(Bloomberg) -- Things are looking bright for Dan Leibu and League Inc., a digital health and benefits platform he founded with three friends two years ago in Toronto.
League plans to triple staff to as many as 200 by the end of the year and start offering services in the U.S. The company provides an alternative to traditional benefit plans offered by insurers, targeting small and medium-sized businesses that appreciate its flexibility and easy access. It received $25 million in venture funding last year from one of Canada's largest pension plans, among others.
Dan Leibu
“We're just racing to catch up with the demand,” Leibu, 43, said in an interview in the company's office in the MaRS Discovery District, an innovation hub that fosters technology and medical start-ups like League in the city's hospital row, where much of the country's publicly funded science research is carried out.
Canadian Prime Minister Justin Trudeau unveiled an “innovation budget” last month designed to help improve the country's historically poor record at bringing ideas to market. The shift is already underway. Ontario joins Quebec as the country's two most-populous provinces see a boom in start-ups and digital-job creation.
That growth is expected to help the Ontario Liberal government of Kathleen Wynne balance its books for the first time in a decade when it releases its budget this spring for the fiscal year starting April 1. The province expects a C$1.9 billion ($1.4 billion) deficit for last fiscal year, down from a projected C$4.3 billion gap in the 2015-2016 budget.
Computer-design and related jobs rose 26 percent in Ontario over the past five years to 162,000 in 2016, driving a 13 percent increase in technology-services employment, as manufacturing fell 2.9 percent over the same period, according to Statistics Canada. Job growth in computer-design was even faster than the 16 percent increase in finance, insurance and real estate, which has been fueled by a housing frenzy. Ontario's economy will grow 2.3 percent this year, outpacing all other provinces, according to the average forecast compiled by Bloomberg. That hasn't happened since 2000.
League employees in Toronto.
“The prospects for growth are excellent,” said Jan De Silva, president and chief executive officer of the Toronto Region Board of Trade. As “the tech community scales up, you've got employment growth coming from that, the people need to live somewhere, they've got service demand, so there's a ripple effect throughout the whole economy.”
MaRS could be a metaphor for Ontario's climb out of deficit, a slow start that's finally accelerating. The center required C$395 million of loans from the government in recent years after a private backer hit difficulties. But it secured new private funding from Manulife Financial Corp. and Sun Life Financial Inc. in February, allowing it pay back the bulk of the loans early.
It now supports more than 1,000 companies, which have created over 7,000 jobs, and attracted big global innovators such as Facebook Inc., IBM Corp. and Johnson and Johnson. While the focus so far has been on start-ups, that's now shifting to “scaling,” said Salim Teja, an executive vice president at the incubator.
Perfect Storm
“There's incredible excitement about what's happening in Toronto and Canada right now," he said. “The breakthroughs we're seeing in science and technology and the ambition the entrepreneurs are bringing to build global businesses has never been stronger. We're in that perfect storm now.”
MaRS Discovery District in Toronto.
Synaptive Medical Inc., which sells imaging technology and other devices used by surgeons to hospitals in Canada and the U.S., is one such company. It recently moved most of its operations from MaRS to another Toronto address to expand manufacturing. The company employs more than 300 workers and plans to add about 100 more this year. It's recently hired people in Switzerland, the U.K., the Netherlands, Germany and Denmark to boost sales outside of North America.
“We're in the production phase now,” Peter Dans, chief financial officer at Synaptive, said in a phone interview. “We were having trouble finding space so we ended up pretty well moving out.”
The revival in the province's fortunes isn't helping Wynne, whose approval rating fell to a record-low 12 percent, according to a poll released March 24 by the Angus Reid Institute, amid complaints about soaring electricity and house prices, and job losses in car manufacturing.
Still, manufacturing is an important part of Ontario's economy, employing 12 percent of the province's workforce. Computer-systems design accounts for less than 3 percent.
Debt Burden
And while the Ontario government has managed to get its deficit under control, it's still the world's most indebted sub-sovereign borrower, according to Moody's Investors Service. Net debt is expected to reach C$304.9 billion, or 38.3 percent of gross domestic product, at the end of March.
“The government's focus should be on building up a fiscal cushion now when things are strong,” said Doug Porter, chief economist at Bank of Montreal in Toronto. “The external environment for Ontario was about as friendly as one could realistically imagine.”
Many are betting it will stay that way. Among them is Andre Itwaru, co-founder and chief executive officer of First Global Data Ltd. The mobile-payments company has taken on a flurry of overseas orders and plans to add 12 people to its 17-person team in the next three months.
Itwaru's company builds partnerships with local banks, telecoms and other businesses in countries like India, China or Nigeria, offering a “mobile wallet” that allows clients to make payments on the go. Instead of building the software on their own, or buying it from a developer, First Global Data's partners can use its ready-made solution in return for a share in revenue.
“We've just leased another space here and we have job ads out for project-management and software management,” he said in an interview in his Toronto-based office. “Right now we have the benefit, or the drawback, of having too many business opportunities. We just need more staff to deploy.”
--With assistance from Chris Fournier Doug Alexander Greg Quinn and Gerrit De Vynck
To contact the reporter on this story: Maciej Onoszko in Toronto at monoszko@bloomberg.net.
To contact the editors responsible for this story: Christopher DeReza at cdereza1@bloomberg.net, Jacqueline Thorpe, David Scanlan
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
