In death, BlackBerry gives life to startups in southern Ontario

TORONTO — Best known, perhaps, for being the headquarters of BlackBerry, Waterloo is a small suburb of Toronto with a population of 98,000 in which 500 startups were born in 2012.

I’m in Ontario, Canada, on a press junket put on by the government to highlight the startup scene in Canada’s most populous province.

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40-50 percent of venture capital in Canada is put to work in Ontario, which is pushing past traditional industries and looking for investment and jobs in high-growth technology-focused companies. Those traditional industries include automotive — more cars are built in Ontario than anywhere in North America, including Michigan — and financial services, which employs more people in Ontario than anywhere else in the Americas besides New York.

But the most interesting stat is about the burgeoning startup scene, particularly in Waterloo, Ontario. Toronto is the big kahuna in southern Ontario, with a population of over 2.6 million. But Waterloo is where Google, Oracle, EA, and Intel have set up offices, where BlackBerry grew from nothing to leading the smartphone industry, and where startups are popping up incredibly fast.

BlackBerry, of course, is quickly returning to nothing, but as often happens in the tech industry, the cycle of creative destruction is resulting in a whole new cohort of hot young startups.

“Waterloo and the culture of startups there is because of RIM,” John Marshall, the president and CEO of the Ontario Capital Growth Corporation says. “You’ve got kids coming up who saw their parents do it.”

While it’s a little early to call BlackBerry dead, the fact is that former Research in Motion is indeed in motion, downwards. Apple, Google, Android, and Samsung have taken over market leadership in mobile phones, and Microsoft looks to be passing BlackBerry with Windows Phone.

But the result has been a two-track acceleration of southern Ontario’s entrepreneurship engine. First, as Marshall says, new blood sees that global success is possible. And second, the high-tech workforce shed by a downsizing BlackBerry feeds the founding and growth of small startups.

That’s music to the ears of Ontario officials like Bill Mantel, the assistant deputy minister of the Ministry of Research and Development, which has invested $3.6 billion over the past decade in the startup ecosystem: R&D, seed funding, and ecosystem improvement.

“We want the world’s next biggest tech company to be built in Ontario,” Mantel says. “It’s about job growth … about half of all job growth is provided by the 3-4 percent of high-growth companies.”

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That includes companies like Desire2Learn, located about 12 minutes away in Kitchener, Ontario. Desire2Learn has gone from 400 employees to 800 in a matter of months as it took the largest VC investment into a single company in Canada — $80 million — just last September, after bootstrapping for almost a decade.

The results are also visible elsewhere.

“In the StartUp Genome report from last year, Ontario had two cities in the top 20,” Mantel says. “Toronto was eighth, Waterloo was 16th, and we think Ottawa should have made the list too.”

There hasn’t really been the emergence of a BlackBerry mafia, in the sense that the PayPal mafia has kickstarted whole waves of startups in Silicon Valley. But perhaps, in a backwards sense, BlackBerry has had a similar effect in southern Ontario.

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photo credit: miggslives via photopin cc

Disclosure: Ontario’s ministry of economic development paid VentureBeat’s costs to send me on this tour of Ontario companies and the venture capital scene. My coverage, however, is my own.