Toronto’s Flourishing Tech Scene Attracts Investors

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Toronto’s Flourishing Tech Scene Attracts Investors is a contribution to CVCA Central from Crédit Mutuel Equity.

Toronto’s flourishing tech hub continues to grow rapidly and to shine around the globe. The recent inauguration and opening of La French Tech Toronto is just another example of the city’s growing power of attraction as one of the world’s most dynamic tech ecosystems.

The Silicon Valley of the North

With 15,000 tech companies, 5,200 start-ups, and 16 colleges and universities, the Toronto-Kitchener-Waterloo corridor is the largest tech hub in North America after Silicon Valley. Ontario’s capital had 230,000 tech workers in 2018, and the fastest-growing job creation rate in North America with its 54%+ growth over the last five years. This represents a higher growth rate than San Francisco, New York, and Seattle combined, according to an American CBRE study, making it an increasingly attractive market for tech sector investors. In fact, venture capital investments in the region have grown massively year over year, reaching over $2.3 billion in 2019 which represents a 68% increase compared to 2018.

French Tech Comes to Town

It, therefore, came as no surprise that La French Tech wanted to establish its own foothold in this vibrant city ripe with innovation. Created by the French government to mobilize and drive the growth of France’s tech ecosystem within and outside the country, La French Tech is now present in close to 100 cities around the globe. With seven locations in the United States, La French Tech Toronto community was launched in June of this year and is its second such venture in Canada, following an initial presence in Montreal.

Created by French entrepreneurs based in Toronto in an effort to reinforce ties between France and Canada, French Tech Toronto is a new high-profile community of entrepreneurs, executives, investors, engineers, and designers, to name a few. They represent a broad range of tech industries such as AdTech, HealthTech, FinTech, AI, blockchain, infrastructure, e‑commerce, FoodTech, and Tech4Good. While a French initiative, La French Tech has been strongly supported by different tech scene associations and individuals, namely by CVCA CEO Kim Furlong, who believe in the importance of strengthening ties between tech scenes around the world.

French VC Pioneers

As the pioneer of the French investment in Canada, with an established and growing presence on the growth and VC scenes here for over a decade now, Crédit Mutuel Equity was proud to encourage and help facilitate the founding of La French Tech franchise in Toronto. As the private equity arm of one of France’s largest banking groups, Crédit Mutuel Equity is invested in the success of the Canadian tech scenes and in acting as a bridge between European and Canadian tech hubs.

Soon after opening its first Canadian offices in Montreal in 2010, the Crédit Mutuel Equity team quickly saw the growing importance of Toronto as a tech hub and as the key home base to be in to pursue VC investment opportunities in the tech sector – not just in Canada but across North America. The team adjusted its growth plan accordingly.

Today, half of Crédit Mutuel Equity’s portfolio investments are in the Toronto-Kitchener-Waterloo corridor, including positions in Q4 inc. (BtB SaaS for investor relations) and ElevenX in Waterloo (IoT Solutions). One of Crédit Mutuel Equity’s most notable investments, with a very successful exit following its acquisition by Microsoft in 2017, was an AI company Maluuba which was born out of University of Waterloo research studies.

By leveraging its strong and growing Canadian platform, the team has been able to build meaningful relationships both in Canada and in Silicon Valley allowing it to participate in exciting investment opportunities alongside top-tier US-based VC firms. Our investment in Seattle-based Hiya, the 86th fastest-growing company in North America on Deloitte’s 2020 Technology Fast 500 this year, is a prime example. Based in Los Angeles, Scalefast is another good example with US$22M Series B raised this summer.

Inversely, these new partnerships are also sparking US investor interest north of the border, into some of Crédit Mutuel Equity’s existing investments in Canada.

Challenges of a Foreign Investor

The road wasn’t always easy for the French private equity firm in Canada. The reality on the ground is always somewhat different than the business plan on paper.

While there may be many affinities between the French and Quebeckers, coming to a new country still meant adopting new ways of doing business, understanding new value systems, and the importance of taking local considerations into account. This also included adjusting our investment evaluation criteria to understand an entrepreneur’s capacity to succeed in an environment vastly different from France’s. We worked hard to listen, learn and adapt to ensure our integration into an exciting new ecosystem that we knew could bring great value and to gain access to the right investment opportunities – for our firm and potential investees.

Certainly, there were a few hiccups along the way, but lessons were learned over a short period of time and we are proud of what we have accomplished since 2010. Crédit Mutuel Équity’s European roots have brought some great deal of advantages to the entrepreneurs we have partnered with, helping to create links and growth opportunities on both sides of the Atlantic. We look forward to continuing to share the global experience we bring to the table as Canada’s tech scenes continue to flourish.

A Promising Future

As diverse a place as they come, Toronto’s tech scene will continue to attract and benefit from its booming private equity and tech space. Underpinned by a strong entrepreneurial culture and an outstanding pool of talent, initiatives like French Tech Toronto will no doubt only strengthen the city’s flourishing tech scene and further grow its global reputation as the Silicon Valley of the North.