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Luke Lockhart, co-founder of PopHire and William Lam, founder of Date Ideas, seen in their downtown Toronto workplace, are two of many recent tech start-ups. (SARAH DEA/SARAH DEA/FOR THE GLOBE AND MAIL)
Luke Lockhart, co-founder of PopHire and William Lam, founder of Date Ideas, seen in their downtown Toronto workplace, are two of many recent tech start-ups. (SARAH DEA/SARAH DEA/FOR THE GLOBE AND MAIL)

Canada's app developers in sweet spot as world goes mobile Add to ...

"At some point, every employee is going to have a smart phone, and every one of those smart phones is going to be GPS-enabled," says Stephen Montano, marketing director of a startup called BerryTracking, whose software lets employers monitor the location of staff such as door-to-door salespeople or delivery truck drivers. Just a small piece of the market will make his company a success, he says. "The sky's the limit, and being part of something where the sky's the limit is kind of cool."

For Canada, the app race provides an opportunity to build a stronger indigenous technology business.

There has never been a shortage of brains here - only a shortage of investors with an appetite for risk and a willingness to fund their ideas. But mobile applications aren't as capital intensive as many other forms of technology development (the cost of developing one varies widely, but some small games can be built for only a few thousand dollars).

Since the business is still in its infancy, it is not yet dominated by Silicon Valley. In fact, so far no one place has achieved a critical mass of app developers. And there is not the same need to be physically close to U.S. technology hubs to get attention: Anyone who develops a popular app like Kik's messenger service is likely to get noticed by venture capitalists, no matter where they are from.

But these low barriers to entry also mean that anyone with a good idea has a shot at the market. And some influential figures in the country's technology community believe that for Canada to be a player in mobile applications in the long term, it needs to build that critical mass - to create a new hub of Canadian digital activity.

For all the success stories, the Canadian tech sector is still rife with bottlenecks. Money is still an issue. According to a report released in August by Canada's Venture Capital and Private Equity Association, when it comes to venture capital fundraising, "the Canadian market continues to be outpaced by the U.S. market by a factor of 35, and investment levels are still down significantly from only three years ago."

Many venture capital firms still don't believe there is a deep enough pool of entrepreneurs in Canada. A report by Deloitte, released this summer, polled venture capital firms about various factors affecting the industry. In Canada, 47 per cent of VC firms cited a "lack of entrepreneurial talent to build a new company" as a factor creating a poor venture capital climate. In the United States, only 6 per cent of firms cited the same problem.

That's in part why various industry groups have been lobbying the federal government to develop an overarching digital strategy aimed at improving the country's low productivity ranking and improving the competitiveness of the country's tech sector.

Of all Canadian cities, Waterloo is the closest to achieving the size needed to become a permanent force in app development, thanks to RIM and what is arguably Canada's best computer engineering university. Over the past few years, the two entities have created a booming ecosystem of talent - the popular BlackBerry Facebook application, for example, was created by University of Waterloo students. Over time, the talent pool has prompted companies such as Google to set up significant operations in the city.

"Waterloo understands mobile," says Mr. Livingston of Kik Interactive. "One of our main competitors [in the instant messaging business]is down the hall from us. It really shows that Waterloo has a better understanding of mobile than most other places, including places like Silicon Valley."

But with less fanfare, Toronto has emerged as another Canadian tech powerhouse, fuelled by operations such as the Ryerson University's Digital Media Zone and the deal-making opportunities that come with proximity to Bay Street, the country's financial epicentre.

Parked in a communal space one floor above Google's Toronto offices, the DMZ is a space for budding entrepreneurs to get their projects off the ground, with help in the form of mentoring, financial assistance and other resources. Less than a year old, the DMZ has already seen two of its start-ups leave the nest, after they received funding from venture capital firms. In all, more than a dozen companies are currently working out of the DMZ.

For Ryerson president Sheldon Levy, that's not nearly enough. "The observation is that this is way too small," he says. "We need multiples of these here - we need to bring 10 DMZs, all in this region. We need to swarm the area with talent."

As Mr. Livingston puts it: "We want to create that rock star Google-Facebook culture here. We want to give young people a strong reason stay in Canada."

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