VANCOUVER — Jason Smith’s pitch deck used to explain to potential investors why he wants to keep his company, Klue, in Vancouver. But during its latest funding round—a $15-million Series A announced in September 2020—the location of Klue’s headquarters sparked “no discussion,” Smith said. In fact, “it’s almost become a moot point.”

Though B.C.’s tech industry has long struggled to scale its startups, it has minted at least five unicorns—private companies with valuations above the billion-dollar mark—so far this year.

B.C. is “punching above its weight,” said Boris Wertz, founder and general partner at Vancouver-based Version One Ventures. Among the firm’s portfolio companies is Dapper Labs, a local maker of blockchain collectibles. It has joined identity-verification software firm Trulioo, legaltech firm Clio, geolocation and compliance firm GeoComply and security-software provider Galvanize in breaking the billion-dollar valuation mark this year. Meanwhile, on the public markets, Thinkific debuted in late April on the TSX with a $1-billion valuation, and AbCellera reached the milestone when it held its initial public offering in December 2020.

B.C. industry leaders credit the surge to a maturing tech sector that’s created a positive feedback loop for talent and investment, turning the province into a place that can produce high-value companies faster—and in greater numbers—than ever.

Unicorns are less rare in global tech than they once were. Since Cowboy Ventures founder Aileen Lee introduced the term to the public lexicon in 2013, the number of unicorns in the U.S. alone has grown more than 850 per cent. There were 372 U.S.-based unicorns and 710 globally as of June 15, according to CB Insights, which only tracks private companies with a US$1-billion plus valuation. (The actual figure is likely higher as the list doesn’t include some known Canadian unicorns.) The pace of funding has further accelerated during the pandemic. “Twelve months ago, we had one unicorn in our portfolio,” said Wertz. “Today, we have six.”

Of the 15 unicorns Canada has produced so far this year, according to PitchBook data, four are headquartered in Vancouver. That count doesn’t include GeoComply, as its announced private equity deal is not yet marked as completed. Of the other 11, five are based in Toronto and one in Leamington, Ont. Quebec produced two. No other province created more than one.

B.C. has typically seen just a few high-value entities emerge in the province each decade, said Bill Tam, co-founder and chief operating officer of Canada’s Digital Technology Supercluster. He highlighted Burnaby’s Ballard Power in the 1990s and Creo in the new millennium. The next decade saw Hootsuite, BuildDirect and Vision Critical (now Alida) become—at least for a time—success stories. What’s changed since, Tam said, is the pace at which B.C. companies grow, shrinking the timeframe they take to mature to about eight to 10 years. Trulioo and GeoComply, for example, were both founded in 2011, meaning they became unicorns in a decade.

As B.C.’s tech industry has grown over the years, it’s spawned more talent, entrepreneurship and investment, which have in turn helped the industry grow.

“There has been a big draw in this area on the talent side,” said Tam, citing federal and provincial government immigration policies that have helped attract newcomers. B.C.’s NDP government recently made permanent the BC Provincial Nominee Program, its fast-track pilot for tech workers, at the tech sector’s urging. The province’s universities “have been quite voracious” in drawing new talent, as well, he said; the University of British Columbia consistently ranks high among global and Canadian institutions. 

“Finally, I think we’ve seen larger companies that have set up shop here create spawning grounds for people to land, and then ultimately create their own opportunity,” said Tam. Amazon first announced plans for a Vancouver presence in 2013. The city now houses one of the company’s two Canadian tech hubs, where it employed more than 2,700 people as of 2020, with 5,000 more jobs planned by 2023. Microsoft, meanwhile, selected the Greater Vancouver Area for its first Canadian software-development centre in 2007. It opened a Vancouver office for over 550 staff nearly a decade later, and recently announced it would add another 500 workers, growing its roster of employees in the city to 1,700. But the original big tech move into Vancouver came when gaming-industry giant Electronic Arts acquired Burnaby-based Distinctive Software in 1991, changing its name to Electronic Arts Canada and growing the studio into one that now occupies a sprawling campus. As the company built expertise in video games, 3D animation and other digital-entertainment abilities, it gave rise to the city’s augmented- and virtual-reality industries, said Tam. Vancouver is now home to the world’s second-largest AR/VR ecosystem, according to the VR/AR Association’s Vancouver chapter.   

The number of startups in the city has grown, too, roughly doubling from roughly a decade prior, said Tam. The province now boasts more than 10,000 technology companies, according to the BC Tech Association, which he once helmed. “That makes a huge difference in terms of creating the vibrancy, and the peer support, and all the other elements that are part and parcel of growing something here,” Tam said.

Their growth creates an environment in which would-be founders can learn before launching ventures of their own, or in which established founders can launch more new firms. “As you get more experienced executives, as you get more people that are … starting multiple companies,” said Steve Munford, chief executive at Trulioo, the latest Vancouver unicorn. “You’re just able to, one, build the company quicker—and build the company [that] gets recognized globally quicker. And secondly, you have a reputation. And I think the combination of market and reputation are really important.”

The lead investor in the round that gave Trulioo its unicorn status agrees. Amol Helekar, principal at TCV, led the firm’s investment in Trulioo and Clio, and is now a member of both boards. He also believes that as the province’s tech sector has matured, local entrepreneurs have built connections with major investment firms from outside of Canada, like the relationship between Munford and TCV, who have known each other for over a decade. Helekar said the firm has known Munford since he was chief executive at cybersecurity firm Sophos over a decade ago. The firm sees him as “a visionary CEO who has a multi-decade history of executing,” said Helekar. Munford believes the personal connections to capital outside of B.C. are “really important” because anyone investing in a startup at a significant valuation has to feel comfortable with the management team. 

Those relationships have paid off in an investing environment that’s “awash in cash,” as Tam describes it. Vancouver and other Canadian cities are well positioned geographically, he said. “Once places like [Silicon] Valley … are kind of flush already, then the next value markets in terms of where the capital … can land are emerging markets like Vancouver and Toronto and Montreal.” Canadian venture capital deals with some foreign-investor participation have mostly grown steadily in deal count and value between 2010 and 2020, according to PitchBook, with some blips along the way. Looking outside “the usual technology hotbeds” is part of TCV’s investment strategy, said Helekar, as the firm tends to “cast a really wide net geographically.”

Wertz said the pandemic and the subsequent shift to remote work have removed much of the friction for out-of-market investors. “Now people realize, ‘Well, not every board meeting will be in person even after the pandemic is over, and so it becomes much more efficient to invest in companies that are far away from my home office.’”

Everyone who spoke to The Logic about the province’s unicorn frenzy felt more would emerge soon. Squamish-based Carbon Engineering may already have hit a multibillion-dollar valuation, Tam said. (A company spokesperson wrote in a statement that “details of the company’s valuation are confidential. It is our policy not to comment.”) Klue founder Smith, who keeps a list of up-and-coming B.C. companies, suggested Dooly—a Vancouver firm that raised US$80 million last month from investors including Tiger Global—could be well on its way.

Still, Smith cautions against thinking that “[a] couple billion-dollar companies all of a sudden means we’ve solved the scale problem.

“I think it points to the fact that we’ve always had a handful of fantastic, potential scale companies,” he said. “We just need more.”