Good morning. Originally a fishing outpost, St. John’s may seem like an unlikely place for a tech boom. In focus today are the factors that have helped Newfoundland stem the brain drain – and what the rest of Canada can learn from the province’s success.

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Hi, I’m Alexandra Posadzki, and I cover financial crime and cybercrime for The Globe.

When I learned that financial-crime technology company Nasdaq Verafin was founded in Newfoundland – a place far from every global financial centre – I was intrigued. I teamed up with The Globe’s technology reporter Sean Silcoff, who has penned several pieces about the hot tech scene in St. John’s, to explore what’s driving the phenomenon.

Verafin uses cutting-edge technology to help financial institutions automate the more repetitive, burdensome aspects of financial-crime compliance. Founded in 2003 by three engineering students from Memorial University, the company made an early pivot from building software for mining robots to building software for banks.

Its rise is a feel-good Canadian success story. In 2019, Verafin announced a $515-million financing deal that was, at the time, the biggest venture-funding deal in Canadian history. A year later, it struck a deal to be acquired by Nasdaq Inc. for US$2.75-billion – one of the largest exits by a Canadian tech company of the past 25 years.

Today, Verafin continues to grow in St. John’s, where it employs more than 900 people and recently opened a second office. Its success has emboldened a new generation of tech entrepreneurs, proving that one can build a billion-dollar tech company anywhere.

I recently visited St. John’s to tour Verafin’s office and meet with local tech entrepreneurs (and to hike the North Head trail, a 1.7-kilometre coastal loop so stunning that I walked it three times). Everywhere I looked, I found the telltale signs of a thriving tech hub: Patagonia vests, industrial buildings transformed into cafes or coworking spaces, and busy professionals talking into their AirPods.

So what contributed to Newfoundland’s tech sector success? From what we learned, here are some of the most important ingredients:

Education

Memorial University of Newfoundland is a highly ranked school with a well-regarded engineering program. Some years, Verafin has hired virtually its entire cohort of computer science grads. Stephanie Champion, executive vice-president and head of Nasdaq Verafin, told me: “The talent that comes out of Memorial has helped us build our business.”

Early-stage financing

Local investors such as Killick Capital and Pelorus Capital have played a key role in many of the early-stage financings that have launched Newfoundland’s tech stars. To attract venture capitalists, a company must already have some traction, such as a rapid rate of growth or prominent customers. “Without Pelorus and Killick, you might not even get that opportunity, so they’re a critical piece of the whole ecosystem here,” said Chris Gardner, chief strategy officer at legal AI software provider Spellbook, which was founded in St. John’s.

A global mindset

Because Newfoundland and Labrador is such a small place, the province’s entrepreneurs are acutely aware of the fact that they’ll have to sell to international markets in order to succeed. That can help them scale quicker – a dynamic that has also driven prosperous but small tech ecosystems in places such as Israel and Estonia.

The lifestyle

Pretty much everyone I met with in Newfoundland who had chosen to stay in the province, or returned after some time away, emphasized the appeal of the lifestyle: short commutes (nothing is ever more than 10 minutes away), fresh salty air, easy access to world-class hiking trails, and house prices well below the national average.

A culture of giving back

Some believe that Newfoundland’s success might not be replicable in other parts of the country. Ed Martin, president and CEO of Genesis, Memorial’s business incubator, said the degree to which the province’s successful founders give back to the community is unique, and likely attributable to the fact that it’s a remote island. “I think there’s this mentality of, we’re in this together and we want to see Newfoundland really succeed on this bigger scale,” he said.