Canada is becoming an increasingly viable landscape for investment activity thanks to its favorable regulatory environment, a flourishing tech sector, and the country’s continued commitment to fostering entrepreneurship.
As Apple (NASDAQ:AAPL) continues to ramp up its generative AI capabilities, the Silicon Valley giant has actively looked to the US’ neighbor up north after most recently acquiring AI startup DarwinAI.
Given these developments, CI connected with Nicholas Brathwaite, Founding Managing Partner at Celesta Capital.
Celesta Capital is a VC firm that actively invests in the deep technology space with key portfolio companies in AI/ML, semiconductors, biotechnology, and cloud infrastructure.
As an alumnus of the university, Brathwaite and the Celesta team recently announced a partnership with McMaster University in Canada to cultivate the emergence of deep tech companies and accelerate their commercialization.
In an extensive discussion with CI, Brathwaite commented on the current state of Canada’s vibrant tech ecosystem.
Our conversation with Nicholas is shared below.
Crowdfund Insider: What is the current state of the tech industry in Canada?
Nicholas Brathwaite: Canada is extremely well-positioned to grow into a global powerhouse tech economy, propelled by a favorable regulatory environment, thriving academic research sector, strong engineering talent, and a continued commitment to fostering entrepreneurship.
Over the past decade, an influx of tech talent from Canada has poured into Silicon Valley, but now many are both returning to or staying in Canada. This includes emerging Canadian tech companies, as well as U.S. companies establishing operations up north. A report from CBRE’s Tech Insights Center shows that Toronto added nearly 64,000 tech jobs between 2017 and 2022, ranking only behind San Francisco. Much of this is driven by the strength of Canada’s universities and the country’s deep base of technical talent.
That said, even with this growth in tech jobs, the overall growth of Canada’s technology and innovation economy has lagged behind its peers, with core technology and manufacturing sectors actually falling as a percentage of the overall economy over the past 20 years. While there is great potential and many strong indicators of growth, it is clear that more must be done in order to keep pace with other major tech economies.
Crowdfund Insider: What led to this conducive environment for tech companies?
Nicholas Brathwaite: Several factors have led to this concentration of highly skilled technical talent throughout the region. Canada’s government has played a significant role through its substantial investments directed towards strategic research initiatives at several postsecondary institutions throughout the country. These programs have made the country a prime destination for Silicon Valley companies seeking valuable, fresh talent.
With such a young, skilled workforce, it is not surprising that more companies are moving their operations to the region to tap into this talent pool. Taking into consideration the stark differences in entry-level salaries for technical positions such as engineers, it is a smart business decision to access this burgeoning market. According to a report conducted by Toronto Metropolitan University, an average Canadian tech worker makes approximately $83,700 in annual wages, as opposed to a US worker’s annual compensation of $122,600.
With this strong base of talent in place, in order to accelerate growth for Canada’s tech economy, the next goal must be to nurture development of more homegrown Canadian tech companies by building up a robust ecosystem to support Canadian tech startup founders.
Crowdfund Insider: Which segments of the tech market are poised to succeed in Canada?
Nicholas Brathwaite: Canada has nurtured a diverse range of technology sectors, with a particular focus on segments of what is considered to be deep tech – cutting-edge technologies built upon advanced science and engineering innovations, of which, AI, biotech, cleantech, defense, and energy have been paramount areas of focus.
Among G7 nations, Canada has established an AI sector that is extremely competitive. Starting in 2017, the Pan-Canadian AI Strategy, an initiative funded by the government to accelerate AI industry research, has led to Canada being considered one of the most robust AI ecosystems in the world today. As a result of this strategic focus, Canada is listed fifth out of 62 countries for AI “capacity”, a term used to measure the scale and intensity of the AI market, ranking ahead of Israel, Germany, Sweden, France, and Japan in AI research.
Canada has also seen promising growth in its biotech sector over the past few years. Vancouver has been at the forefront of this ascent, with the number of biotech jobs and businesses in the province growing substantially in recent years. This boom in the region’s life sciences space has been spurred by strong alignment across public and private stakeholders, evidenced in British Columbia’s recently-solidified life sciences and biomanufacturing economic plan to catalyze this progress even further.
Energy and cleantech are additional rising Canadian tech sectors, bolstered by strong support from the Canadian government. Late last year, officials announced approximately $125M in funding to support a green energy hub to be built by EverWind Fuels. This investment from the Canadian government, along with growing private sector interest, has led to Canada being ranked fifth among nations for cleantech investment between 2021 and Q3 2023.
Crowdfund Insider: What is Celesta Capital’s presence in Canada?
Nicholas Brathwaite: I personally have long-standing ties with Canada, having graduated from both McMaster University and University of Waterloo, as well as managing large Canadian teams in executive roles at multiple past companies, including in my time as CTO of Flex.
As we’ve taken notice of Canada’s growing opportunity to become a hub for deep tech startups, we at Celesta Capital are intentionally ramping up our presence in the country. We have made investments in Canadian startups, including Stathera, a manufacturer of next-generation timing devices, as well as Quartic.ai, developer of AI solutions for autonomous manufacturing.
As we look ahead, we also saw that Celesta could help to fill significant gaps that exist today. Many deep tech inventors and entrepreneurs in Canada face headwinds including relatively limited access to early-stage venture capital, a smaller pool of seasoned operating executives and entrepreneurs, and difficulties inherent in commercializing technologies incubated at academic institutions. While government initiatives such as Lab2Market are a fantastic start, more must be done to cultivate a broader ecosystem of private investors, business leaders, and other partners.
With Celesta’s expertise as leading deep tech venture capital investors and operating executives, we believe we can help address these issues through our complementary abilities to identify, nurture, and develop high potential technologies into leading deep tech companies equipped to scale globally. This will of course require a much broader network of other investor and technology industry players to also engage, along with continued government support.
As an extension of our commitment to Canada and belief in its potential, Celesta recently announced an exciting partnership with McMaster University aimed at spurring the development of more deep tech startups throughout the region by partnering with McMaster’s network of academic researchers and budding entrepreneurs. We believe that strengthening the bonds between universities and industries will be a critical element necessary to accelerate the growth of Canada’s innovation economy.
In that spirit, this partnership will provide McMaster’s rising tech talent both financial and intellectual capital from Celesta’s team, with a focus on commercializing technologies incubated at McMaster. This partnership, with Celesta’s vast network of investors and entrepreneurial experience, in combination with McMasters’ research, talent, and intellectual property, hopes to play a foundational role in the rise of Canada as a global deep tech leader over the coming years and create a new generation of leading Canadian tech companies.
