Special Feature: Inside Vancouver's great tech evolution
An in-depth look at the history and promise of Vancouver’s tech ecosystem.
|Paul Welsh||May 26||2||1|
In 2018, the founders of Vancouver’s Thinkific had a decision to make.
Launched in 2012 as a platform that allows people to create and offer courses online, Thinkific had seen impressive year-over-year growth in customers and revenue, going from $6 million in 2018 to $21 million in 2020. The founders, brothers Greg and Matt Smith, along with co-founders Miranda Lievers and Matt Payne, considered all options for the future of the company including potentially selling, raising more venture capital or taking the company public. They decided the best approach to help course creators, given the massive scale of the opportunity, was to go public.
“We just felt we had a lot more ahead of us,” Greg Smith says.
Thinkific’s team set their minds to an IPO and on April 27, 2021, the company went public on the TSX, valued at more than $1.2 billion at the day’s close—up 20 percent from the opening price. They effectively joined the unicorn club (companies valued at more than $1 billion)—along with others in the BC technology sector including Galvanize, purchased in early 2021 by New York-based compliance software giant Diligent for reportedly $1 billion USD, and Clio (the legal software service provider) who announced an April financing at a $2 billion valuation.
Alongside these next level valuations, other BC-based industry leaders have emerged: AbCellera in the life science space, BroadbandTV (BBTV) in online content distribution, Boast.ai in R&D tax credit automation, and Vancouver’s Dapper Labs, which almost single-handedly lit the fuse on the global NFT market and is now one of the most valuable crypto companies in the world. Global technology leaders Microsoft and Amazon have committed to expanding their BC-based workforces by thousands. Vancouver-based VC firm Version One’s big bet on crypto has become a “fund maker,” leading to a recent announcement that the fund is stepping out to play on a global stage.
All signs point to Vancouver and BC’s emergence as a technology sector with heft. But this isn’t the first time BC’s tech sector has boomed. The nineties saw PMC Sierra, Sierra Wireless, Creo and Electronic Arts. In the early 2000s, we saw big name companies in the life sciences space, gaming and VFX, and alternative energy.
Exploring their options just like the founders group at Thinkific, founders in some of those companies made different decisions, selling before their companies reached scale. And while those exits returned money to founders and backers, in many cases it meant putting an end to hopes of building homegrown technology powerhouses.
So, after having lived and worked through previous technology booms in BC for the past 30 years, I have just one question: is this time for real? Can Vancouver and BC become home to global companies hiring the best and brightest from our colleges and universities, attracting talent from anywhere and everywhere to work on technology making a difference in the lives of people in every corner of the world?
I was lucky enough to speak with long-time entrepreneurs who have worked in the local tech sector for decades, policymakers and industry representatives, and leaders from the companies scaling their businesses and making headlines today. When I started down this road, I was assuming the answer to my question was about boom and bust, with people, capital and knowledge grown here and then fleeing, with those left behind picking up the pieces and starting the climb back up all over again.
But the answer to whether we are witnessing a step change in the health and strength of the British Columbia innovation ecosystem is a lot more nuanced than that. This isn’t a story about revolution, with things breaking and being rebuilt.
This is a story about evolution.
It was the early 1970s and Robert Metcalfe, an American engineer credited with inventing the ethernet who would go on to found 3Com, came up with a concept about how networks expand and create value. What became known as Metcalfe’s Law states that a network's worth is the square of the number of nodes in the network. For example, if a network has 10 nodes, its inherent value is 100 (10 x 10). Metcalfe’s Law has spawned the theory of “network effects,” which is credited with the growth of some of the world’s biggest technology companies from Airbnb to Facebook to Uber.
But long-time BC entrepreneur Jeff Booth says network effects not only apply when establishing technology platforms and companies, but technology communities and ecosystems as well.
Booth co-founded building industry online marketplace BuildDirect in 1999, running it for almost 20 years before exiting in 2017. Booth suggests the strength of any regional technology ecosystem relies on the correlation between knowledge, people and capital and it takes time to build all three. But once you do, network effects kick in.
“You have more and more capital, more and more knowledge and more and more really good people building that network,” Booth says. “So [the BC tech ecosystem] is very different today, but it’s only different because the network effect is stronger today than it was in the beginning and it takes a long time to build that. And you are building it through the successes and failures of companies.”
In Booth’s case, his network is expanding all the time. He is co-founder of another marketplace serving Thailand and Southeast Asia, NocNoc (“it’s already bigger than BuildDirect ever was,” he says), serves as chairman of agtech companies Terramerra and CubicFarms as well as fractional real estate ownership platform Addy, and is a Fellow with the Creative Destruction Lab that provides mentoring and support to early-stage companies.
“And that’s just me,” Booth says. “There are more and more people like me with similar stories in Vancouver who are seeding the community with their time, mentoring and capital and that’s helping fuel the growth we’re seeing now.”
One of the pitfalls of living in the modern moment is a certain level of myopia. We lose connection to our history and past, ascribing more to the current point in time than might actually be due—things tend to be bigger, better, first, best seen through today’s lens alone.
But it’s not like we haven’t created leading technology companies in BC before. At its peak, Creo, a pioneer in the digital transformation of the printing industry founded by Ken Spencer and Dan Gelbart in Burnaby in 1983, grew to 4,200 employees around the world and billions in revenue before a $1.2 billion sale to Eastman Kodak in 2005.
Geoffrey Ballard and the engineers at Ballard Power Systems blazed a trail for commercial application of hydrogen fuel cells for both industrial and transportation applications, leading then-BC Premier Gordon Campbell and California Governor Arnold Schwarzenneger to dub the west coast of North America “The Hydrogen Highway.”
In 1982, Don Mattrick took a $4,000 investment in the video game Evolution (deemed by some as the first Canadian video game to go into production) and formed Distinctive Software with high school friend Jeff Sember. Sember left in the late 80s and Mattrick sold Distinctive to Electronic Arts in 1991 for $11 million, leading to the creation of EA Canada and seeing its Burnaby campus become EA’s largest studio worldwide—as well as spawning an entire industry of gaming and creative technology companies in Vancouver.
A little-known Vancouver company, Consumers Software founded by Jack Grushcow, turned to a junior engineer by the name of Dick Hardt in 1986 to take their core email product, Network Courier, and package it for use on Microsoft Windows—with Network Courier (and the people from Consumers Software) becoming the core technology behind Microsoft’s email applications for years to come.
And local dreamers and builders haven’t been shy in their willingness to take moonshots—literally. The granddaddy of BC technology companies, MDA (formerly MacDonald Dettwiler and Associates), was founded over 50 years ago in Richmond, BC. The maker of the Canadarm, a feature of NASA’s space shuttle and Space Station programs, continues to be a global leader in space and radar technology, going public with a $400 million IPO on April 7, 2021.
The team at General Fusion, based in Burnaby, is in a global race to harness the power of the sun and deliver commercially viable clean energy through nuclear fusion—the holy grail for those in search of an endless supply of abundant renewable energy. Founded in 2002, the company has raised more than $200 million in private capital to date and boasts Amazon’s Jeff Bezos and Shopify’s founder Tobias Lütke (through his venture firm Thistledown Capital) on its cap table.
Nobody can say BC technology companies have lacked ambition. But as long-time venture capitalist and industry watcher Brent Holliday of Garibaldi Capital Advisors says, we’ve had trouble in the past balancing talent, capital and ideas—the three legs of the stool Holliday, Jeff Booth and many others I spoke with feel are required to sustain a tech ecosystem consistently over time.
“I used to say back in the late 80s and early 90s that everything in the tech industry in Vancouver was like a teenager. We weren’t quite there—we were gangly and falling over—but had successes based on raw talent,” Holliday says, pointing to companies like Creo, MDA, MDI (which sold to Motorola) and PMC Sierra. “The problem was, we didn’t have enough of it to create critical mass and what we did have was being sucked up by these successes.”
Bijan Sanii, a serial tech CEO and community builder and current CEO of Inetco Systems, has had a front-row seat to the evolution of BC’s tech sector. He led Infomax Computers, a value-added reseller, in the 80s, was COO and member of the executive team that took Infowave Software public in the late 90s before the dot-com meltdown, was Executive Chair of video streaming compression technology company UB Video that saw a $40 million exit in the 2000s, was a long-time director of CEO association ACETECH, and helped guide the gaming and creative technology industry as former vice-chair of NewMedia BC.
Like Holliday, Sanii argues that BC has always had talent. But lining that talent up with capital has been a constant struggle.
“Don’t tell me we haven’t had the talent in this market,” Sanii says. “Don Mattrick came into my shop on the corner of Burrard and Pacific in 1983 with an application he had written, the game Evolution. He was shopping it around himself! And that talent has led to billions of dollars of assets for EA. And that’s just one example. But capital hasn’t always been available.”
Sanii argues the sector has struggled under the weight of a capital pool that, at times, lacked ambition, and was experiencing its own growing pains.
“It’s not like there was a long list of venture firms around in the 80s and 90s and 2000s—not like what we’re seeing now,” Sanii says. “Investment infrastructure in Canada has not been the same as in California and centres like Boston and New York—multiple centres in the US where the concentration of capital and the willingness to invest that capital in risk has been way more pronounced. And Vancouver is still developing that—both in terms of critical mass and Canadians being more aggressive around risk.”
One place where there have been attempts to bring Holliday’s “three legs of the stool” together is through accelerators and incubators. Over the past 25 years, many have come and gone—the NewMedia Innovation Centre (NewMIC), the Hydrogen Highway Project, the BC Technology Industry Association’s Centre for Growth—and all with seemingly the same mandate: bring together government, industry and companies to grow, build the talent pool, support founders, increase access to capital, and advance the sector.
In my previous life as a partner in a Vancouver agency, my firm helped a number of these groups with their marketing and communications work. And while they all spoke to the virtues of partnership and collaboration, there always seemed to be something missing—a certain lack of urgency and focus on outcomes.
Today, we have another example of government and industry coming together: Canada’s Digital Technology Supercluster. Launched in 2018 with $153 million in funding from the federal government and $200 million committed from industry members, the Digital Supercluster is focused on playing to the BC tech sector’s historical strengths in digital technology to solve real societal problems. Different words but similar ambitions to partnership organizations from the past.
I asked Bill Tam, the Digital Supercluster’s co-founder and Chief Operating Officer, what his team learned from previous attempts in BC to use government dollars to spark private sector growth and innovation. Looking back, he believes that, while it’s hard to draw a straight line between the previous investments, there have been cumulative effects that have helped to lay the foundation for what we’re seeing today.
“Would you have seen the successes out of our new media industry if you didn’t have those [organizations] in place?” Tam asks. “It’s hard to say. But the reality is, those institutions were put in place at the time with the purpose to try to ignite an industry or to provide a nucleus for spawning new ideas or new companies and were a necessary part of that infusion at the time. Whether or not they had the longevity that was originally imagined or not, the impact is still there.”
And when it came to the Supercluster model (there are five across Canada) and the BC-based Digital Supercluster in particular, Tam says it isn’t a reaction to what came before, but rather a strategy to develop a broader innovation agenda in the country—with one primary objective being to help break down the historical Canadian bias to only buy local once our companies prove themselves elsewhere.
“[There has been the belief in Canada] that it could only be a good solution if someone else has bought it and someone else has bought it from afar,” Tam says. “It’s the classic Canadian rock star syndrome.”
Companies with new technologies need first customers, and Canadian buyers have been reluctant to purchase early, waiting for the technology to be proven elsewhere. Tam calls this a “supply chain problem” his organization is designed to address by putting entrepreneurs together with the buyer or end customer right from the outset of a project, with the customer investing in the R&D project alongside the start-ups building the product or solution.
“We are turning innovation from an individual sport into innovation as a team sport,” he says.
While planning for customer success sits at the core of the Supercluster’s mission to support early-stage companies, two of the brightest lights in the current tech ecosystem had their eyes on the customer from the beginning and have clearly cracked the customer acquisition code.
Biotech firm AbCellera reported Q1 2021 revenue of $203 million, up from $5 million in Q1 2020 (some of the jump can be attributed to the company’s role in helping its partners fight COVID-19). But another key metric for the company is “programs under contract”—the number of other drug companies using AbCellera’s technology platform to advance their therapeutics—grew 63 percent year-over-year.
At Clio, the company’s cloud-based legal practice management solutions are used by 150,000 legal professionals in 90 countries and approved by more than 66 bar associations and legal societies around the world.
For CEOs of both companies, lessons from the past have helped shape where their companies have been—and where they’re going.
AbCellera CEO Carl Hansen doesn’t see past life sciences stars QLT and Angiotech as examples of lost opportunity; rather, they were casualties of a traditional pharmaceutical development model that has failure baked into the equation from the outset. Typically, companies like QLT and Angiotech emerge from the pursuit of a single drug therapy. It can take anywhere from $300 million to $1 billion and more than 10 years to bring that drug to market.
“Success rates are very low, and commercializing the drug once approved is even harder,” Hansen says. “At a certain point it’s better in the hands of a larger player and success is the sale. We looked at that model and took a contrarian approach from the very beginning.”
AbCellera launched in 2012, not to develop its own drugs, but rather as a technology company creating a platform where “other innovators come to move their molecules faster,” Hansen says. While there were doubters (“people kept asking us why we didn’t have our own molecules”), he points to Doug Jansen, CEO of early life sciences company Cardiome, as someone who saw and believed in the model and became one of the company’s first investors.
Clio’s Jack Newton sits at the head of a private company today valued at approximately $2 billion. He knows firsthand what it’s like to be on the wrong end of the capital game, trying to secure funding in 2008-2009 at the height of the Great Recession (“It was really depressing”). That’s why he doesn’t question the decisions of local founders who came before him who may have taken an early exit.
“It’s really hard and I have every respect for founders that do take money off the table earlier in the growth story,” he says. “There is so much risk and you are taking a gamble. We turned down some acquisition offers early in Clio’s journey that would have been a life-changing amount of money for me and my family, so I respect the decisions they made.”
For Newton, the decision to hang in for the long-term is mission-driven and has been part of Clio right from the start.
“I want Clio to outlive me,” he says. “And doing big things. Having a large impact and actually achieving audacious outcomes is something that takes in the order of decades, not quarters or fiscal years. That timeframe inspires me and I think it inspires people to join the company as a place to do their best work.”
As for the technology sector as a whole, Newton does think we are entering a new phase of sustained growth and that Vancouver’s flywheel is starting to spin. He points to the fact that while Clio competes with Amazon and Microsoft for talent, having global leaders here alongside startups and Series A, B and C companies means top talent now has choice—something Vancouver lacked in the past.
Having options for a career path is something the sector needs to recruit talent from elsewhere. Newton says that when people are interviewing, they not only think about the job they’re interviewing for, but also where they might go next if it doesn’t work out or after they’ve done all they can do in that job.
“They look around at the job market and wonder, what else is in Vancouver after Clio?” he says. “We need a real multitude of choice for people to look at the opportunity landscape and see not one or two companies they can imagine themselves working for, but a dozen companies or a hundred companies. And we are starting to see that critical mass now . . . and that’s just a virtuous cycle that will continue to feed on itself.”
Lynda Brown-Ganzert is someone whose career as a CEO straddles previous boom cycles and today’s excitement. She was founder and CEO of GoBe Media in the early 2000s, served as President of New Media BC, helped build the local talent pool as chair of the Board at Simon Fraser University, and for the past seven years she has been CEO of Curatio, a digital private social health network offering peer-to-peer connections for patients looking for support on their health journeys.
She is proudly one of the first 1,000 users on Twitter and remembers a time when “the web was so small you could ask a question and there was only 2,000 people on it and someone would get back to you.”
She has seen it all over the past 20 years. And she does think it’s different this time around.
“We have a deeper, wider pool of talent in BC with the experience and the battle scars to go with it that have helped establish a foundation we are building from today,” she says from her home base in Kelowna. “There are a bunch of people who have put in their time on the bench.”
She points to what she calls the “democratization of the web” as a huge inflection point and accelerator for the industry, and the introduction of the smartphone as a direct distribution channel to consumers in every sector of the economy.
“This isn’t a bubble, and certainly we’re seeing that in health,” she says. “Technology is fundamentally changing the way people live and it’s only going to continue, whether it’s wearables, data, personalized medicine, genomics, personalized pathways. Technology is part of all that and global acceptance of the benefits of the supercomputer people are holding in their hands.”
If it truly is different this time, with ideas, capital and people aligned to fuel growth, what storm clouds might be on the horizon to stop this cycle in its tracks?
One, there continues to be a typical Canadian love-hate relationship with risk.
“It doesn’t help the startups that the Canadian ethos is still to take the job that pays me well,” Garibaldi Capital’s Holliday says, “It’s not the Silicon Valley ethos that says I am going to work for as many options as I can. There it’s all about equity and the home run, but here it’s still different. And one of the reasons we see big brands coming to town knowing we are more likely to take the salary in Vancouver—and in Canadian dollars.”
Curatio’s Brown-Ganzert also warns that while there are significant benefits to global players coming to town, they have the potential to suck up the talent—in a similar way Creo and MDA did back in the nascent days of the late 80s and 90s.
“We’ve put so much time and resources into growing programs and growing talent. And the big guys continue to come in and we are being eaten for lunch when it comes to pay and expectations,” she says. “It threatens to throw the scales out of whack, and I am very worried about the ability of companies at my scale to hire in a way that’s sustainable.”
For Clio’s Jack Newton, he sees what he calls “the great reshuffling” of how and where people work as a result of COVID-19 as a huge opportunity for Vancouver and BC. But jurisdictions around the world are looking to attract the same talent, and Newton says industry needs the help of policymakers at every level to stay in the fight.
“This is an incredible place to live . . . and I think we have the best shot in 50 years to reverse the brain drain that we’ve seen to the South,” Newton says. “What we need more of is the Mayors, Premiers and the Prime Minister thinking of themselves as the CEOs of Vancouver, BC and Canada, who are going out there to help us win these companies and win this war for talent.”
And then there is the inherent contradiction between the needs and realities of the sector, and the forces driving policymakers. Politicians tend to think about their world and their voters’ world, full stop—a city or a province. Global is nice, but global doesn’t vote. That reality at times runs counter to the needs of technology companies who need to compete globally to win—on price, on taxes, on incentives, on immigration policy and more.
“I remain concerned that policymakers at all levels of government don’t really grasp the global nature of tech and how decisions at home impact our companies’ ability to be successful,” says BC Tech President and CEO Jill Tipping.
At the same time, the recently released 2020 BC Tech report shows that, of the almost 11,000 tech companies in BC, only 220 have more than 100 people—and 8,000 of those companies have less than 10 people. Tipping says this challenge of companies staying small has been a long-time problem in the space, one her organization feels policymakers need to help the industry address.
Tipping points to the fact that government funding and programs in BC lag behind other jurisdictions in Canada, something that BC Tech is working to address. For example, the budget of Innovate BC (the provincial agency with the mandate to support BC’s technology and innovation sector) remained fixed in the most recent budget (at $6.1 million), while Ontario’s equivalent government agency with the mandate to support the tech sector has had a budget of $150 million. BC Tech and other industry partners have a proposal in front of government, ScaleUp BC, which is designed to not only address this funding gap, but also to help companies grow and scale.
“I look at this and say: look at what we’re achieving when we are not fertilizing the way we could,” Tipping says, “and I wonder what would happen if we fertilize and accelerate and think about what more we could achieve.”
Storm clouds aside, the technology sector wheel continues to turn. Kim Kaplan, part of the executive team that steered a 2015 $575 million exit for Vancouver dating platform Plenty of Fish, has jumped back into the game with a new video dating app, Snack. She spent the past few years as an angel investor and mentor to a handful of local start-ups, before launching the company and closing a $3.5 million round earlier this year.
“I was enjoying my sabbatical and working with other founders,” Kaplan says. “I wouldn’t be doing this if I didn’t think it could be massive . . . a major success.”
The evolution continues.
Correction, May 26, 2021: An earlier version of this article stated that MDI was sold to FedEx. MDI was sold to Motorola, not FedEx.