Partner Sites

Logo BusinessBecause - The business school voice
mobile search icon

Vancouver Emerges As Tech Start-Up Destination For MBA Entrepreneurs

Propelled by social media juggernaut HootSuite, Vancouver has emerged as a tech hub for start-ups. MBA entrepreneurs in Canada are supported by b-schools, and have access to more funding.

Sun Jun 22 2014

On a Wednesday afternoon in late July, Ryan Holmes signed off on a press release that would shakeup Canada’s technology sector and place his business firmly in investors’ sights.

The CEO of HootSuite, a pioneer in social media management, had spent the night before preparing for his company’s biggest announcement to date.

The message came out early on Thursday morning, revealing that the tech start-up had raised another $165 million in capital. The series B funding round, representing the largest software deal in Canadian venture capital history, had stunned some techies.

“This capital gives us additional resources to expand quickly and strategically into new markets, innovate rapidly, and deliver on our vision around the world,” said Ryan in a statement at the time.

It was HootSuite’s fourth anniversary. The Vancouver-based business had swelled to a seven million user base in over 175 different countries. Fortune 500 brands like PepsiCo and Virgin were quick to sign-up to the platform.

The month before, the company had pencilled a 300% increase in revenues into its quarterly report. HootSuite is valued at $500 million.

The Canadian-based business has nearly 400 employees and wants to hire another 100 this year.

HootSuite hasn’t announced plans to float on the stock market yet – but many tech businesses in Vancouver wish the firm would.

In the nine months since that announcement, a bevy of tech companies have taken to the Vancouver start-up scene. Business schools have played a starring role in the city’s development by helping entrepreneurs raise finance and by accelerating up-starts in incubators. Vancouver is now seen as a viable start-up destination.

MBA graduates, lured by relaxed immigration laws for students and improved access to venture capital, see the potential too.

The Sauder School of Business, part of the University of British Columbia, recently launched an Innovation and Entrepreneurship (IE) career track within its MBA program at the Robert H. Lee Graduate School. It is designed for budding entrepreneurs who want to kick-start new business ventures. Many of those ventures are based in Vancouver. Many are also in the business of tech.

“HootSuite is the darling that has forged lots of interest,” says Paul Cubbon, a Sauder professor who helped develop the school’s IE track. “We’ve also got the Google’s and Facebook’s of the world… they find there is an educated and talented workforce available in Vancouver.”

But there is a misunderstanding about entrepreneurship. It is not just the Steve Jobs and “hero founders” of the world that can be successful entrepreneurs.

“If you can go and work for an early-stage start-up, you’ll find that you need a lot of the same skill-sets – you’re just not the person who founded it,” says Paul. “There are ten times as many jobs like that.”

Paul is not the only one to notice. Technology was the most popular industry for Sauder MBA graduates to enter, according to data from the school’s 2013 employment report, topping interest in the consulting and finance sectors.

Last year’s MBA class came primarily from the professional services industry – 19%. But the largest component of this year’s cohort came from tech – some 18%.

Nearly 80% of Sauder MBA graduates are employed within three months of graduation and 65% receive MBA job offers before then.

Meanwhile, British Columbia’s wider tech sector is booming. Despite overall employment slipping in recent years, workers in B.C’s high-tech sector made 7% more money in 2012 and saw their total pay rise to $6.3 billion – the highest ever, according to a B.C. Stats report.

High-tech revenues rose more than 3% to $23 billion throughout the same year, the report says, while the sector’s share of B.C’s total GDP grew by about 3%.

Average high-tech salaries in the region are $1,440 a week – 60% higher than the provincial average of $870.

MBA students will also take confidence in new QS data which revealed that MBA graduates in the US and Canada are set to net $109,000 salaries including bonuses – the highest world-wide.

“Vancouver’s got the talent and the funding,” says Paul. “The city is finally getting its confidence,” he adds.

Ray Walia calls it the PayPal affect. “Once you have a major success, the entrepreneurs don’t stop being entrepreneurs,” he enthuses. “Some take a little time off but they all come back and invest in companies, and you see a multiplier effect.”

The executive director of Launch Academy, a non-profit helping start-ups in the Vancouver tech sector, sits down to speak from his accelerator’s 12,000 sq ft office space in the city’s downtown eastside. But two years ago the incubator was renting out just 12 desks for about $200 a month.

Ray took the money he made from the first tenants and bought 12 more desks from Ikea. By the end of Launch’s first month it was home to 30 tech start-ups. 

Today, they’ve had over 200 businesses under their roof. Ray says their companies have raised over $25 million in funding so far and have created over 350 jobs in under two years. Some of them have come from UBC’s Sauder School of Business.

“Entrepreneurship is really hot right now. When you look at the state of the economy people are less interested in working for large organizations when the risk is just as hard as [in start-ups],” says Ray.

He adds: “Canada is easier to get into than Silicon Valley. Vancouver is one of the best places in the world to live and the talent is here. There’s been a huge shift in the tech ecosystem here… and the cost of building a business here is a lot lower.”

Yet one of the biggest obstacles to tech entrepreneurs in Vancouver is accessing venture capital. Canada is likened to Europe in that respect. Both regions are thought to have fallen behind Silicon Valley.

HootSuite may have raised millions, but others struggle. In response, a bevy of incubators like Launch have cropped up to help fill the gap in supply.

For MBA candidates, business schools like Sauder offer some of the best opportunity to bank start-up cash.

“I have about ten MBA students who are, instead of doing a paid internship, trying to start businesses out of the course. That’s a big step forward,” says Paul.

“We are identifying spaces where they can be hosted and [trying to] get them seed funding so they can find whether they have take-off velocity or they want to kill [the idea].”

We were only 14 days into the New Year but Canadian Prime Minister Stephen Harper wasted no time in addressing the country's problematic VC industry.

In January last year he launched the government's Venture Capital Action Plan to improve access to venture capital financing for high-growth companies.

“Our Government understands that Canada's long-term economic competitiveness in the emerging knowledge economy needs to be driven by globally competitive, high-growth businesses,” said Prime Minister Harper in a statement at the time.

“We will provide the resources needed to put Canada's venture capital industry on the path to sustainability and ensure Canada's high-potential firms have the resources they need to succeed.”

He pledged $250 million to private sector-led national funds of funds, up to $100 million to recapitalize existing funds of funds and an investment of up to $50 million in three to five existing Canadian VC funds.

However, not everyone is convinced. Paul suggests the VC industry is hampered by a lack of big IPOs. “It’s been much more like people getting some money released from a round that is in the 10 to 50 million range, rather than multibillion IPO releases,” he says.

Ray agrees: “There’s just far more VCs out in the US than in Canada.”

But he added that some big American VC firms were beginning to come to Canada. “All these US companies are keeping an eye on Vancouver. And as they grow or as the industry here grows, more transactions will happen.”