Toronto is broken

Editor’s Note: This is a cross post from Zak Homuth (LinkedIn, @zakhomuth) originally published August 7, 2012.


Image by John Cavacas link

I’ve got bad news. And I don’t really know a better way to say it, so I’m just going to tear the bandaid off, one motion, no fucking around. Here goes…

Toronto is broken.

Ugly right? We’re the 4th most active startup ecosystem in the world. We’re the largest ecosystem in Canada. And were the best non-US city for funding.

But there are some very serious problems under the covers.

Toronto is a young startup ecosystem, largely because it wasn’t always possible to run a startup here. This has 2 effects as far as I can tell. The first is that most of the entrepreneurs here in Toronto are very young, the average age is definitely lower than the Startup Genome Project average of 33. And the second is that almost all of us aren’t tied to Toronto. We have all been somewhere else, worked somewhere else, and got money somewhere else.

Weak Founder Network

Being young & unconstrained means we don’t brag about or lean on our native networks in Toronto. We brag about our investors and mentors in the valley (like we all haven’t been), we try to impress our Toronto network instead of learning from them, and we don’t trust our peers here to help us succeed. Its ok. And its pretty normal from what I’ve seen in other fledgling startup communities.

BUT until we can trust and work with our peers here in Toronto the community will continue to flounder. We will continue to leave (not necessarily a bad thing). We will continue to NEED other networks. And getting together will continue to be about bragging instead of helping and learning.

Small Ideas

I’m not sure if this is because the ecosystem is so young. Or because our service providers think they run startups. Or because we’re a largely Canadian club. But our ideas on average aren’t world changing. We dream of things that already exist. We dream of parts of other company’s visions. We dream of features. We dream of being an Instagram for Instagram rather than Facebook, Go instead of Google, CRM instead of Salesforce.

This is a theme across the startup galaxy right now. But we aren’t helping. Why not be the place big ideas come from? Why not be known for dreaming bigger? Lets be frighteningly ambitious. Lets change something. Fuck the $25MM Google acquisition. Can we please do a little bit more than building another feature for Salesforce?

Crossing The Scale Gap

We have almost zero entrepreneurs and early employees experienced at scaling. It might even be the real reason for the pre-scale acquisitions lately. We can’t cross the gap. Who are you going to hire to scale your marketing? What about sales & bd? Or support? Or product management? Have they ever done it at a startup before? Better still, will they – without a question – give you an unfair advantage because of how awesome and repeatable they are at it? I doubt the list is any longer than a few names for each – and I bet most of them are running their own startups or have retired.

There is a huge void here that doesn’t exist in SF or even NYC. We have very, very few startups that have achieved scale, cycled, and produced experienced founders or employees that want to go back out and do it again. This is why so many of our startups open offices in San Francisco or Palo Alto. Will you? Does it bother you that you have to split up your team, or move? You need to move if thats how you win – but could we ever help each other to do it here at scale?

Mentorship

Its pretty weak in Toronto. Its a side effect of the same lack of experience. The same lack of cycling. And there just isn’t the same kind of culture of free giving that exists in the valley. We have this sort of East Coast I work to get paid mentality that doesn’t jive so well with mentorship. All that being said I can’t fix this. This is a huge problem that has cultural roots, a lack of raw material, and well all be dead (or at least our startups will be) by the time it gets fixed.

My advice: Get a mentor in the valley, and figure out how to use skype.

Capital

Don’t waste your time raising in Toronto. If you can and do raise elsewhere Toronto will pay attention. If you can’t, they still wont. And the best part is you don’t need permission to be in Toronto anymore if this is the right place to run your business.

My advice: Raise the money where you can, run your business where you need to, and get the fuck back to work.

But…

There still are some pretty great things about Toronto. Hell, I haven’t left yet. The talent here is A+, the money goes further, the government helps, its one of the biggest economies in North America (ie. fuck loads of customers), and you can build a first class startup culture of first class talent that has worked at startups in the valley and abroad.

So lets fix the broken parts. I think its still worth it.

Too much words? In picture form!

Problems I’m trying to fix:

  • Build a stronger founder network
  • Encourage and enable bigger ideas
  • Fill-in or otherwise enable companies to cross the scale talent gap

Things I’m NOT trying to fix:

  • More and better mentorship
  • More and better capital

About Me

Upverter is my 3rd startup. I dropped out of highschool, and then university, both times to run startups. I’ve worked in Ottawa, Waterloo, Stuttgart, Bangalore, and Mountain View. I have never lived in Toronto before, so it’s a first for me, but we’re here because it’s where our team wanted to be. And I’m not ok sitting back and letting this opportunity – to make Toronto kick more ass – pass me by.

Wanna join the cause?

Shoot me an email ([email protected])

  • http://startupcfo.ca/ Mark MacLeod

    Hey Zack, if you care about the Toronto ecosystem, the best thing you can do is focus 100% on building Upverter. Period.

    The grass is always greener elsewhere and I could point numerous exceptions to every point you have made. 

    Every city has its issues. Even in the Valley.

    Just build a great company.

  • Cphoward

    Zack and Mark, good points on both sides, overcoming the challenges that Zack lists are indeed the mission of the builder and yes Mark there are are exceptions or examples of where Zack’s observations can be countered but that doesn’t mean he is wrong nor that he should be ignored (not suggesting you are ignoring him).
    I would observe after years of Global living and working and growing businesses – that our great country and Toronto in particular needs an injection of a sense of “Plenty” not scarcity; community not islands; and yes Zack big ideas that build big Canadian companies that anchor the eco-system.
    Go forth and build a great company! Ask for help if you need it! Challenge the ‘current state’!

  • bat9991

    Zack,
    I think you hit the nail on the head here. Many times I keep thinking why I shouldn’t just take the plane and move to the valley, and the sad part is that whenever any of my friends build something awesome they just pack their stuff and move there.

    Mark, yes of course focusing on building your own startup is the number 1 priority, but an ecosystem is very important, you need other founders/developers to scale, you need mentors, you need funding, and if being in Toronto puts you at a disadvantage in all of these we need to somehow fix it… if we can
    Yes, the grass is always greener on the other side, but I never met anyone in the valley that thought that, at least in terms of the startup ecosystem.

    Samir

  • http://davidcrow.ca/ davidcrow

    Maybe rather than using the word “ecosystem” because that implies a lot of infrastructure. We are really referring to is a founder “support group”. See http://en.wikipedia.org/wiki/Support_group 

    Sure goal 1 is to build successful companies. But it’s nice to engage with those that have a shared experience, or sympathetic understanding of the trials and tribulations of running a startup. It’s about being able to find support during the downs, to have others that have similar experiences raising money or not, to be able to talk about scaling on AWS, business models that are working elsewhere, hiring front end developers and other dirty bits of startup life over a beer with someone who empathizes and understands. Maybe has some advice or guidance. 

    I believe that we need these networks for our own sanity. (PS I still don’t think the networks are a scaleable business)

  • http://twitter.com/sanj_arora Sanjeev Arora

    Zack, like the post and agree to a certain extent…….Toronto is slow in envisioning the bigger picture and that is the only issue. It is much faster to make Silicon valley understand your big idea/app & get funded but it is also as fast for them to kick your idea out of the door as their big ego doesn’t like to go in detail at first. They all think, it has all been done before & then they end up acquiring 2 people companies from Copenhagen (Podio) & many more..!
    You will see all the support & momentum in Toronto. We (Tabillo.com) just got selected by Canadian Consulate to attend an accelerator program – Canadian Technology Accelerator at New York City, who would do that for you in Silicon Valley.
    Canada takes a building business approach & economy like Hootsuite (Vancouver) raising $50m at $500m valuation, not to just get acquired & move the wealth out.
    just my 2 cents..

    Sanjeev

  • Literacy

    Use apostrophes once in a while. Difficult to take such a poorly written article (or its writer) seriously.

  • http://abdallahalhakim.tumblr.com/ Abdallah Al-Hakim

    Each city has its strengths and weaknesses. I think the article made a good list of these and to me there is no reason any startup should by bound geographically – the internet has no borders and you can do a lot of networking and getting mentoring from virtually anywhere. I do think that Toronto seems a bit isolated from Waterloo and I wouldn’t mind seeing more connectivity between the two startup ecosystems, as they would both benefit. 

  • http://startupcfo.ca/ Mark MacLeod

    Yep, for sure that support is needed, but why look for it locally? If I’m running a SaaS business, I want to hang with people doing similar things. Not people doing other things that happen to be nearby.I advise and have invested in many companies – a small portion of which are in the city I live in.

  • Gerard Buckley

    Good businesses get funded anywhere. Toronto is a vibrant city with lots of resources. If you have a idea that is disruptive, the mentors are here; however, networking to find both financing and mentorship is not easy work. The NACO stats are out funding for start-ups is up in Canada 2011 vs. 201o by almost double. see below.

    For further confirmation look at the accelerators that are active in Southern Ontario. A lot of people are investing both their time and money in this space.

    If an entrepreneur is serious, has a strong work ethic and a great idea then the evidence I see is that there is lots of assistance and capital.  http://www.profitguide.com/news/angel-group-investment-soars-39029

  • http://www.rocketwatcher.com/ April Dunford

    This is a really interesting post. In particular I’m thinking about this statement: “…we don’t trust our peers here to help us succeed.”
    As someone who has worked in the states and come back to Toronto I notice that my homegrown experiences are discounted when I talk to folks in Toronto in a way that they are not when I am anywhere else.
    I don’t see a lack of startup talent here but I worry that there is a lack of confidence in and recognition of that talent sometimes. If we don’t see our world-class folks as such then I suppose we’ll never get the “talent” we are looking for.
    April

  • http://davidcrow.ca/ davidcrow

    I think that Google Hangouts and Skype drinking sessions still mean that you are sitting alone in a room drinking by yourself. 

  • http://twitter.com/honanboss Ronan Levy

    I think this article perfectly exemplifies the problem in the Toronto start-up scene. We are so filled with conflicting feelings of self-doubt the we never strive to achieve anything. The conversation is always “Toronto is great, but…” That needs to change to “Toronto is great, period.” I hate to use a sports quotation, but as Michael Jordan once said, “you have to expect things of yourself before you can achieve them.” The same is true here. 

    A friend/mentor in the venture space told me once that when he finds an interesting startup in Toronto, he’ll often fly the founders down to the Valley to meet with their competitors/peers. Upon their return he’ll ask them if the people they met with are any more qualified than themselves. Almost inevitably, the answer is no. 

    We need to start exemplifying the right attitude, from the grass roots upward. Articles like this – while no doubt sincere and accurate – only serve to undermine the confidence that ultimately needs to be built. So let’s stop spending time critiquing ourselves and start investing the energy into a positive attitude, and building the infrastructure we need to make Toronto an awesome centre of entrepreneurship and innovation.  

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  • http://twitter.com/allenlau allenlau

    This is a very interesting post, especially when it is written by someone who has only been in Toronto for a short period of time.  While for the most part I agree with the assessment, there are also quite a few things that I can’t agree with.

    1) Weak Founder Network

    “We don’t trust our peers here to help us succeed”

    This is far from true.  Getting help abroad does not automatically mean we don’t trust our local peers.  If the market of your service / product is US based, it will be crazy to artificially limit your circle of investors / mentors to just Canadians. 

    I don’t think the problem is lack of trust.  IMO, the problem is lack of self confidence (which April correctly pointed out).  

    A few home runs will solve this problem.

    2) Small ideas

    This is mostly true (sadly).  But to be fair, this is not a problem exclusive to Toronto.  This is a wide spread problem that the valley is seeing as well.  It is less apparent in the valley because they have way more startups than we do (remember, California has more people than Canada, let alone Toronto).  However, I can bet that their percentage of big ideas is not significantly higher than us.  Believe me, there are lots of small ideas coming from the valley too.

    The problem that I see is that we celebrate the $20M exits.  Don’t get me wrong, I know how hard it is.  And any exit deserves a big pat on the founder’s shoulder.  But we really can’t celebrate as if we have won the gold medal when it is only $20M.

    3) Crossing The Scale Gap

    While I agree that this is also a problem, we have to remember that the Toronto startup ecosystem is a startup itself.  We are like NYC a few years ago.  Give it some time (read: a few more home runs) and it will be fixed.  

    4) Mentorship

    “We have this sort of East Coast I work to get paid mentality”

    If you talk to people who work for insurance companies, then yes.  However, I don’t think what you said is true for local startup people.  For example, none of the Extreme Startups mentor get compensated (note: I am one of them).  I can say that most, if not all, mentors are doing this because they want to give back to the community. 

    5) Capital

    While I agree that you should raise the money where you can and run your business where you need to, I wouldn’t say it is a waste of time to raise money in Canada.  Using Wattpad as an example, while in terms of dollar amount most of our capital is coming from US, we have more Canadian investors than US investors actually.

    If you are looking at things that the valley is good at (network, capital etc.), most places including Toronto will be pale in comparison.  But the valley also has its own issues too (e.g. monolithic culture, tendency of focusing on products for the top 1% of the world’s population, especially 1% of the 15-30 male! etc).  I doubt Foursquare, Tumblr or Etsy would be as successful if they were based in valley.

    Building a startup is more than just capital or mentorship or network.  The most important part is the startup itself.  

    Let’s build a few billion dollar startups here and the above problems will go away!

    Time to get back to work …..

  • http://startupcfo.ca/ Mark MacLeod

    Relevant reading recommendation: http://www.amazon.com/exec/obidos/ASIN/1118441540/startuprev-20

  • http://engag.io/ William Mougayar

    Toronto has its issues, but most of them aren’t the ones you mentioned. Maybe you are reflecting based on your own experience, but it’s difficult to generalize and extrapolate. 

    A more constructive post would have been one that is less thin on advice that states the obvious, e.g. get a mentor in the valley, or raise anywhere. Believe me, I’ve done both, and it’s a lot harder than just saying it.

  • http://engag.io/ William Mougayar

    Well said. The more great examples there are, the better the whole place becomes. And this applies to Toronto, Montreal, Vancouver or anywhere. 

    Let’s look at GoInstant- in one scoop, they put Halifax on the map and showed that it can be done from there. That’s worth a lot more than ink or rants.

  • http://www.markevans.ca/ Mark Evans

    No doubt this post struck a chord but I think it’s off the mark and makes some sweeping generalizations. Here’s my response: http://www.markevanstech.com/2012/08/09/no-torontos-startup-ecosystem-isnt-broken/

  • http://www.linkedin.com/in/scottjhoward ScottjHoward

    Love the responses to this and Mark’s post, wrote a longer view on each perspective here: 
    http://scottjhoward.tumblr.com/post/29092146476/to-ecosystem-angst

  • http://engag.io/ William Mougayar

    I think support is part of the ecosystem. @bfeld:disqus calls it Feeders vs. Leaders in his new book, ref: http://startupnorth.ca/2012/08/14/book-review-startup-communities-its-about-the-entrepreneur

  • http://abdallahalhakim.tumblr.com/ Abdallah Al-Hakim

    well written response. A few big homeruns will indeed change the mindset of the city. I always like to refer to the Canadian example of owing the podium during the Vancouver Olympics. Once we decided that we need to go for it and celebrate big victories – we were able to do it.

  • http://davidcrow.ca/ davidcrow

    But it is also a classical problem when a feeder tries to control the community.

  • http://www.twitter.com/luclalande Luc Lalande

    What would Marcel LeBrun have said about Fredericton’s startup ecosystem?

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