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next big thing

Extreme Venture Partners founder Amar Varma.JENNIFER ROBERTS

Big U.S. technology companies are on the hunt for mobile and Internet startups based in Canada.

With at least 20 major acquisitions since January, startups might now have the capital needed to transform areas of the country – Toronto, Waterloo, Montreal and Vancouver – into global mobile hubs.

But no matter how big the buzz becomes over the country's Internet and mobile scenes, don't call it Silicon Valley North. "We don't produce chips up here – there's no silicon," said David Crow, an entrepreneur and co-founder of the blog StartupNorth.

What Canada's cities, especially Toronto and tech-heavy Waterloo, Ont., have produced in the past decade, is a slew of mobile and Internet entrepreneurs vying to create the next big thing. A flurry of recent takeovers by dominant U.S. players such as Google and Twitter has boosted confidence in the entire region, Mr. Crow said.

"The acquisitions aren't the end game, but they sort of are blips on the ecosystem EKG," Mr. Crow said.

Those blips are becoming more frequent. At the end of August, CNN purchased Vancouver-based Zite Inc., creator of a personalized news application for iPads, for an undisclosed amount – with some reports suggesting the deal was worth around $25-million. And in another recent deal, Toronto's Five Mobile was bought for an undisclosed amount by Zynga, owner of the wildly popular Farmville. Other recent deals have also been pegged at around $25-million, such as Google's April purchase of PushLife.

Of this year's big-player acquisitions of Canadian tech companies, nine of at least 20 were of Toronto-based companies, according to Canadian blog

Acquisitions by technology giants won't be enough to turn the Toronto area into the next tech hot spot. Canadian entrepreneurs and venture capitalists also have to participate, said Amar Varma, founder of Extreme Venture Partners.

"If I said I was going to start a mine in the Congo, I'd have more luck raising money than if I said I was going to start a mobile company," Mr. Varma said.

An entrepreneur himself, Mr. Varma's Xtreme Labs was in the mobile business before it exploded with the advent of the iPhone in 2007. He now invests in younger startups, providing them with the capital and the mentorship they need to get traction in the industry.

More entrepreneurs like Mr. Varma have to reinvest in the area if it is to become an international mobile hotbed, said Debbie Landa, the founder of Dealmaker Media and a Canadian who lives in the Valley. While Canada does have excellent investors in the natural resource segment, there aren't enough experienced mobile investors up north, she said.

"It's not like all the startups want to run away to Silicon Valley, but that's where they have to go for support," she said. "The more entrepreneurs who can make money and invest it back into companies in Canada, the more people will have experience and the better the environment will be."

A lack of investors aside, Canadian cities do have advantages as a mobile hubs.

"We are not recognized as a world leader in what we do yet, but we have got the pieces to get there," said Kunal Gupta, chief executive officer of Polar Mobile.

Canada has a great market to get early customers, prove products, and generate early revenue, he said. He also pointed to the proximity between Waterloo, home of giant Research In Motion Ltd., and Toronto as another advantage.

"We need to start thinking of Toronto and Waterloo as the same, because that's where we're going to get strength as a community," Mr. Gupta said. "From San Francisco to San Jose, you think of that as the Valley. They are able to leverage that."

Strong education in entrepreneurship, engineering and technology is an advantage Toronto has, said Karim Awad, founder of Big Time Design And Communication Inc., an Internet startup.

"There's a lot of attention on Toronto," Mr. Awad said. "They're looking for talent and we have it here – we have it in abundance."

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