Historically speaking, the technology sector in Canada might not be as rampant as its neighbour to the south – the United States – but up north Canada’s tech unicorns hold just as much potential as their peers.
Across the country, booming technology sectors range from artificial intelligence in healthcare, gaming and e-sports to software as a service (SaaS), augmented and virtual reality and financial technology (fintech), among many others.
In line with this, the S&P/TSX Capped Information Technology Index has had a stellar year, rising by 28.28 per cent year-to-date to 177.99 points. The S&P/TSX Capped Sector Indices provide liquid and tradeable benchmarks for related derivative products of Canadian economic sectors and, in this case, the technology sector.
Putting it simply, the increased performance of the index this year alone has put Canada’s tech sector slowly but surely on par with that in the U.S., and it hasn’t shown any signs of slowing down.
Case in point, in 2021, 15 tech companies in Canada reached unicorn status, which is more than the total number of unicorn companies that were created in 2020. As of mid-2023, roughly 21 companies have reached tech unicorn status across the nation, proving that tech is alive and well here in the Great White North.
But – what exactly is a tech unicorn, who are they, and where are they located across Canada?
Below, The Market Herald Canada dives into what makes a company earn unicorn status, where the top tech hubs are in Canada, and examples of just a few of the top tech unicorns in Canada.
What is a unicorn?
Putting it simply, a tech unicorn is a privately held technology company – meaning it isn’t publicly listed on a stock exchange – that has reached a valuation of at least C$1 billion.
While the phrase is most commonly used amongst venture capitalists, these kinds of tech companies are usually start-ups that are generally working their way to becoming public.
The term was first conceived in 2013 by Aileen Lee, who founded Cowboy Ventures out of Palo Alto, California. Lee had written an article called “Welcome to the Unicorn Club: Learning from Billion-Dollar Start-ups” where she discussed technology companies founded in the early 2000s and estimated that less than 1 per cent of them reached billion-dollar status. The term unicorn resulted in the fact that startups reaching billion-dollar valuations was as rare as finding a unicorn.
Understandably so, reaching tech unicorn status isn’t particularly easy and in order to reach such a monumental valuation, companies must have innovative ideas that will put them on the path for growth, as well as solid plan business plans in place.
Unicorns also have different options when it comes to their exit strategies, such as:
- Staying private, although this might limit future potential growth
- Going public. This allows companies to get the funds they need to grow by way of an initial public offering.
- Mergers and acquisitions, for example, appealing to a larger company that is interested in adding the tech unicorn to its portfolio.
On that note, some start-ups that reached tech unicorn status before going public include Airbnb, Facebook, Spotify and Google among others.
At present, some of the biggest global tech unicorns range from ByteDance wth a valuation of $225 billion, SpaceX with a $137 billion valuation and Shein with a $66 billion valuation to Strpe at a $50 billion valuation, Canva at a $40 billion valuation and Revolut at $33 billion.
Notably, the last half-decade or so has seen a particular increase in the number of tech unicorns around the world. Case in point, at the start of 2016, there were 165 unicorns, and by mid-2021 there were 743, representing a staggering increase of 350 per cent.
Where are Canada’s tech unicorns?
So with that all being told, where are Canada’s tech unicorns, exactly?
As it currently stands, the nation is host to 21 unicorns – otherwise known as narwhals, according to the Narwhal Project.
Although 2022 was more or less a forgettable year in Canada’s tech sector, tech unicorns still thrived across the country. With that in mind, the following regions are home to the biggest tech startups in Canada.
As of Jan. 1, Canada’s top 19 tech unicorns can be found across key cities such as Vancouver, with five tech unicorns; Waterloo, Ontario, with three tech unicorns; Ottawa, with one tech unicorn; Montreal, with one tech unicorn; Mississauga, Ontario, with one tech unicorn; Victoria, B.C., with one tech unicorn; and Toronto, with seven tech unicorns.
Research from Hellosafe.ca estimates that Canada is the fourth-best country in the world for tech startups, just behind the United States, the United Kingdom and Israel. Impressively, this puts Canada ahead of countries like France, Germany and China, and it also has 11 cities that rank in the world’s top 200 cities for start-ups.
Notably, research from the firm shows that Toronto ranks as the top Canadian city for start-ups in 2022, followed by Vancouver, Montreal, Ottawa and Kitchener-Waterloo.
In line with this, more than 5 per cent of the top 200 cities for tech start-ups in the world are Canadian, while 41 Canadian cities ranked among the top 1,000 best cities for start-ups in the world.
Putting it simply, the technology sector is alive and well in Canada, and the nation has nothing but potential when it comes to future growth and companies reaching tech unicorn status.
Who are Canada’s top tech unicorns?
As noted above, at least 19 tech unicorns are in the country. With that in mind, the top five unicorns in Canada, according to the Narwhal Project include:
Founded in 2018 and based out of Vancouver, Dapper Labs is the company behind popular collectible non-fungible tokens such as NBA Top Shot, NFL All Day and UFC Strike and Flow, a developer-friendly blockchain. The company uses blockchain technology to create real-world experiences.
With its headquarters out of Montreal, Hopper was founded in 2007 and is a travel-based app. The company has partnered with airlines, hotels, homes and car rental providers that travelers can book with around the world.
1Password was founded in 2005 and is based out of Toronto. The company is a password manager where users can generate, store and autofill passwords on their mobile devices for all their online accounts.
Ada was founded in 2016 and is based out of Toronto. The company uses artificial intelligence (AI) for customer service automation and helps organizations resolve issues through the use of AI.
Figment is also based out of Toronto and was founded in 2018. The company provides a decentralized staking platform for proof-of-stake (PoS) blockchains. The platform allows users to stake their tokens on PoS blockchains and earn rewards.
The future of tech in Canada
Between 2015 and 2020, revenue in Canada’s tech sector grew at an average rate of 9.4 per cent, and it is certainly showing no signs of slowing down.
Additionally, during the forecast period between 2021 and 2024, it is expected the industry will grow by a total of 22.4 per cent and is, in fact, outpacing the United States in its overarching workforce.
In line with this, the Canadian government implemented a tech talent strategy in June to attract workers from all over the world. Approved applicants will receive an open work permit of up to three years in duration and will be able to work anywhere within the country.
As such because the country is already fourth in terms of start-ups, the potential for more can only go up from here – and where they will come from, exactly, is still to be determined.
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