Sask. tech start-ups optimistic about future after province extends investment incentives
Province offers 45 per cent tax credit to investors in Sask. tech start-ups.
The Government of Saskatchewan is extending the existing Saskatchewan Technology Startup Incentive (STSI), and some start-ups say they're optimistic about the impact the decision will have on the growth of the province's tech sector.
The latest proposed legislation will extend STSI for five years, and introduces additions to the program that was first launched in 2018.
"As the province emerges from the pandemic, the government remains committed to creating a competitive business environment that stimulates investment and growth," said Jeremy Harrison, the minister responsible for Innovation Saskatchewan, in a statement.
"By reducing the barriers tech entrepreneurs face in accessing capital, the program has been instrumental in supporting the growth of tech startups that bring new products to market and create jobs in the province."
The STSI currently offers a non-refundable 45 per cent tax credit to people, corporations and venture capital funds that invest in early-stage technology companies in the province.
In addition to the tax credit, the province is increasing the amount of capital a start-up can raise under STSI from $1 million to $2 million. The proposed legislation will also set the value of the annual tax credit cap at $2.5 million, and it will extend the investment holding period from two to three years.
Kirk Morrison, CEO and co-founder of Krugo, a tech start-up based in Regina, says the STSI extension is good news for Saskatchewan's tech community.
"There's going to be an opportunity to see some pretty substantial growth in this sector. There are many different kinds of companies in Saskatchewan being founded and growing. So I think it's going to be really helpful in allowing those companies to kind of scale [up], hire more people and be more aggressive," said Morrison.
Krugo was founded in 2017 — the app helps people find events, restaurants and nightlife in cities across North America. The company participated in the STSI program early in its infancy.
"Our investors had the opportunity to participate in that tax credit as part of their investments into our company. And as a result of that, we were able to raise a lot of the capital right here in Saskatchewan," Morrison said.
"I think it really changed perceptions when the pilot project was initially launched. [It] definitely turned some investor attention toward the tech sector."
Today Krugo has seven Saskatchewan-based investors.
According the province, since its launch, the program has attracted $22 million of investment and supported the creation of 144 new jobs among 62 companies. It has increased the size of the province's investor pool, with 184 investors being approved to raise capital, according to the Saskatchewan government.
Saskatoon-based start-up SalonScale benefited from the initial incentive as well. SalonScale's app allows salon owners to weigh, track, and charge for the amount of hair colour they use in real-time.
According to the province, the company raised more than $1 million in seed funding in 2019, with more than $700,000 coming from STSI investors.
"Our Sask. investors were given an incentive that would lower their risk and increase investment, which has positioned SalonScale for success today. It's great to see the province of Saskatchewan supporting startups in this way," SalonScale CEO and founder Alicia Soulier said in a statement.
Krugo has taken a hit throughout the pandemic, as many small businesses have. But Morrison says the company has managed to weather the storm, and he's optimistic about the post-pandemic tech industry landscape.
"I think lots of times when there has been economic downturns, that's when the most innovation comes to light. Certainly, you look at 2008/2009 ... a lot of really innovative companies were born at that time," Morrison said.
"I think there's no better time than now to kind of think about what the opportunities coming out of the pandemic might be. The world is going to be a different place. There's going to be opportunities in the future that there weren't in the past."
Going forward, Morrison says he's interested in seeing the extended STSI program's "downstream impact" — how many jobs can be created, how many of the companies can scale globally and sell products around the world.
"That's going to be a true testament to the success or not of the program."