Here’s how Waterloo tech survived BlackBerry’s fall — and how hot it is now

Here’s how Waterloo tech survived BlackBerry’s fall — and how hot it is now

Here’s how Waterloo tech survived BlackBerry’s fall — and how hot it is now

By Kira Vermond | Thu., Sept. 2, 2021 | 8 min. read

Don’t ask Marcelo Cortes how many employees work at Faire. He doesn’t know. Or at least he has to think about it. After conferring with his marketing rep over a Zoom call, the company co-founder and CTO finally settles on a firm number. Sort of.

“Over 500 employees. And in Canada we are getting close to 200 now,” he says. “I’m even losing track sometimes.”

Cut Cortes some slack. The digital platform first burst onto the startup scene in 2017, offering small, independent shops better access to wholesale vendors in a tech-savvy, streamlined way — giving Walmart and Amazon a run for their money. Within three years, Fast Company named Faire one of its 10 most innovative retail companies and Forbes described it as a “high-flying unicorn” as venture-capital funding poured in. There was $12 million from Forerunner and Khosla Ventures, then later, $100 million, $150 million and $170 million from other investors. Then on June 10, 2021, Faire announced it had raised yet another $260 million (U.S.) in funding at a $7-billion valuation, led by Sequoia Capital, based in Beijing.

Between that and moving his Waterloo, Ont. offices six times to keep up with its growing workforce, Cortes has obviously been too busy to count heads.

But here’s what he is sure of: Kitchener-Waterloo, once a sleepy community less than two hours west of Toronto that echoed with the oompah of its famed Oktoberfest, is now a technology boom town, and it pays to be at the centre of it all.

Ten years ago, it was a different story, says Chris Albinson, the newly minted chief executive officer and president of Communitech, a public-private innovation hub that supports more than 1,600 area companies, from startups to multinational corporations. He mentions the lost decade in Ontario when Nortel Networks went bankrupt and “RIM lost its way and private venture capital basically left the country.” But while Ottawa continued to struggle for years after Nortel’s implosion, Waterloo bounced back with a slew of dynamic startups and scale-ups. The Kitchener-Waterloo area, which also includes Cambridge and Guelph, might still be considered a “secondary city” compared to Silicon Valley or New York, but momentum is growing.

Scratch that. Exploding.

The rise in capital

After Faire, there’s Waterloo’s other unicorns (companies with $1-billion valuations) like ApplyBoard — the education technology company that just landed an astonishing $375 million in funding in June — and Arctic Wolf, headquartered in the U.S., with an office and employees in KW (as locals call Kitchener-Waterloo). Meanwhile, tech giant Google is set to add 2,000 more employees to its current 1,000 when it finishes construction of its new 11-storey, 300,000-square-foot Breithaupt expansion in downtown Kitchener. Other U.S. tech businesses, like MasterClass, are moving in, too.

Then there’s Velocity, the University of Waterloo’s incubator in downtown Kitchener. It has launched more than 300 companies including high-growth Avidbots and Vidyard. With its focus on community, startups that share the 37,000-square-foot building don’t compete with each other, but rather learn from one another through working groups and domain-specific meetups. There’s also office support, access to lab space, mentoring and pitch competitions.

“Looking at it over the last decade, it’s just been a remarkable resurgence,” says Albinson of the KW area, who, despite being on the job for only a few months after leaving San Francisco to come back to Canada, can rhyme off statistics galore. But there are a couple that are true jaw-droppers.

Albinson explains that when he took the CEO job, the Communitech board gave him two objectives: get 25,000 tech workers into the Waterloo area and a billion dollars a year invested in startups by 2025. The newest data? At 25,900 jobs today, Waterloo has already reached the first goal years ahead of schedule. According to a recent CBRE report, it has the fourth-highest concentration of tech workers in North America (at 9.6 per cent) — only Ottawa (11.6 per cent), San Francisco Bay area (10.9 per cent) and Toronto (10.2 per cent) were higher. 

And then there’s the money: within the first 60 days of Albinson starting his job, KW companies landed $1.6 billion in funding. Compare that to the $2.2 billion the region raised during the previous decade

He doesn’t consider KW an overnight success story, though. After the spectacular fall of BlackBerry a decade ago, practically all private venture capital for tech left the country. He says it took red-hot companies like Shopify in Ottawa to pull investor’s eyes back to Canada. But the money didn’t simply stay in the nation’s capital. KW has something that Ottawa does not: It’s close to Toronto, with a population of highly trained tech employees. 

What’s more, area companies have easy access to University of Waterloo co-op students and grads, many of whom launch new startups every year, taking advantage of the university’s focus on technology and entrepreneurship. (This has helped Waterloo become the Canadian leader in the production of intellectual property — the number of patents issued is 11 times the national average.) 

The network effect 

You also can’t discount hometown pride. Albinson points to a story from a couple of years ago when Vidyard co-founder Michael Litt spoke to a group of 150 student entrepreneurs at Communitech. Standing on the second-floor balcony overlooking the crowd, he proclaimed, “Hell no, we’re not going to go,” referring to the company’s decision to stay in Waterloo. Albinson considers that moment a turning point for startups and scaleups. They would stay too, and help build the area up again.

“Success breeds success,” says Renee Mckenzie, senior vice-president and chief information officer for OpenText, one of Waterloo’s first tech stars launched 30 years ago. What started out as a University of Waterloo project to digitize the Oxford English Dictionary is now a multinational information-management corporation headquartered in Waterloo with 14,000 employees worldwide. The company hired 950 employees in Canada this past year and there are another 250 open positions now.

Like many tech leaders in Waterloo, Mckenzie moved to the area long ago, thought she’d spend a couple of years there before moving on, but stayed. It’s hard to beat the Goldilocks feel of the city — small enough to enjoy a good standard of living, large enough to make some waves professionally. And with new companies launching and new positions opening, it’s now easy to build a long career without moving anywhere else. 

Mckenzie says she doesn’t mind a little competition when it comes to hiring talent these days either. Competition builds enthusiasm, draws new blood to the region from across the country and around the world, and entices superstar Waterloo grads to stay in Canada.

“If it was just us in KW, you wouldn’t have this excitement — no matter how well we were doing as a company. It’s really that diversity in the Kitchener-Waterloo network that really created this compelling opportunity, not just for startups, but for legacy companies,” she says. “Without that competition, you could get lethargic and complacent. It really keeps us inching forward.”

And although there is a new scramble for talent, Faire’s Cortes says that competition doesn’t get in the way of co-operation between companies. He says he often connects with Vidyard’s Litt or Martin Basiri, founder of ApplyBoard, to talk shop about fundraising in the U.S. and growth strategies.

“I mean, it’s not a big area, right? We all know each other,” he says. “Every time somebody needs help with something, whether it’s marketing, growth, user acquisition or strategy, we reach out, send a message and ask for advice.” 

That’s the same spirit that keeps Martha van Berkel, CEO of Schema App, excited about growing the company in Guelph, a 35-minute drive away from KW. A former Cisco employee, van Berkel and her husband Mark van Berkel launched the company, which translates web content so search engines can understand it, in 2011.

Part of the company’s success can be traced back to Fierce Founders, a Communitech workshop for women who are tech CEOs and founders in the area. She attended in 2017, and soon after, Schema App took off.

“It enabled me to find some other female founders who were journeying through it together. It gave me a really amazing support system,” she says.

It also introduced her to KW and Communitech resources. She and her husband hired their first two employees, set up shop in a Communitech open-concept office and eventually moved back to Guelph as the business grew. In only a few years, they’ve become a 24-employee office and known as a worldwide expert in their niche.

That Goldilocks feeling 

Now with the province’s plans to start all-day, two-way GO Train service between Toronto and KW, stopping in Guelph along the way, soon there will be even more reasons to work in Guelph, even if employees don’t live there. Yet.

“That GO Train is a game-changer for all of us. It will just open up talent pools, and people can choose the best companies to work for. It’s super, super exciting,” says van Berkel, who cut her teeth in Silicon Valley back in 2000, and doesn’t miss the rat race there. Guelph, with its relaxed vibe, is nothing like that. At Schema App, employees are encouraged to talk about their lives outside work. The time is built right into meetings.

Marco Osso, vice-president of human resources at Tulip, which digitally transforms retail store operations, agrees that the area is special. It’s also less expensive than paying Toronto’s real-estate prices — when the pandemic hit, the company ditched its Toronto office and kept its head office in Kitchener. Despite the pandemic, Tulip keeps growing by filling their ranks with new computer-science grads from University of Guelph, proving that Waterloo isn’t the only game in town.

“Every single organization goes after Waterloo grads, but I think other universities have caught up,” he says.

Not that everything in KW is perfect, of course. van Berkel admits finding talent has gotten harder as hiring heats up, locally and beyond. And as cranes loom over downtown Kitchener and condos shoot sky-high, housing prices climb too. In early July, the average price for all residential properties was $759,115, a number unheard of just a couple of years ago. (Although, by Toronto standards, a steal.) Osso worries the housing won’t be able to keep up with demand as sector hiring continues.

But for Cortes, there’s one more thing the Waterloo region requires to send it over the top and make it a top-tier technology hub globally: more experience. It’s a great thing to be ahead of the curve, but also lonely. While Faire builds an e-commerce marketplace with millions of users, he admits, there aren’t many people in the region who have worked on anything similar.

“That’s one of the challenges,” he says. “It takes time for the market to mature, and the people in the market to mature as well. But I think we are on the way there.”

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