ABCtech #56 20JAN16 Unleashing Alberta’s Technology Sector

ABCtech #56 20JAN16 Unleashing Alberta’s Technology Sector

Canada is to be transformed from an energy powerhouse to one of innovation and creativity, capitalizing on the diversity and resourcefulness of its people!  That is the expressed vision of Justin Trudeau in his speech yesterday to the World Economic Forum in Davos, Switzerland. SEE HERE  To illustrate, last week the Prime Minister announced $20M for a cell therapy institute in Toronto to advance the commercialization of regenerative medicine technologies. FOR MORE  The dedicated clustering of emerging technologies is a welcome option for bridging science – emerging technologies – and commerce.

While Canada’s national vision and a complimentary centre are a welcome opening, we’ll need more and expect provincial and municipal governments to align for realizing the essentials for creating the new Canada!: energy transitions – from renewable resources to fusion energy, leadership in innovation – with a dedicated commitment to emerging technologies, and a resilient economy – featuring a vibrant innovation ecosystem.

In the following article Robert McGarvey sets out a few prime recommend-ations on what might help in this ambitious and timely undertaking. Stay tuned for a forthcoming series of articles on sustainability followed by our re-assessment of Alberta’s economic resilience.  – Editor

Unleashing Alberta’s Technology Sector by Robert McGarvey, Troy Media Columnist

Here we go again, Alberta Premier Rachael Notley has commissioned a panel to study how to diversify Alberta’s economy. The public may be forgiven for shrugging their shoulders, after all diversification has – theoretically – been a top priority ever since Peter Lougheed. The truth is, when it comes to diversification, we know what to do, but not how to do it.

ThePremier’s Council on Economic Strategy (2011) recommended ‘…reducing our vulnerability by… applying knowledge in new ways to get greater value from all our natural and human resources…” Luckily, the answer to getting greater value is staring us in the face; unleash the power of Alberta’s technology sector.

Like many other jurisdictions the Alberta government spends hundreds of millions of dollars annually supporting technology related R&D (research and development). Total R&D funding in Alberta from all sources, federal, provincial and private sectors, is over $3 billion per annum, and is growing at a healthy pace. The result, in areas of excellence like bio-refining, (space age) materials, nanotechnology, clean tech, biotechnology and health care is very impressive. World-class innovation is being generated in Alberta and has been for many decades.

But R&D alone is not enough to diversify the economy. There is a need to build solid commercial enterprises that headquarter in Alberta, develop products, hire new staff and compete successfully in world markets. The problem is, very few of the thousands of technology rich start-ups that exist today are able to escape the Starvation Zone and become successful commercial businesses in Alberta.

What is the Starvation Zone? It is the financial black hole that technology meets when it emerges from the laboratory. Having developed in a fully ‘oxygenated’ university environment, for example, the young technology entrepreneurs encounter a world where bank doors are closed and where alternatives sources of capital like angel investor networks and venture capital are extremely limited.  Regrettably, as a result, a technology ‘success’ in Alberta most often involves the sale of a world-class technology to a U.S., Chinese or South Korean venture firm at ‘pennies in the dollar’, and the loss of opportunity for Alberta. So, what do we do to solve this problem?

It is now time to address the roots of the problem. Technology commercialization needs its own nutrient-rich commercial biosphere – the innovation ecosystem. This protective environment needs, first of all, the raw material of innovation but it also needs access to vital nutrients including:  expertise in commercialization, production, global marketing, sales and finance in order to create the conditions for life. Clearly we have many of the ingredients for this biosphere already. Alberta is rich in innovation and has expertise of all sorts, including business development specialists, technology incubators and related support services. What it lacks is access to finance.

There are two major impediments that need to be overcome in order to ‘oxygenate’ Alberta’s technology environment, both of which can be influenced by government playing the role of catalyst.

One, strengthen the balance sheets of technology-rich start-ups by capitalizing their intangible assets. Doing so would formally recognize the latent value in their intellectual property; perhaps quantify leverage-able collateral. Secondly, engage Albertans by reforming Alberta’s capital markets for connecting the multiple billions of dollars in Albertan’s RRSP, TFSA, pension and mutual funds to local investment opportunities.

The first of these problems is a direct government problem; it’s a product of how we manage corporate tax in Canada. Junior companies are encouraged to write off their development expenses in order to reduce their tax burden and qualify for various government grants. So far so good, but the result is empty balance sheets, no assets (or collateral) and therefore no financial leverage. Solve this accounting problem (it is being done in other jurisdictions now) and Alberta technology has a fighting chance.

Capital market reforms are also something government could support. The Alberta government has two major financial institutions it influences, the ATB (Alberta Treasury Branches) and Alberta’s credit unions. Both of which have millions of depositors and/or members. These institutions should be encouraged to establish ‘Alberta First’ mutual-like funds, which direct savings toward ‘investment-ready’ Alberta technology companies.

None of these initiatives is particularly difficult, and with sufficient support they could ‘oxygenate’ the technology biosphere and help achieve the goal of diversifying Alberta’s economy.

See also:

:

Capital Market Reform Key to Alberta Diversification Effort

Podcast HERE

Diversifying the Alberta Economy – Capitalizing on Intangible Assets

Why the Alberta Technology Sector Can’t Seem to Pull Ahead

How Alberta Can Regain It’s Swagger

Alberta Needs to Diversify or Die

2015 Proceedings – Creating the new Alberta!

Status Report on Alberta’s Economic Resilience

Alberta boosts support for high-tech innovation and research 

Alberta remains focused on economic diversification and supporting families

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