Alberta urged to help high-tech industry 'at risk' from economic crisis

Technology and innovation companies are looking to the UCP government to provide the incentives needed to attract capital investment to a budding sector.

Province to unveil 'next steps soon' after receiving panel report on how to grow tech sector

James Lochrie is a Calgary-based tech entrepreneur, investor and managing partner of Thin Air Labs. He says the biggest issue the sector faces in the province is attracting capital investment. (Colin Hall/CBC News)

The thousands of vacant offices in Calgary's downtown towers have often served as a reminder of the tough times Canada's oil and gas sector has endured the past few years.

But James Lochrie believes those towers can fill up once again — if Alberta gets things right.

"I've got to believe that it's going to be the tech sector that is going to fill those towers," said Lochrie, a Calgary-based tech entrepreneur, investor and managing partner of Thin Air Labs.

"I don't believe there is a lot of other opportunities that we're looking at in Alberta that can fill them as quickly, can grow as quickly and can approach global markets the way that we can through the tech sector."

But like so many other parts of the Alberta economy, the budding industry has been rattled by COVID-19, fuelling warnings it could be severely damaged if governments do not act soon. There are concerns companies will leave, or have already.

Now, attention is on the provincial government and what steps it may take after receiving a highly anticipated report by the Innovation Capital Working Group (ICWG) on how to grow the tech industry. 

The report has not yet been made public, but in a statement to CBC News, a spokesman for Economic Development Minister Tanya Fir said it has been received and provided to the province's economic recovery council.

Tanya Fir, Alberta's minister of economic development, has received a panel report from the Innovation Capital Working Group. The report is now in the hands of the province's economic recovery council. (Nate Gross/CBC)

"As part of our economic recovery, we are going to be looking at ways to grow the technology sector to create high-paying jobs and attract investment," said press secretary Justin Brattinga in an email. "We will be announcing our next steps soon." 

Advanced technology is the province's third-largest industry.

The information and communication technology sector includes about 4,600 companies, generating roughly $15 billion in annual revenues in 2016, according to the province. 

It has also had a number of notable successes, including Calgary-based Solium Capital, which was bought last year by American financial giant Morgan Stanley for $1.1 billion. This month, another Calgary company, Symend, made headlines when it raised $73 million from investors. The company has built a platform that helps customers at risk of defaulting on payments

Many in the sector, who felt they had been gaining momentum, were angry when the UCP government decided last year to scrap tax credit programs created to boost investment. 

Last fall, Fir announced the creation of the ICWG to prepare a report on ways to growing the high-tech sector. Then the COVID-19 pandemic shattered economies worldwide.

In an open letter sent to the provincial government this spring, hundreds of Albertans with ties to high-tech called on the UCP for further support of their businesses and entrepreneurs.

"This crisis puts tech companies and the ecosystem that supports them at risk," according to the letter.

It urged the province to help attract private capital with matching funds that reduce the risk for early-stage investment. It also encouraged the province and municipalities to become a customer of Alberta-made tech firms. And it asked government to consider and act upon the recommendations of the ICWG.

Among the province's tech success stories is Morgan Stanley's $1.1-billion acquisition of Calgary-based Solium last year. (Mark Lennihan/Associated Press)

Adam Legge, president of the Business Council of Alberta and co-chair the working group, didn't discuss details but said it made recommendations on incentives and financial tools.

With Alberta competing with many other jurisdictions wanting to be the next Silicon Valley, there are some key things it needs to do to keep adding to the province's competitivenessLegge said.

This includes building out the support network for encouraging new business development, the right tools and incentives for attracting investment, and setting ambitious targets to strive for.

"We need to say we want to have this many companies or this much GDP or this many employees," he said.

"And aggressively put the resources toward making that happen across all parts of our post-secondary research or support programs or financing and investment incentive programs."

Legge said it's also important to look at the new ways in which companies are succeedingThat may not necessarily be with tax credits, he said, but might include customer-driven incentives.

Keith Warner, CEO of Colorado-based New World Interactive, says the company chose Calgary for its Canadian expansion in 2019 in part due to the tax credits the province offered. (Audrey Neveu/CBC)

"The critical piece of a new startup company is getting that first customer, the first bit of revenue," Legge added.

Lochrie said the biggest issue the sector faces in the province is attracting capital investment. 

"We started seeing a lot of momentum in Calgary over approximately two years ago, three years ago, when they had the Alberta Investment Tax Credit, which encouraged and helped incentivize early investment," he said.

"And we saw a lot of companies form — and Symend was one of those — under that paradigm. That paradigm is now gone under the changes the UCP government has made."

Lochrie said companies are leaving and entrepreneurs are choosing to set up their businesses elsewhere.

The UCP government said this year's budget contained more than $200 million for innovation, research and commercialization, including $34 million for artificial intelligence over three years.

It has also said that its venture capital corporation, Alberta Enterprise Corporation, and its fund partners have invested $54 million in Alberta tech companies since last October.

But there's an appetite in the tech sector to have the old tax credits reinstated.

Those credits helped lure Keith Warner to Calgary last year.

Warner picked Calgary for a Canadian expansion of his Denver-based game company, New World Interactive. One reason was the Interactive Digital Media Tax Credit, which covered 25 per cent of salaries and bonuses for staff.

Would he make the same decision today?

"It's a very hard question to answer," Warner said in an interview from Colorado.

"But in the vacuum of what I knew then versus what I know now, without the benefit of knowing the people who I've become lifetime friends and the connections I've made there, the answer is no. We would not have come to Calgary."

Still, Warner is optimistic programs designed to help build up the tech sector will return as the pandemic's impact underscores the need to diversify Alberta's economy. 

"Perhaps now … with COVID and the situation in the energy sector, [it] may encourage that investment, so to speak."


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