B.C. tech sector leading positive business charge

The explosion of tech startups since the 2010 Winter Olympics could outfit local angel investors with deep pockets – something long missing from B.C. 

Dean Prelazzi, managing director, B.C. Acceleration Network | Photo: Dominic Schaefer

Back when email was in its infancy in the mid-1980s, Jim Fletcher was part of an investment team that helped raise about $1 million for Consumers Software Inc.

The Vancouver-based startup had developed the world’s first PC-based email application and was poised to strike it big in electronic communication.

“We had a significant head start but after two or three years, the Silicon Valley guys figured it out and started something called cc:Mail as a competitor,” Fletcher recalled.

“They put $25 million into cc:Mail as a startup, and so it took cc:Mail no time at all to catch up and get way ahead.”

Lotus acquired cc:Mail for US$55 million in 1991, while Microsoft (NASDAQ:MSFT) bought the Vancouver software company the same year for less than half that at US$20 million.

Fletcher said it’s a very typical story when it comes to tech firms on the West Coast.

“We just don’t have deep enough pockets. Period. End of story. The money’s not here.”

But as tech startups like Hootsuite inch closer to initial public offerings (IPO) that could be worth hundreds of millions of dollars, the venture capital traditionally lacking in Vancouver’s tech sector could begin rolling in, according to Dean Prelazzi.

The managing director of the BC Acceleration Network at BC Innovation Council – a Crown corporation that promotes the province’s tech industry – said ever since the 2010 Winter Olympic Games the city has been able to create a reputation as the “place to go” for tech.

“There’s just a general maturation of B.C.’s technology industry where we’re starting to see a lot more critical mass across the landscape,” he said.

BC Technology Industry Association CEO Bill Tam said information and communications technology (ICT) has been the traditional workhorse of the province’s tech sector, accounting for 55% to 60% of jobs and revenue.

“With the abundance of companies nowadays, especially in the last few years, we’ve seen enormous amounts of startup activity that we’re really well poised.”

Tam added that B.C.’s tech industry has grown an average of 7% annually.

The province’s overall economy, meanwhile, grew by 1.8% in 2012 and 2% in 2013, according to Statistics Canada.

The tech sector employs more than 80,000 British Columbians and generates revenue of nearly $15 billion, according to a 2012 industry report card from KPMG.

When broken down by each sector within the tech industry, ICT companies such as Telus (TSX:T) account for more than 40,000 jobs and nearly $8 billion in revenue.

Meanwhile, digital media firms such as Hootsuite provide 14,000 jobs and $1.2 billion in revenue, and the wireless sector is home to 10,200 jobs throughout the province, bringing in $3 billion in revenue.

There are 10,200 jobs associated with life sciences, which covers pharmaceuticals and medical devices, along with $800 million in revenue.

Cleantech accounts for 6,400 jobs and generates annual revenue of $1.7 billion.

But Prelazzi said it might be misleading to subdivide sectors this way.

“People never refer to tech industry in B.C. as software. They always refer to it in their industry sectors,” he said, adding that ecommerce companies like BuildDirect and Cymax Stores Inc. have developed proprietary software despite not being thought of as traditional tech companies.

“But I think a trend that’s continuing to drive this community is the continual growth in the software industry.”

As of 2014, between 400 and 700 Vancouver-based startups are listed on online databases such as Startups List and AngelList.

Many of these companies are employing software developers that are creating programs that have caught the eye of investors.

In 2013, Urthecast raised $46 million in financing, while BroadbandTV raised $36 million and Visier raised $15 million.

And in September, Hootsuite announced it had closed $60 million in financing, fanning speculation it was close to launching an IPO.

But Prelazzi said the upsurge of software development – specifically in the realm of social media – has the potential to boost the industry exponentially if a company like Hootsuite were to go public.

“It’s going to put 50 people or more into B.C.’s technology community with really deep pockets and the experience of having been with a startup and growing up with it from the start through to multimillion-dollar revenue.”