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Venture capital investment in Canada is way up compared to years prior, and a lot of that funding comes from U.S.-based firms. Last week, we drilled into what鈥檚 driving the increases in funding and how the country鈥檚 tech ecosystem is growing.

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This week, we鈥檙e looking at which regions and sectors in Canada are hot and why.

The Great (Green) North

The country鈥檚 three big entrepreneurial ecosystems are in Toronto, Ontario, Montreal, Quebec, and Vancouver, British Columbia, according to , CEO of the Toronto-based (CVCA).

But it鈥檚 Toronto 鈥� which is one of North America鈥檚 largest cities 鈥� that is by far and away the biggest Canadian market in terms of startups and amount invested. As seen in the chart below, Ontario was home to 48 percent, or nearly half, of the venture capital dollars invested in Canada since 2012.

The Toronto/Waterloo corridor is also home to of Canada鈥檚 finance sector. Woollatt likens its startup scene to that of New York. Then there鈥檚 Vancouver, which he said has a very similar feel to the San Francisco Bay Area with a more laid-back, West Coast style.

鈥淵ou won鈥檛 find a suit in Vancouver,鈥� he joked. That city is home to, a widely used platform for managing social media. Woollatt believes it鈥檚 one of the country鈥檚 roughly dozen or so .

鈥淭here鈥檚 huge companies operating in the fintech and AI spaces right now,鈥� he said. 鈥淚n general, the ecosystem is growing rapidly, and we鈥檙e seeing more VCs focused on niches.鈥� (This is happening across the border as well: America has seen a dramatic rise in VC interest in AI聽for example.)

, general partner of Vancouver-based聽, believes there has been an increase in venture capital investments mainly in three Canadian provinces: Quebec, Ontario, and British Columbia.

鈥淭hey are all excellent innovation hubs and home to some of the world鈥檚 top universities,鈥� he said. 鈥淎nd there are several AI centers at universities in Canada that are creating good spinoffs.鈥�

Another burgeoning sector is information and communication technologies (ICT). In 2016, the CVCA $1.6 billion (CA$2 billion) was invested in ICT startups across 330 deals. Life sciences was second with investments of $585.9 million (CA$730 million) over 103 deals.

One challenge for Canada has been keeping its talent from migrating south. Many of them go back and forth between the valley and Canada, according to Woollatt. Some of the higher-profile members include , co-founder and chairman of , and 聽co-founder and CEO .

鈥淯nfortunately, we lose a lot of Canadians to the Valley,鈥� Woollatt said. 鈥淚t鈥檚 a big problem.鈥�

Success Begets Success

Pangaea鈥檚 Erickson has seen his country鈥檚 tech ecosystem mature since his firm was founded in 2000.

鈥淚t鈥檚 just a great environment for startup companies,鈥� said the investor of advanced materials startups. 鈥淕enerally employees are very loyal 鈥� people don鈥檛 jump ship quite so often. Plus, it鈥檚 not as expensive to hire software people or scientists here.鈥�

Erickson believes as more Canadian companies have proven successful, the more VC interest there has been.

鈥淢ore VCs have been getting good returns, raising more money and investing it in Canadian companies,鈥� he said. 鈥淲e鈥檇 like to see that improve and grow.鈥�

As evidence of such success, the CVCA that in the first half of 2017, the country saw 21 exits compared with 32 in all of 2016. So far the largest exit this year was San Francisco-based $315 million (CA$393 million) purchase of Montreal鈥檚 . There were also two venture-backed initial public offerings: Ontario鈥檚 and

Erickson also points to the country鈥檚 research institutions as an excellent source of startups.

鈥淯niversities are different here. There鈥檚 more public support, and it鈥檚 less expensive for students to attend,鈥� he said. “That鈥檚 being recognized, and we鈥檙e seeing more university spinoff companies getting venture funding.鈥�

For its part, Pangaea recently led an undisclosed in Vancouver-based, a four-year-old biotech company focused on the 3D printing of human tissue. The startup was spun out of the . Palo Alto-based also participated in the round.

A Founder鈥檚 Perspective

, president and CEO of Aspect Biosystems, said the company was built on almost a decade of research. It鈥檚 currently focused on commercializing its 3D printing of tissues for a variety of applications in life sciences. Its technology could be used to predict how drugs are going to respond in our bodies before going through clinical trials.

It is also seeking to replace damaged or malfunctioning parts inside the body. To jumpstart this process, Aspect has inked a partnership with Johnson & Johnson to develop personalized 3D printed meniscus tissue.

While Mohamed concedes raising money 鈥渋s never easy,鈥� he believes his company has all the right features to make it attractive to investors.

鈥淚鈥檝e always believed the innovation we have in Canada is world class 鈥� from our research institutions, talent, and innovation,鈥� he said. 鈥淥ur company is an example of that. It鈥檚 just about getting the visibility on the global stage.鈥�

In general, it鈥檚 harder to get the visibility you need and to build a strong network in Canada, Mohamed admits.

鈥淭he VC community is not as strong or as big as in the U.S.,鈥� he said. 鈥淏ut we believe we are on a growth trajectory. And that helped make it easier.鈥�

While Canada still trails far behind the U.S. when it comes to raising venture capital funds, there鈥檚 no question that the jump in financing has been impressive. But for the country to continue on its path of increased fundraising, it will need to focus on keeping more of its top talent at home and growing its companies鈥� exposure to outside investors.