Alberta venture capital investment poised to break record again

Alberta's tech sector broke an all-time record for venture capital investment in 2020, closing $455 million in deals. (File photo)

In Canada's largest oil and gas producing province, investors who have been made wealthy by the energy sector are starting to open their pockets to a budding local tech industry.

For years, Alberta's startup technology sector has complained of a lack of access to homegrown venture capital. Tech entrepreneurs in Alberta have historically had better luck going to Silicon Valley for funding than trying to raise money locally.

But that's starting to change. Alberta's tech sector broke an all-time record for venture capital investment in 2020, closing $455 million in deals.

And though full-year figures will not be publicly available until March, Alberta government figures show that as of September 2021, the province had already surpassed 2020's record for venture capital dollars invested by 5.5 per cent.

“We're waiting to get the final results for all of 2021, but it looks like it's going to be a significant increase, with a new record,” said Doug Schweitzer, the province's minister of jobs, economy and innovation.

Whatever the final dollar figure turns out to be, at least half of that funding will likely still have originated outside of the province, particularly from U.S.-based investors, said Zack Storms, founder of Startup TNT — an Edmonton-based non-profit that works to stimulate investment in the tech sector.

But Storms said a growing amount of the investment capital flowing into the province's startups is locally generated.

“We are starting to see more Alberta investors,” Storms said. “There's also a lot of new venture capital funds popping up. Local, homegrown and other Alberta VC funds — I think there's more to be had there than I've ever seen.”

David Edmonds, who sits on the board of The A100 — a Calgary-based non-profit whose aim is to help the next generation of tech entrepreneurs thrive in Alberta — said for many years, high net-worth individuals in the province were hesitant to invest in the tech sector, preferring to invest in oil and gas and other more familiar industries.

But he said that has changed dramatically in a short period of time.

“It started a couple of years ago with certain family offices, as the next generation comes forward,” Edmonds said. “Three or four years ago, you could see that there was a sentiment shift toward the big companies — Amazon, Apple, etc. If you're an investor watching trends, you see that you want to be part of that. And to be part of that, you have to do some portfolio mixing."

“Tech is an untapped market. And in the past, (Alberta investors) have been scared,” said Ashif Mawji, an Edmonton-based partner with Rising Tide VC. “It's been kind of 'I see it, but I don't understand it.'"

Mawji, who also invests privately, will launch a new Alberta-based venture fund next month. He said it's significant that this time, much of the capital is coming from people without a tech background.

“These are folks who have made their money in construction, in real estate, in oil and gas. But they have the confidence now,” Mawji said. “Not to directly invest in a tech company yet, but they're confident enough to go into a fund, where the risk is diversified.”

If confidence in Alberta's tech sector is growing, it's likely due at least in part to a string of high-profile success stories. Last year, Calgary-based software firm Benevity achieved envied “unicorn” status when British-based Hg Capital LLP purchased a majority stake in the company in a deal valued at US$1.1 billion.

Other companies — like Edmonton-based Jobber and Calgary-based Symend, which raised more than US$60 million and US$100 million respectively in recent funding rounds — have also attracted attention.

“When people start to see these companies in Alberta that are commanding some significantly high valuations and raising some serious money, I think they start to say 'there is something here,'" Mawji said. “And the VCs have started to take note.”

While Mawji said tech is currently booming all over the globe, Alberta's industry has benefited from public and private sector efforts to encourage diversification during a string of downturn years for the province's traditional oil and gas economy.

But even with oil prices booming once again, boosters say tech in Alberta will continue to attract ever growing amounts of investment capital. Schweitzer pointed out that some of the companies attracting seed and early-stage funding right now will grow into larger, more mature companies capable of attracting larger dollar amounts.

“We anticipate that in the years to come, the venture capital numbers in Alberta are going to grow quite exponentially, because there will be more and more companies getting to those later stages,” Schweitzer said.

This report by The Canadian Press was first published Feb. 8, 2022