Shopify’s success shines bright light on ‘renaissance’ of Ottawa’s tech sector

Shopify CEO Tobias Lutke, center wearing hat, is celebrated as he rings the New York Stock Exchange opening bell, marking the Canadian company's IPO, Thursday, May 21, 2015. AP Photo/Richard Drew

OTTAWA – Shopify Inc.’s successful stock-market debut is expected to reverberate well beyond the firm’s Ottawa headquarters – and shine a spotlight on what some see as the second coming of the Canadian capital’s tech sector.

Years after part of Ottawa’s once-flourishing tech industry crashed, the software company’s hometown has seen a resurgence of startups driven in large part by an expanding group of young entrepreneurs.

Today, the city boasts 1,700 technology firms, more than twice as many as Waterloo, Ont., according to Invest Ottawa.

On top of that, the organization said initial public offerings over the past five years by other local companies – Halogen and Kinaxis – means Ottawa software companies have raised more cash than all other Canadian cities combined.

READ MORE: Shopify shares soar in 1st trading after IPO

And all that happened before Shopify (TSX:SH) went public this week, raising a larger-than-expected sum of US$131 million. The company offered its shares on both the Toronto and New York stock exchanges in a dual IPO.

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Only about a decade ago, the e-commerce platform, which helps businesses sell their wares on the web, was a modest outfit run by three guys hawking snowboarding equipment online.

The company says it now serves more than 160,000 businesses in about 150 countries, employs over 600 people and produced $8 billion in total sales.

The people behind Ottawa’s tech scene are now looking for all that Shopify-fuelled hype to lure even more attention to the city.

“It’s letting us sort of say, ‘Hey look, Ottawa builds great stuff,”‘ Brandon Waselnuk, chief executive and co-founder of an Ottawa startup called Tattoo Hero, said of Shopify’s international success.

Not even two years old, Tattoo Hero is a five-person firm that builds software which, among other things, helps tattoo artists run their businesses.

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Tattoo Hero’s co-founder, Steve Tannahill, said much of the startup success in Ottawa is anchored to all of the local talent coming out of the city’s college and two universities.

With growing job prospects in the startup community, students are opting to take on riskier, more creative pursuits rather than chase the security of Ottawa’s often-stuffier government gigs.

“It’s not like your regular government job where you just sort of go in and you can get away with 25-per-cent (effort) and come away with a huge cheque at the end of the day,” said Tannahill, who works out of a small third-floor space in downtown Ottawa.

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“There’s a lot more work involved with this and a lot of dedication and trust – it’s a different type of attitude.”

READ MORE: Canada taking over the tech world

That entrepreneurial spirit reminds some of the city’s 1990s tech boom, which came as the Internet exploded, igniting a huge demand for connectivity.

Local companies like Nortel Networks were particularly good at telecommunications and helped the city earn the moniker “Silicon Valley North,” said Bruce Lazenby, the president and chief executive of Invest Ottawa.

Much of that success, he added, was due to Ottawa’s unique position as the perch of the federal government. At the time, Lazenby said, federal labs churned out research in this area, creating a wealth of local expertise some folks spun into startups.

It didn’t last, and by the early 2000s “the wheels started coming off the investment” when the world no longer needed such a vast amount of connectivity, Lazenby said.

But over the last five years, the local tech sector is bouncing back.

The revival even has links to the past, as some of the people behind the city’s former startup success stories have provided advice and financial support to newer firms.

Lazenby referred to Branham Group Inc.’s 2015 list of Top 250 Canadian information and communications technology companies as a rough measure of where Ottawa’s tech industry stands in the country.

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From the consultant firm’s list, 11 per cent of the top companies are based in Ottawa, which puts the city behind only Toronto (23 per cent). By this count, Ottawa remains ahead of Vancouver (nine per cent), Calgary (eight per cent) and Montreal (six per cent).

Lazenby also said the Conference Board of Canada estimated Ottawa’s tech industry enjoyed a robust eight-per-cent annual growth over the last five years.

Shopify itself has played an important role, working to foster Ottawa’s startup community by supporting local events.

Lazenby said Shopify’s IPO means Ottawa will soon be home to several dozen new millionaires, which could inject even more life into the sector.

READ MORE: Retail software maker Shopify increases IPO ahead of expected listing

“The question is, what will those millionaires do?” said Lazenby, who expects to see some of that extra money “sloshing around town” to flow into local startups.

The co-CEO of Ottawa startup Gymtrack also expects some of the people who see cash from Shopify’s IPO to become so-called “angel investors” for local companies.

Pablo Srugo, whose firm grew from zero staff in January 2014 to 34 employees today, said the community is “heating up” thanks to favourable business conditions in Ottawa. The city, he added, benefits from factors such as its higher-quality, lower-cost talent pool and cheaper office space – especially when compared to places like Silicon Valley.

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But Srugo thinks Canada as a whole still isn’t viewed as being startup friendly – something he thinks Shopify can help change.

“If we can have more Shopifys here, then changing the perspective of what Ottawa’s like is definitely not too hard,” said Srugo, whose company produces software that tracks people’s workouts through sensors installed on exercise machines and worn by users.

“You only need to a few more of those and then people will start paying attention.”

Tattoo Hero’s Waselnuk, who was in California recently, said Shopify has already put Ottawa onto some radar in Silicon Valley.

“Before they’d be like, ‘Can you show me on a map?”‘

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