The app kings: meet the army of tech genius millionaires who are turning Toronto into the new Silicon Valley
Why bother with a boring office job when you can share code at networking parties, design games for smartphones and sell your idea for a fortune?
A 20-something dressed in jeans and a T-shirt enters a stern, early-20th-century brick building near King and Yonge and gets on an elevator. He stands beside suits who spend their days plying commercial real estate and trading securities. The man-boy stops at the sixth floor and enters a cloud blue–coloured lobby, pulls a magnetic security card from the wallet in his jeans and swipes his way in. He removes his ear buds, drops his backpack at his desk and picks up a bagel in the kitchen, passing the room with the ping-pong and foosball tables and another room with the staff Xbox. Then he returns to his desk and becomes one face in a sea of young, so-nerdy-they’re-cool Michael Cera types, though many of these Michael Ceras are Asian, and a few are female. They sit at rows of computers organized by platform, like a really cliquey junior high lunchroom at the world’s smartest school: there’s the BlackBerry row. Android. IPhone. The room reverberates with chatter that sounds, to an outsider, like the kind of talk on a TV medical drama that makes no sense but communicates urgency through tone: “Fleshing out the photo imaging…test for download…integrated platform…”
Extreme Venture Partners is one of the most innovative companies remaking Toronto as a high-tech epicentre. It’s a new kind of hybrid business that houses both the investors and some of the tech companies in which they invest. The idea is to fund the talent, pass on the knowledge that will see them prosper, and increase the chances of a huge payday. Two hundred and fifty people work here. Two years ago, there were 25. Two years from now, the plan is to have 2,500.
Extreme has had good fortune with the 14 companies it’s invested in so far. The biggest in the current portfolio is Xtreme Labs, which builds apps for smartphones. Its apps for BlackBerry (10 million downloads and counting) include NBA Game Time, where basketball fans feed on live scoring and video highlights; Urbanspoon, which lists the best restaurant near where you’re standing; and dictionary.com, the biggest word definition app out there. Another investment, a company called J2Play, created a popular framework for multi-player games and was bought out by Electronic Arts last year for a rumoured $2 million. Google is said to have paid $35 million for BumpTop, another Extreme start-up. BumpTop’s founder, a U of T graduate named Anand Agarawala, had a simple but brilliant idea: a touch-screen app for tablet computers that imitates a real-world desk. His program can make the usual 2-D desktop graphics appear amusingly 3-D; with your finger, you can arrange objects in piles and even pin them to walls.
Extreme also runs Extreme University, a training program for young entrepreneurs who want to prove they have what it takes to execute a tech idea that will attract investors or get bought for millions. Three teams of two to four people are selected for each 12-week session. Extreme gives them each $5,000 in seed money, and in exchange the company owns a piece of the project. The students work next to seasoned veterans—many only in their 20s—and attend a speaker series of business world rock stars who drop by to share their insights. “Mike McDerment was here,” one young developer told me during my visit, sounding like a 12-year-old girl who had just met Justin Bieber. (McDerment is the CEO of a Toronto-based on-line billing company called FreshBooks with 1.6 million users.)
One team in the training program is led by Shaharris Beh, a bass-voiced 26-year-old former VJ from Malaysia. He’s working on an app called Sunrank that aggregates popular opinions: if you desperately need to find out whom the masses determine to be history’s Coolest Rock Chick, you can find a top 10 list immediately, based on the users’ opinions of Joan Jett. Beh got the idea when he was watching the spread of iPhone fever. “I kept thinking, OK, yeah, everyone knows what the number one phone is,” he told me, “but what’s the second most popular phone?” He’s devoted to Google’s Android and hates Apple. “I’d rather slit my wrists than use something that hipsters buy to express their ‘quirky, unique identities and personalities,’ ” he says.
Another team is building an app and a Web site that designs the perfect date, offering advice on wine bars and relationships through your phone. “We used to be called cheapdateideas.ca, but we’re rebranding,” says Will Lam, who is 28. With the air of an inventor pulling back the curtain to display his latest brainstorm, he says, expectantly, “It’s getdateideas.com now.” Lam left a full-time position in the fraud investigations unit at BMO to perfect his app. One of his two partners, 30-year-old Matt Read, quit his job developing insurance rating software at the Markham company Camilion Solutions; the third partner, 27-year-old Irene Kuan, one of the few women in the office, is a journalist on leave from the news agency Reuters, making the leap from old media to new.
“Three years ago, we never would have left our jobs. It would have been completely stupid,” says Read. “But now you see your friends out there taking risks, and you don’t want to get left behind.”
“The whole city is enrolled in Entrepreneurship 101,” Kuan adds.
That enthusiasm, harnessed by the right kind of audacious investors, has the potential to make many people very, very rich. But tech ventures have no guarantee of return, and Toronto is not known as a city of risk takers. Had the young people in this room been born 10 years earlier, many of them would have gravitated toward jobs on Bay Street. Instead, they believe our city’s long-delayed future as a high-tech hub has finally arrived. In universities, think-tanks and private companies, and tucked away in their parents’ houses, young developers are making this bet not necessarily—or not only—because they have dollar signs in their eyes, but because they have been living inside their own private tech boom their whole lives.
They’ve grown up in the shadows of the billion-dollar conquests by the likes of those pubescent Facebook founders. no wonder they’re quitting their day jobs and becoming tech entrepreneurs. Google was just a few people in a garage 12 years ago. why not them?
Amar Varma and Sundeep Madra, the founders of Extreme, met while working in Silicon Valley in the semiconductor industry. They returned to Toronto in 2007 because they saw a city of untapped talent and a global hunger for a new, cheaper kind of tech. Varma, who is 34 years old, now spends roughly three weeks a month in Toronto, while Madra, who is 32, works out of Extreme’s office in Palo Alto, building a bridge between these budding Toronto companies and potential venture capitalists and buyers in California. (The two men, proudly frugal despite their recent successes, crash on each other’s couches when they travel.)
“Semiconductors cost tens of millions to develop, but apps can be made for very little,” says Varma. He wears white linen pants and loafers, and speaks in a languid, relaxed voice. “All you need to build an app is a computer and creativity.”
In Toronto in the late ’90s, pre–tech crash, there were a handful of tech companies as revered as Extreme. Those start-ups also had offices containing foosball tables and gaming rooms, and managers who insisted that work wasn’t just work, but an extension of one’s rec room. Yet even then, the high-tech moniker was more rightfully applied to Waterloo, home of RIM; Toronto’s techies mostly congregated in consulting and marketing, helping other companies get big, but rarely starting their own shops. When the money disappeared at the turn of the century, the consultants were the first to go. After the crash, software developers went in-house, retreating to banks and manufacturers. No one spoke of foosball anymore.
Then, two years ago, Apple opened its on-line app store. At first, no one knew whether the public would pay money for apps. Now BlackBerry and Google’s Android have their own stores, too. An app can be anything—news, weather, GPS, goof-off game—and there’s an appealing inborn democracy in the app world: anyone who can build one can submit it to Apple, where it’s reviewed and then posted. Today, Apple displays more than 250,000 apps. Anyone who submits an app prays that theirs might follow the trajectory of something like Tap Tap Revenge, a Guitar Hero–like game involving tapping and shaking the phone while avoiding falling arrows. Made by a Palo Alto company called Tapulous, Tap Tap Revenge has been downloaded millions of times, contributing to its more than $1 million in sales a month (split 70-30, with the 30 per cent going to Apple). This past summer, Disney bought Tapulous for a figure said to be north of $20 million. The two Tapulous CEOs are now happily working for The Mouse’s mobile gaming division.
There are an estimated 200 mobile development companies in Toronto and another 750 companies that are launching their own mobile divisions. Venture capitalists and angel investors have begun jumping into the game. Part of this is a monkey-see, monkey-do phenomenon, or, more flatteringly, a halo effect: if investors see an invention like BumpTop bringing in $35 million, they want in on the next BumpTop. Last summer, a company called Sysomos, which makes software to analyze conversations on social media, was sold to the news service Marketwire for a reported $35 million. “These kinds of acquisitions loosen the purse strings,” says Varma, who spends much of his time pounding the pavement for capital.
Some of the world’s most respected tech schools are in or near Toronto, churning out talented programmers by the hundreds. The majority of Extreme’s interns and employees come from the computer departments at Waterloo and U of T. Ryerson’s new Digital Media Zone at Dundas Square, open 24 hours a day, seven days a week, is a gathering place for tech entrepreneurs. And at an OCAD building at Richmond and Duncan, a big, sunny office now houses four mobile start-ups in their own version of Extreme University. Smaller colleges are beginning to offer training in mobile development. MaRS, the tech innovation centre, was an early partner of Sysomos. Everyone is inspired by Waterloo’s RIM, and many of the city’s young programmers have passed through the company’s doors.
The critical mass of talent is encouraging venture capital firms on both sides of the border to sniff around the city. One of the most prominent is Bridgescale Partners, a Silicon Valley–based fund with $160 million to invest. Since setting up a Toronto office nine months ago, Bridgescale has invested in three Toronto companies: Rypple, Dayforce and BlueCat Networks. “It’s low-hanging fruit up here,” says the Bridgescale partner Howard Gwin. The young Toronto companies, he says, “have shown moxie, shown that they understand that model, shown the ability to grow; now they just need leverage to get to maturity.” In August, Bridgescale spearheaded a $10-million investment in Dayforce, a workforce management software company that has offices at Yonge and York Mills, as well as in Georgia.
the wired generation isn’t making toronto a tech hotbed out of civic pride, but because they genuinely don’t recognize borders. silicon valley is less a place than a state of mind, so why not stay in a livable city with excellent bars and relatively cheap real estate?
People in tech love to talk about “seeding the ecosystem.” In Silicon Valley, investors have been seeding for years: the guys who made millions in the early days of Google and PayPal continually sink their money back into start-ups. Toronto may finally be flourishing because a few pioneers are following their lead. For instance, the birth of a handful of Toronto’s present day tech companies can be traced to the sale in 2007 of a management software firm called Workbrain for $227 million. Three years later, much of the capital from the Workbrain sale is now spread across several new companies, including Dayforce, Rypple and Versult. All are housed in the GTA and buoyed by this shared experience of taking a company from nothing to the pinnacle, a level of expertise the city hasn’t seen before.
Toronto’s attractiveness to start-ups is due in part to a government tax credit called SR&ED (Scientific Research and Experimental Development, pronounced “shred”) and to grants from a federal industrial research assistance program. In 2010 and 2011, the program will hand out $90 million in stimulus dollars to small- and medium-size Ontario businesses.
These kinds of economic incentives stimulate new companies and may keep more established ones from leaving Toronto. Polar Mobile, one of the city’s fastest growing new companies, builds apps and develops software for 150 clients in 10 countries, but mostly in the U.S. (Time and CNN are two of its most prominent customers). Polar creates a product that barely existed when its CEO, Kunal Gupta, was a first-year student at Waterloo in 2004 (he won’t reveal exactly how young he is, possibly to avoid freaking out his blue chip clients), but is now in high demand. Earlier this year, his company, which has 40 staff members, was dealing with a tidal wave of business, and briefly considered outsourcing its R&D to China or India. “We looked into it,” Gupta says, “but between the talent that’s here and the tax credits, we realized it was cheaper to do it in Toronto.”
The new generation of techies was born suckling the computer teat. They’ve spent a lifetime in a constant state of connection and conversation, ever since they could click a mouse (mice! How 2000!). Familiarity has made them fearless; computers and mobile devices are simply in service to their endless conversation. They jailbreak their iPhones to add the apps that Apple doesn’t want them to add. They download all the music they listen to, books they read and movies they watch. They see the holes in the Internet—Why can’t I easily find all the hockey photos on Twitter? Why can’t I play a game involving werewolves and tambourines and lassos?—and try to fill them. And they’ve grown up in the shadows of the on-line, billion-dollar conquests by the likes of those pubescent Facebook founders. No wonder they’re quitting their day jobs and becoming tech entrepreneurs. Google was just a few people in a garage 12 years ago. Why not them?
The wired generation isn’t making Toronto a tech hotbed out of civic pride, but because they genuinely do not recognize the borders between Toronto and anywhere else. Silicon Valley North, Silicon Valley South—it doesn’t really matter when the entire world is connected. Silicon Valley becomes less a place than a state of mind, so in that case, why not stay in a livable city with excellent bars and relatively cheap real estate? The tech boom is part and parcel of what Richard Florida (and Jane Jacobs before him) has been saying about Toronto for years: the city is attractive because it’s a bastion of diversity, culturally and creatively.
Many of the tech start-ups have congregated in Liberty Village—with its mix of offices in renovated 19th-century factories, new condos and brunch restaurants—precisely for those reasons. One company, NuLayer, was launched in 2007 by Jeff Brenner and Peter Kieltyka, two university friends best known for Crowdreel, an app that organizes Twitter photos. The owners of Twitter were so impressed by Crowdreel that they tried, unsuccessfully, to persuade Kieltyka and Brenner to move to California to work for them. “We love Twitter, but we just couldn’t do it,” says Brenner. “We see ourselves as artists—the goal is to write our own products.” Kieltyka adds, “We don’t want to work for other people. It’s the difference between playing weddings and writing your own songs.” This fall, after landing the contract to develop an app for the Toronto Star, NuLayer and its staff of eight moved out of their $1,700-a-month shared office in Liberty Village into a new, bigger, solo space around the block, complete with wood beams, big windows and an all-whiteboard think-tank room.
All this youthful vigour can be comical to those a mere 10 years older. Farhan Thawar, a 36-year-old VP and engineer at Xtreme Labs who runs the Extreme University program, recalls that during the Olympics, the staff was working on a Web site called Athletes in Motion, posting films directed by famous actors. One was by the former Beverly Hills 90210 hunk Jason Priestley. “I stood up and said, ‘Who in this room knows Jason Priestley?’ And not one of them did. They just looked at me.” Priestley is as relevant as a cave drawing to these people, a few of whom were born in 1990. As if man has truly merged with machine in some kind of Videodrome present, their real-life language is often on-line shorthand. “I’ll be talking to them, and someone will say ‘FML,’ ” says Thawar, “but you probably can’t print that.”
On any given night in the city, there is probably a gathering of young developers in pubs like The Pilot in Yorkville, or any Firkin-related watering hole. They gather over beer and talk programming code at DemoCamp, Mobile Monday and GenYTO—networking nights organized by local entrepreneurs and tech activists and announced through Twitter. Some of these evenings are about connecting generic small businesses (Sprout Up is one), but many are more niche—code bugs are solved and programming information exchanged. Every one of NuLayer’s employees was found at a networking event.
Kunal Gupta, the young CEO of Polar Mobile, has watched the gatherings evolve. “It’s a sign of maturity. They’re splitting up by platform. There was a BlackBerry developers meeting last night, and iPhone developers meet next week. This is something you didn’t see a few years ago.”
The result of this grassroots pioneering is that the world is now seeking Toronto talent in Toronto rather than luring it away from here. Polar Mobile just announced its Toronto offices will be making apps for several Asian newspapers. Start-ups in India and the U.S. are applying to Extreme University. At Xtreme Labs, Thawar is preparing American visas for two developers, adding to two other recent American hires. “We’re seeing reverse brain drain,” he says.
The finale of the 12-week Extreme University program is a Dragons’ Den–style event where the students present the results of their work to a room of potential investors. Last year, Cassels Brock, Extreme’s lawyers, lent the company space at its offices at the top of the Scotia Plaza tower. The graduates put on suits and skirts and nibbled at tables of catered food. The city twinkled as twilight fell across the floor-to-ceiling windows all around. They were told there would be 100 potential angel investors there with their chequebooks. Be ready.
Thawar pointed out to his students some of the significant players in the crowd: JLA Ventures, RBC Ventures, Josh Sookman of the BlackBerry Partners Fund, Scott Pelton of GrowthWorks, investors in BumpTop.
One by one, each team went up onstage and demonstrated its technologies in real time on a computer. Chris Ye, a 23-year-old, and Mark Lampert, who is 28, unveiled the apps that they had finessed over the summer. They were confident, almost cocky: after all, they already had 100,000 active paying users.
The night of the presentation, wallets didn’t open for Ye and Lampert, though in the weeks following, there were some calls and meetings. Eventually, Extreme offered $250,000, and they chose to go with them. They thought that Varma and Madra best understood their vision for the company, which contains the contradiction of wanting to grow “by magnitude” while following the adage “We don’t make games to make money. We make money so that we can make more games.” (To date, the three groups who graduated from last year’s program have collectively raised $1.5 million in capital.)
In the Extreme offices, Ye shows me one of the games he developed for his iPhone. It’s a kind of retro cartoon role-playing game called Villains. What makes his and Lampert’s games unique is that they’re ubiquitous in the mobile world, available across four platforms: Facebook, iPhone, Android and the Web, through Facebook Connect. Almost no other gaming companies are blanketing in this way—not yet.
Ye’s avatar in the game is a busty woman, the kind you’d see spray painted on the side of a van, named Superhugebrother. “Over the past few days, all these people have attacked me, and I retaliated”—he taps the phone—“It’s text based, so there are statistics involved”—tap, tap—“Last week, Villains was ranked 13th most downloaded app in the U.S.”
Ye looks up and offers his phone. On the little rectangular screen, large cartoon letters read “KABOOM! You won the battle!”