How the tech sector is turning in Alberta
Alberta’s tech sector is slowly recovering from predominantly self-inflicted injuries that threatened to leave the nascent industry behind Canada’s tech leaders in British Columbia, Ontario and Quebec.
In 2019, the Alberta government removed incentives for investors to fund technology startups in the province, prompting some venture capital funds, private equity, individual funders and angel investors to take their money elsewhere.
As 2021 draws to a close, some in the industry believe Alberta is finally experiencing a resurgence, with the help of a more cohesive government and investors more willing to open their portfolios.
Investments are increasing, confidence is growing, and some developers and start-ups are starting to see the money coming in.
At a recent showcase event at the all-new Platform Innovation Center last month, companies from Edmonton and Calgary (and five from Saskatchewan) lined up to sell their latest ideas and inventions to investors watching virtually or online. anybody.
“It’s really cool to see. The depth and breadth of the ideas that come from Calgary are really impressive,” said Neil Vande Bunte, who is an investor and one of the event’s organizers.
While there is optimism and growing confidence, it has been difficult to convince investors to fund projects that are outside of Alberta’s traditional industries and money generators, including energy. and real estate.
“Raising capital is not easy. It is not for the faint of heart,” said Alina Martin, CEO of Waitwell, an app that manages queues, queues, dates. and crowd control for businesses.
“We’re taking the lines out,” said Martin, who made a $ 1.3 million pitch to grow the Calgary business.
Martin, who has spent his entire career in tech, says luring Alberta investors can be a challenge because the industry is relatively new and evolving, and some say risky. She says there is a lack of understanding of options for investors.
“In Alberta, when it comes to investing money, people invest in what they know, they invest in what they understand,” she said.
“A little risk aversion”
Jade Alberts is an angel investor in Calgary who watches the technology and innovation marketplace in Alberta, albeit slowly.
“We are crawling right now, as if we are just starting to move, but we are moving in the right direction,” he said.
“We’re a bit risky here.”
He says that in Toronto investors are more willing to write “million dollar checks,” while in Alberta, and to some extent in British Columbia, there is much more caution, due diligence and prudence.
“But we in Calgary like to see some things. We would like to make sure they are established, we would like to see MRR (Monthly Recurring Income), we really believe in the founder – that sort of thing,” says Alberts.
According to briefed. in, Calgary has already exceeded the number of investment transactions through the end of September, compared to the first nine months of last year, but the amount of money raised is $ 45 million less than the same period in 2020.
The Canadian Venture Capital Private Equity Association (CVCA) reports that $ 480 million was invested in 61 deals in Alberta during the same period.
That’s a lot of money, but it shows how Alberta lags even further behind the country’s tech behemoths in Ontario, Quebec and British Columbia, which have seen the most investment activity. , representing 92 percent of all dollars raised through the end of September. Toronto alone accounted for $ 4.9 billion in investment.
“Return on a competitive basis”
One of the co-authors of a report The government, which has warned that Alberta risks being left behind compared to other tech-friendly jurisdictions in Canada, says the sector is now more robust.
The Innovation Capital Working Group was blunt in its prediction for Alberta, which in 2019 eliminated some incentives, grants, and tax credits for startups and investors.
The group called for urgent action beyond expanding and diversifying the economy.
“We face a significant risk of continuing to lose more talent, capital and jobs to much more aggressive locations to attract top talent and dollars to their jurisdiction,” he warned.
“It is obvious that Alberta is in danger of being left behind.
Adam Legge, who is the chairman of the Business Council of Alberta and the report’s co-author, says that since their report, the UCP government has introduced a to agree this year for small and medium-sized businesses investing in research and development.
Legge also points to the increased funding for the Alberta Enterprise Corporation, which has extended its investments to venture capital funds.
“From the flow of business that we are seeing, there is clearly a resurgence of interest in investing in technology in Alberta. So I think we’re back on a competitive basis, ”said Legge.
He says one of the key recommendations that has not been implemented is a co-investment model that could help inexperienced investors.
“It would be a bit of a replacement for AITC (Alberta Investor Tax Credit), where ordinary Albertans who want to invest in the tech sector could do so, as we sort of lack some of these vehicles for less investors. experienced in the technology, “he said.
“A world full of opportunities”
The managing partner of a Calgary-based venture capital firm said the half-decade has been incredibly difficult for the Alberta economy and there is no shortage of pessimism, but says the environment is different in Alberta’s nascent tech sector.
“It’s not the world I live in. It’s a world full of opportunity, optimism and success,” said James Lochrie of Thin Air Labs.
Lochrie says the UCP government’s decision to eliminate an investor tax credit for tech and innovation companies was a big step backwards. He says before energy prices took off this year, the only sector “winning” in Alberta was technology.
“Not only did they realize this fact, but they also realized that the speed of growth was increasing, and so they made a total of 180 on the industry,” he said.
“Politics change, attention shifts, capital shifts.”
Lochrie says Thin Air Labs will launch a $ 30 million investment fund for start-up tech companies in the new year and expects it to reach $ 100 million later in 2022 with the addition of institutional investors.
Back at the Platform Innovation Center, Waitwell turned out to be the big winner of the evening. The company got the maximum amount, $ 400,000, which Martin says will help keep the business local and allow it to grow and hire more people.
“It will also help us develop and execute our marketing plans, which will help us generate more leads and acquire more customers,” she said.
Bryan Labby is a corporate reporter for CBC Calgary. If you have a great story idea or tip, you can reach him at [email protected] or on Twitter at @CBCBryan.