, but from my experience I agree that B2B is a much more attractive business model for the Canadian investors.

    In reference to Brian’s comment – I think it matters what the startup does, who the target customers are, and how developed the market is for the startup’s technology. I can speak only for myself, but our business has been described as Shazam for Shopping – and there is a bit of an education curve we need to overcome to explain what we do. That’s why I make comment to how developed the market is for the particular tech being sold.

    Overall i see a lot of people in Toronto, including investors, mentors, incubators, and companies all being very open to getting involved with startups and for that I 100% agree its a great city.

  • Matthew Potter

    As an example of such a strong developer community here in Toronto, know that on May 5th, many of the developer community leaders are having one of our regular meetings together to discuss past, current and future events. We regularly like to meet to maintain good relationships, cross-promote and also see where we can support each other.