Each year, MaRS conducts a survey of our “ventures,” the startups we support with venture services. As part of Data Catalyst’s work trying to discover trends and patterns in the innovation economy, we thought the MaRS venture survey results would provide an interesting window into the startup ecosystem in Toronto and surrounding region. The survey results aren’t all encompassing, of course, but with 597 companies reporting, it’s a valuable dataset that provides a snapshot of what’s happening in and around the city.

Who are Toronto’s entrepreneurs?

Toronto is recognized globally as one of the world’s most diverse cities, but is that diversity reflected in our startup ecosystem?

According to the MaRS survey results, the entrepreneurs in this city and surrounding region are fairly diverse, breaking the myth of startups being dominated by younger technology professionals. There is, of course, a strong youth component. As shown in the graphic below, 33% of the founders in the MaRS survey are under the age of 30, but with two-thirds of founders being 30 and above, there is reason to believe that the common perception of the young startup founder doesn’t always hold true.

Age of Founders from MaRS Venture Client Survey
Age of Founders from MaRS Venture Client Survey

Toronto’s ethnic diversity continues to be reflected in the survey results. As shown in the graphic below, just over half (52%) of all companies have founders who came from overseas. This number reflects the immense amount of talent that is being attracted to Toronto and the surrounding region, as well as the growing positioning of this city as a global innovation hub.

Nationality of Founders from MaRS Venture Client Survey
Nationality of Founders from MaRS Venture Survey

The startup ecosystem in the city and surrounding region is maturing, as reflected in the high—and growing—prevalence of repeat entrepreneurs in the survey. Just under half (45%) of founders were working on their second or third ventures. Interestingly, there are diverse motivations for starting a business: 70% of the survey respondents said they have a wider social purpose for their companies outside of making money, such as the improvement of the environment, health or education outcomes.

First-Time Founders from MaRS Venture Client Survey
First-Time Founders from MaRS Venture Survey

What kinds of technology companies do entrepreneurs found?

The Toronto innovation ecosystem covers a wide spectrum of technology startups, which is reflected in the results of the MaRS survey. ICT companies in all of their various forms make up about half of the startups in this city; health and life sciences companies (including drug development, therapeutics, diagnostics etc.), and cleantech and advanced manufacturing companies (including energy storage, distribution, new materials etc.) each make up a quarter of Toronto’s startup space.

Correlation between founders and sectors

The diversity of the ecosystem is driven by the motivations of founders. As shown in the graphics that follow, we found some interesting correlations between founders and sectors, including:

  • While there is still a lot of work to be done in gender representation, the number of startups with female executives continues to grow—it was up to 33% in the information and communications technology (ICT) and health sectors, as shown in the graphic below.
  • Founders under the age of 30 have the strongest presence in ICT, as shown in the graphic that follows.
Women Executives by Sector
Women Executives by Sector from MaRS Venture Client Survey
Age of Founders by Sector
Age of Founders by Sector (Cleantech, Health, ICT)

Where is the money in Toronto’s ecosystem?

While venture capital grabs headlines, according to the survey, there is a diverse range of equity and debt models from numerous private finance sources; across all sectors, private sources of funding are by far the most common source (78%) and government grants are the least common (10%).

Median Funds Raised by Sector
Median Funds Raised by Sector (Cleantech, Health, ICT)

More capital is concentrated in ICT (41% of total), but this is expected with a larger number of ICT companies than other sectors. Capital raises in ICT are noticeably smaller (median of $163k) than the more capital-intensive cleantech (median of $523k) and health (median of $345k) industries. While we often hear how difficult it is for entrepreneurs to raise the required capital, our survey provides a heartening statistic: 71% of the companies looking to secure funding were successful.

The key challenges for all innovative startups are establishing their business model and driving a revenue stream that will help them become high-growth companies. Different sectors entail different challenges and timelines. Of the startups in our survey, 48% are generating revenue in ICT, 47% in cleantech and 37% in health. Importantly, more startups are now gaining significant traction, with 10% of cleantech and 7% of ICT respondents reporting over $1 million in annual revenue.

What does it all mean?

Toronto has a vibrant startup ecosystem, covering a large diversity in sectors, founders and financing. The city’s innovation support structure needs to adapt to meet the changing needs of the rapidly growing and maturing entrepreneur community, and Data Catalyst is going to keep examining the datasets—like the MaRS survey—that can help guide that evolution.

We’re going to follow this post with some more information on the financing and growth of companies in specific sectors, but in the meantime, please let us know what you think. We look forward to your feedback and insights.

Notes

  • Survey conducted in 2014; data covers ventures’ business activity for their last financial year corresponding to 2013.
  • Not all questions are compulsory; sample size for questions varies. See sample size for each chart.
  • To see a summary of venture results by sector, see Our Results.
  • As noted by KPMG, the independent survey administrator, “Responses from the survey were taken ‘as reported’ and not independently verified or validated by KPMG LLP. Certain additional information provided by MaRS and available via third parties were also utilized in the study where available and appropriate.”

Photo credit: Toronto Skyline by City of Toronto under CC BY 2.0