The Alberta Tech Ecosystem: The Good, the Improving and the Tough Realities

My take on what we are doing well and what we can do better in Alberta.

Lately there has been significant buzz about the Alberta tech ecosystem. In a province that has deep roots in the traditional oil and gas sector, which has been very turbulent in the last decade, we are seeing the people welcome an emerging new star.

In this letter, I share my opinion - this is only my opinion - on what is working in Alberta tech, what is improving with momentum, and the realities we face if we truly want to create a thriving tech sector and diversify the Alberta economy. I expect when people read this there will be many counter points made and I may change my opinion on some of this. Think of this like a balance sheet of my perspectives, a snapshot in time of my current view on how we are doing in the Alberta tech ecosystem as of January 16, 2022.

A framework I will be using for this letter is in my mind the three pillars to any great tech ecosystem: Talent, Founders, and Capital. Community efforts are also important, but typically support one of these three pillars. I don’t think this framework is novel, and I have probably come across it somewhere and it stuck with me.

Ok, so what is going well?

First, when we compare Alberta’s growth year over year, tremendous progress is being made, and there is forward momentum in the ecosystem. For those that believe in compounding, this is exciting as every year, there is significant growth from the previous.

The most conclusive evidence of this progress can be seen in Capital. According to the Venture Capital Association of Alberta in 2020 Alberta raised $455 million through 51 venture deals, the result was a 100% increase over 2019. In the first 9 months of 2021, Alberta has raised $480 million, so well on track to break the record again.

We also have recently seen large exits from companies such as Benevity, Shareworks, Enervus, Parvus Therapeutics and Absorb, proving that it is possible to have large wins in the Alberta technology and innovation ecosystem.

In addition, seed stage capital is becoming more abundant in the ecosystem. Seed stage investors like Harvest Ventures and Thin Air Labs are closing in on their inaugural funds. Also, the angel community continues to the grow with several grass root initiatives. I am personally very impressed with Edmonton based Startup TNT which is now investing north of $1 million dollars every summit into early-stage start-ups and educating a new crop of angel investors. Other initiatives such as VA angels, Intergen, Women at the Cap Table are providing new sources of capital from new angels in the ecosystem. I expect this trend to continue.

From a talent perspective, the educational institutions have woken up to the need to retrain and reskill our talent pool. Notably, David Bissett’s $30 million dollar donation into the SAIT school for Advanced Digital Technology, has broadened the programming available for mid-career professionals. That combined with many bootcamps, and vocational training programs (InceptionU, Lighthouse Labs, Edge Up, TECHCareers, Bow Valley College, InnoTech, 321 Growth Academy), have created retraining programs for those who want to break into tech. AltaML’s applied AI lab allows new trainees to get real hands on and paid experience to build their skills. TuskHub also hires new professionals to tech training them in growth related roles.

Full disclosure, I am a bootcamp grad, and am thankful that the program propelled me into a technology career.

The Alberta government has also announced an “express” pathway for international talent to migrate into tech. While we wait and see if this program results in the intended outcomes it is aiming for, we can be certain that the technology companies will need a consistent stream of talent. I have heard a lot of push back on this, that why would hire externally, when we should focus hiring at home first? Simply, we need both. External talent can quickly help fill in the gaps in experience that the local population cannot and the benefits of diversity for creative thinking and collaboration are key components to a healthy tech ecosystem.

We have strong research departments particularly in the fields of AI and Machine Learning at the University of Alberta, supported by the success of the Alberta Machine Intelligence Institute. We also have large multinationals such as IBM, Microsoft, and most recently Amazon, with offices in Alberta.

There are many grassroots initiatives that also support talent in our ecosystem, notably Chic Geek, Product Calgary, Tech West Collective, YYC Data Society, Immigrant Techies Alberta and many, many more. Calgary’s grass root game is great. Although I would love to see more groups focused specifically on Sales, Marketing, Customer Success and Business Operations. If you’re reading this and thinking about starting a community initiative in those areas, reach out, let’s talk.

Discussing the tech ecosystem in Alberta is incomplete without mention of the Rainforest movement. This is something as a province we can truly be proud of. If you’re reading this and want to learn more and support the local technology and innovation ecosystem, please go to Rainforest’s Wednesday Lunch without Lunch.

Last but not least founders. It appears there is a tsunami of pre-seed and seed stage founders in the Alberta tech ecosystem. Startups seem to be popping up at a tremendous rate as the overall population becomes more familiar with digital technology and innovation. I believe this also can be attested to Alberta’s entrepreneurial roots.  Alberta seems to have a strong number of female founders or cofounders in our tech startups (30% compared to the Canadian average of 13% in 2018, a dated stat but I believe this trend has continued). However, I am unsure that the same type of traction is taking place for minority groups. If someone has better data for this, I would love to see it.

Some very prominent global accelerators Plug and Play, The Alchemist, The 500 are entering the Alberta market thanks to funding by Alberta Innovates. Many consider these to be very strong programs right behind YCombinator and TechStars. 

Alright, enough with the rose-coloured glasses, let’s talk about what needs work:

The relative growth in the Alberta ecosystem has stalled in 2021. With less scale up capital going into the ecosystem. Heck, there is very little later stage capital (Series A, B, C), directly sourced from Alberta tech firms. There are VCs with head offices outside of Alberta with some presence here, particularly from other areas of Canada (Chrysalix, Inovia, McRock, Panache Relay, Yaletown), but very few home-grown VCs.

There are fewer VCs from the US with a local presence (Azure, Builders VC), but these tides are turning, partly thanks to the Alberta Enterprise Corporation investing into international VCs and mandating that they have a presence in Alberta. There is hope that we will get our first fund with enough capital to have the appetite to participate in later stage rounds, Thin Air Labs, cheering for them to hit their target of $100 million in capital by the end of 2022.

In addition to this, when the Conservative government was elected, they abruptly ended the Alberta Investor Tax Credit, a tax credit of 30% for individuals like you or I to invest in start-ups. This move is inconsistent with our neighbours BC who has a tax credit of 30% and Saskatchewan with a credit of 45%. This move was in my opinion, reckless and disruptive, especially considering the expense on our “Energy War Room”, which hurt our prospects of companies and talent moving to Alberta. The prime example was WattPadd a scale up company looking for its second HQ and ending up choosing Halifax over Calgary.

Similarly, outdated accredited investor rules make it difficult for  investors that are just starting out to invest in promising startups. Although a recent relaxation for certain designations is certainly a positive…but heck, you can buy crypto and penny stocks, but cannot invest in a local start up? To be fair, this is a North America problem not just Alberta. 

Now, let’s talk about talent. In some ways the turbulence in the oil and gas sector, has caused a mindset problem in our talent. Particularly, I find many displaced oil and gas workers to have a “solution” mindset. For example, a problem is shared and they start engineering a solution. This is rooted in the fact that oil and gas companies are commodity-based businesses, where understanding macroeconomics, engineering and logistics are key to a successful business.

Tech startups need a problem mindset. What problem are we solving? What problem should we solve? How do we know this is the right problem? It takes both convergent and divergent thinking, a healthy dose of optimism, and a ferocious understanding of the customer.

With that, we have very significant talent gaps in our market. Traditional oil & gas companies have little to no sales, marketing (traditional, not energy marketing), customer success: all roles critical to a tech start-up. And it is not good enough for a product to be functional, it needs to be user friendly and enjoyable for the consumer, meaning we need to retrain how we think about design.

In a community that I run to help people pivot into tech, we see the vast majority of professionals seeking to pivot into Data, Software Development and Product, but very few into marketing, sales, customer success, and UX design. A trend we need to course correct if we are going to provide technology companies with the full suite of talent they need to thrive in Alberta.

Now founders. Similar to talent we don’t have enough product founders in Calgary. Our startups are significantly over engineering solutions before testing it with the market, and distribution of the product is not being thought about early enough. Start up success is highly dependent on understanding the needs of the customer and rapid iteration, and embracing experimentation is must needed for success. Additionally, making changes to code is a very expensive and slow process, reducing risk up front is key to shipping velocity. I do think the ecosystem is doing a good job of educating new founders, but there is a larger cultural issue we need to work on.

Another thing is founders have significant distractions chasing grants and programming. There are significant grants in the Alberta tech ecosystem, which is helpful, but too many see this as validation. True validation is when a customer buys your product, and then another customer buys it again for the exact same use case. There needs to be more focus on actual business building than landing grants and joining accelerator programs.

Many of our support initiatives ultimately are funded by government agencies. Meaning bureaucracy, slowness, and just inefficiency. All in all, they are probably a net positive, but sometimes there can be too much focus on getting non-dilutive financing that comes with a big list of milestones that don’t necessarily make for a successful start up. That being said, the Alberta Energy Corps investments into funds is really great. Also, please bring back the Alberta Investor Tax Credit. Pretty please.

Alright, lastly the tough realities.

Let’s talk about capital. Although our available capital is growing, we are really far behind. In the first 9 months of 2022, BC has raised $2.3 billion, compared to $480 million in Alberta. Alberta’s population is about 88% of BCs, but has raised only 20% of the venture funding. Similarly, Saskatchewan raised $201 million during this time, 40% of what Alberta raised, with only 25% of the population. 

Digging deeper into this you can see that BC did 79 deals, Alberta 61 deals, and Saskatchewan 13 deals. Meaning the average deal size for BC was $29 mm, Alberta $8 mm, and Saskatchewan $15 million…pointing to a lack of later stage deals. Notably there were only a few series B deals in 2021: Jobber, Symend and Neo, and a handful of Series A deals: Samdesk, Athennian, StellarAlgo, Veerum, Gradient MSP, CostCertified, Showbie, and I am very likely missing some.

Source: CVCA

We have a scaling challenge in Alberta. Which is a great segway into talent.

We simply don’t have the senior talent needed to scale technology enterprises in Alberta. We constantly need to look elsewhere to bring in this talent. This is a very difficult problem to solve, but at its core we need Alberta to be an attractive place to live, so talent is willing to relocate here. Our climate is certainly a major obstacle for this, but remote working can make this less of a barrier. Our external reputation of being the “Texas” of the north conservative culture, needs some work as I truly believe that that Alberta is much more balanced than it appears from the outside looking in.

We also need to home grow this experienced talent. Currently top talent jumps between 4 or 5 companies on average.  This can be evidenced by studying how many senior professionals have jumped between Benevity, Getty, Blackline Safety, and Shareworks in recent years.

One program which is developing senior scale up talent is the Alberta Product Leadership Program. They train product professionals into become product leaders, we need more programs like this. If you know of any, please let me know, I would love to promote them.

The talent challenges are not limited to scale ups. Finding a CTO in Calgary that is willing to work at a start up is next to impossible. Partly there is a lack of talent, partly start ups can’t incentivize senior professionals to leave more established companies. Why? Start-ups have a difficult time paying competitively. This is into a market that is already underpaid for North American standards. Why? Our investment rounds are priced way below North American standards.

Founders in Alberta need to spend way too much time raising money, and the funds they raise are too small and at too low of valuations. This leads to the founders spending most their time raising money, and not enough time with customers. External VCs coming into this market should help with this, but the local investment community needs to be willing to take more risk and move quicker for the right founders. Please kill the long list of due diligence items if you’re writing an angel check, do you believe in the founder, the market, and do they have the ability to bring a scalable solution to market? Don’t bog them down in endless due diligence, this isn’t an IPO.

The combination of the talent problem and the investor readiness problem has caused a significant brain drain of talent of founders the south of the Border. Which we desperately need to stop. Did you know one of the founders of Uber is from Calgary, a U of C grad, Garett Camp? When he was raising funds for his site StumbledUpon, Alberta investors laughed him out of the room straight to the Silicon Valley. Well now, he is one of the richest Canadians on the planet.

To the founders themselves, they are simply too “Canadian” sometimes. We are too pragmatic as a culture. As founders you need to be overly optimistic, you need to see and sell the disruption your company is going to make in the world. The person who is going to see the most potential in your company is you, and investors need to see pathway to exit.

Overall, our appetite to take risk, think big, and be creative is lacking compared to some other tech hotspots. Silicon Valley’s key advantage is they embrace failure, and do not penalize founders for failing. We need more of that, celebrating big swings, even if they strike out.

My hope is that this letter may spur some discussion about the realities we face in our local tech and innovation ecosystem. And that we can work together to make it better. I love Alberta, this is my home. Mostly I want Albertans to have meaningful, fulfilling, fun and creative careers, and I think technology and innovation is a great place for that. We need more great companies for people to work at!

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