$625,000 can provide 4–8 months of additional runway in Toronto-Waterloo compared to top U.S. tech hubs
A rent and salary cost comparison for startups considering Canada vs USA.
Introduction
The Toronto-Waterloo region is rich in depth. It’s surrounded by investors, start-up programs, and co-working spaces to foster a healthy tech environment. Companies are also backed by quality talent from over 16 universities and colleges. Not to mention, the population is also extremely diverse. Over 150 languages are spoken here, and Canada is supportive of overseas talent through the Startup Visa Program. Growth in the Canadian tech ecosystem is driven by the complimentary resources available.
Last fall, I helped Extreme Accelerator author a report to showcase the Toronto-Waterloo Corridor’s flourishing start-up ecosystem.
One of the key findings on the Corridor that I’d like to share is its low cost environment advantages (wages and rent only).
Money lasts longer in Canada
Two expenses common among every startup are rent and salaries. The analysis performed excludes any other expenses.
According to TechCrunch, the median seed round in the U.S. was $625k USD in the first half of 2016. The question is: how long can this money fund core expenses in top tech hubs in the U.S., and how would this same money perform in Toronto/Waterloo?
Without any consideration of SR&ED in the calculations, start-ups can see between a 4 to 8 month increase in runway for core expenses if they were to operate in Toronto or Waterloo.
The total amount spend on just salaries in the lowest cost city, Atlanta, is still more than both salaries and rent combined in each of the Canadian cities. Evidently, both rent and salaries play a factor in reducing burn rate each month for companies. Let’s take a deeper look into each of these.
The Corridor has some of the lowest wages among the top cities for technology jobs per the CBRE Scoring Tech Talent 2017 Report. Even with high quality candidates from top-tier universities and others around the world, the cost of hiring talented individuals is significantly lower others. Hiring non-tech talent is fairly comparable among most cities, but the true difference is in the cost of tech talent.
Among these cities, Atlanta has the cheapest rent for both personal apartments and office space. Office rent costs in Toronto and Waterloo are almost a third of what it would cost in San Francisco, and over four times cheaper than New York.
Closing
Core cost advantages stand out and can mean a lot to companies. Having those extra couple of months in runway can make the biggest difference. I want to mention that we’ve only touched the tip of this iceberg by looking at rent and salary costs. There are many other costs that are industry or company specific not mentioned, but the purpose of this was to illustrate fundamental cost differences among tech hubs.
Please feel free to comment, or send any notes to hello@extreme.tech.
