Alberta Enterprise Fund positive step

Darren Massey Following the recommendations of the Alberta government task force on technology commercialization, the Premier and the Minister of Advanced Education and Technology made a bold move to establish the $100 million Alberta Enterprise Corporation (AEC). The purpose of the Corporation is “to attract and strengthen venture capital investments in Alberta,” focused on early-stage technology-based companies. Do we really need to do this, and if so, is the Corporation the best approach? The answers are most definitely yes and yes. Let me explain why.

Ask any entrepreneur trying to get a technology-based company off the ground in Alberta what their major barriers to success are, and they will invariably state access to risk-tolerant capital – so called angel and venture capital. Anecdotal reporting from the Canadian Venture Capital Association and others suggests Alberta receives far less of an equivalent GDP proportion of Canadian invested venture capital. Currently there are only three private VC funds with offices in Alberta actively investing: Avrio Ventures, BDC Venture Capital and iNOVIA Capital. That’s not enough. A vibrant, connected venture capital community attracts technologists, entrepreneurs, and angel investors to startup companies. It is a model that works for Vancouver, Denver, Austin, Boston, and of course, California. There’s no reason it can’t work for Alberta.

So we know we need more venture capital at play in Alberta. Is AEC the answer? There are doubters. Recently the media reported that AEC will invest directly in companies, picking winners and losers – and cronies – until the capital well is dry and we are no further ahead. I don’t see it. The Corporation is not designed to invest in technology companies, but in Venture Capital funds. It is the job of AEC to pick the winning venture capitalists, while it is the job of the venture capitalists to pick the winning companies.

The real challenge for the province is first attracting a top board and management team to the Corporation, and then attracting the best venture capital fund managers in the world to come invest in Alberta companies. The $100 million is a nice carrot, but not sufficient to attract the best fund managers who dine on caviar. Why? Because the best so-called Tier 1 funds don’t lack for capital. In fact, when you have the best returns, everybody wants to give you cash (including us). But what these Tier 1 funds never get enough of is quality deals to invest in. And that’s really the challenge: proving to the world that Alberta is home to world-class under exploited innovation just waiting to become the next RIM.

I think we can do it. But it’s going to take much more than the AEC. The process of technology commercialization is best thought of as an eco-system. It takes all the right ingredients—in the right amounts—to make the system work. Venture Capital is just one, albeit very important ingredient. Other ingredients are strong fundamental and applied research, deep and diverse base of experienced entrepreneurial talent, and a favourable economic environment with supportive programs, services, and infrastructure.

The bad news is Alberta isn’t strong in all these areas. The good news is the province understands this and is taking a holistic approach with a plan for each area. In addition to the AEC, Alberta’s $178 million action plan calls for provincial scientific research and experimental development tax credits, expansion of business and product development centres, pre-commercial seed funding, and support to encourage youth entrepreneur development.

This diverse approach is perhaps the greatest departure from past government policy, and the main reason why the eco-system may grow and thrive.

But eco-systems aren’t built in a day. These are not short-term solutions, but rather long-term investments in the future of the province’s economic health and diversity. Eco-systems are also fragile, so no doubt some initiatives will need tweaking, and new initiatives will be developed. It is paramount that the province keeps its eye on the horizon and remains committed over the long term to these and other initiatives. Success will be measured not over dinner, but over decades. We all must be up for that commitment.

Keywords: Alberta, investment, Calgary Technologies Inc. AEC

News Beats: Technology