Those are the main findings of a survey of Atlantic Canadian startups – defined as locally owned companies commercializing propriety technology for the global market – conducted in January and February by Entrevestor. The results were released today in the Entrevestor Intelligence report on www.entrevestor.com and summarized in this infographic.
The findings indicate the growth in startups in the region in the past three years has created about 15,000 direct and indirect jobs. These jobs are being supported by increasing revenues at these companies, and a steady stream of investment into them.
Here’s how we arrived at those numbers. We send surveys out to 290 startups across the region – every one that we knew of. We received 162 responses, and were able to supplement these responses with information drawn from interviews.
The best data set we got was in employment. The 162 startups that responded told us that they had of 1,453 employees as of Dec. 31, 2013, up 43 percent from 1,019 a year earlier. The astonishing part of this is how quickly these young companies are adding employees. By contract, data from Statistics Canada show that overall employment in Atlantic Canada increased just 0.3 percent in 2013.
These companies are also planning to keep growing, forecasting an increase in their workforce by as much as 52 percent this year. The market for programmers and business development specialists is really tight right now, so it would be miraculous if they actually meet these hiring goals. But the high number indicates the opportunities and optimism in the startup world.
Supplementing the survey results with other information we’ve gathered, we concluded that there were about 3,000 Atlantic Canadians directly employed by startups and by former startups that were bought out by larger corporations.
Research by Enrico Moretti of the University of California at Berkley shows that each high tech job creates 4.3 indirect jobs due to professional services, taxes and individual spending. Notice that Moretti said “high tech” jobs, but I believe his ratio should apply to jobs in other startup sectors, such as life sciences and clean technology.
Our survey found that the average salary of an IT startup – devised by dividing the total payroll by the number of employees – was $52,000. But the average salary was $55,200 in life sciences and $56,300 in cleantech. These three sectors accounted for 88 percent of the startups in the region. So obviously, startups are producing high enough payroll that Moretti’s ratio should apply across the whole community.
What’s driving this job growth? The companies that revealed revenue (some chose not to) showed that sales at the startups increased 30 percent last year. And investors continue to back the startups. Venture capital investment in the region increased to $30.8 million from $23 million, driven mainly by a huge increase in funding from institutions based outside the region.
One final note: this is a very young sector. Sixty-seven of the companies were launched last year, and 58 percent are less than three years old. Assuming a critical mass of these companies can find the capital, customers and employees they need, there are excellent prospects that the growth will continue. We’re at the early stages of something exciting.
Peter Moreira is a principal of www.Entrevestor.com, a news and data site for Atlantic Canadian startups.