ACVC: An Alberta Advantage
When I discovered Alberta—first as an investment banker,
and later as a venture capitalist and educator—I was impressed
to hear that one government objective was to put DSL
technology into every household.
Today, in Alberta, the powerful tentacles of technology
have penetrated in a practical and influential way—the
foundations for growth have been laid. Now, the challenge lies
in creating an infrastructure that will continue to support
technology development.
As a former Federal Reserve economic analyst, I am
impressed by Alberta's macroeconomic factors. Venture
opportunities in this province have a lot going for them.
World-class universities with distinguished engineering
schools continually give birth to savvy engineers. The
entrepreneurial spirit is alive and kicking. Alberta has many
of the conditions that allow technological opportunities to
flourish—yet the frustration of raising capital has been
holding the province's enterprises back.
Bridging the "capital gap"
For technology opportunities to grow and thrive, private
capital must be available to support the enterprise at all
stages of development. In Alberta, early or seed-stage
investors are evident, but support from private-investment
capital beyond this stage of development is difficult to
discern. Most angel investors cannot be counted on for capital
support beyond the early stage. All too often, on the road to
success, the entrepreneur is in a bind as to where to seek
growth capital—the province is suffering a "capital gap."
One solution is to take the company to the public markets.
But the metrics of growth for publicly listed companies are
more difficult to meet than for private companies. The
consequences of taking a company public are certainly more
costly and, at times, tragic.
A more viable solution for Alberta enterprises is the
expansion of investment avenues available to entrepreneurs and
the cultivation of investors—specifically, the development of
venture capital.
Cultivating the north–south corridor
For this to happen, enterprises need to look south. For
Alberta's technology start-ups to enhance their probability of
success, they need to expand their reach to the more mature
U.S. capital markets.
In the U.S., the technology sector has accounted for as
much as a quarter of the approximately $1 trillion gross
domestic product in recent years. In large part, what makes
this possible is the maturity of the venture-capital industry
in the United States.
The modern era of venture capital, as defined by the
participation of institutional investors, is now a
half-century old in the U.S. Venture capital in Canada has
enjoyed a much shorter lifespan. In 2001, Cdn$3.9 billion of
venture financing backed 761 start-ups in Canada. In the same
period in the U.S., Cdn$63.6 billion funded 3,224 venture
start-ups.
Historically, Silicon Valley has been the significant
domain of venture capital in the U.S. Approximately 40% of
institutional investments in U.S. venture capital are
domiciled with Silicon Valley venture-capital firms.
Connecting with global customers
To succeed in a U.S. environment, Alberta enterprises need
venture-capital networking partners that understand their
specific needs and can help them reach their goals. In 2001,
to help meet this challenge, the Alberta California Venture Channel (ACVC)
was established to reduce barriers to capital and support the
growth of sustainable technology enterprises.
Sponsored by over 18 private-sector companies,
not-for-profit industry groups and government departments,
ACVC provides a capital and entrepreneurship corridor spanning
from Alberta to Silicon Valley and the broader U.S. Through
investor events and the provision of assistance to
entrepreneurs, ACVC has been instrumental in establishing and
securing productive business relationships between Alberta and
California entrepreneurs and investors.
To date, ACVC has:
- Participated in five industry events
- Organized a half-day conference on cross-border
financing
- Hosted an investors' dinner that attracted over 50
Silicon Valley investors.
As a result of its initiatives:
- Thirteen Alberta companies have sought financing,
mentoring and customers through ACVC contacts
- Two Alberta companies are exploring term sheets with a
California investment group
- Four California companies have explored the opportunity
of coming to Alberta.
ACVC assists Alberta enterprises not only in securing
meaningful capital, but also with the "company building" of
sustainable technology enterprises. This is vital because,
from a venture-capital investment perspective, the dimensions
of a mature company are different in the U.S. than in Canada.
Building a company to the right development stage to secure
the magnitude of capital required is a critical success
factor.
Rallying support
And more is needed. For the technology sector and the
venture capital industry to expand and thrive in Alberta and
in Canada, support must be forthcoming from many areas of the
business community and government. Beyond the creation of
strategic venture-capital channels, ongoing support will be
critical in such areas as:
- Regulating the transfer of intellectual property
- Establishing Canadian cross-border tax subsidies
- Encouraging joint entrepreneurial endeavours between
Canada and the U.S.
Looking ahead, the support of the business community and of
government will be vitally important in enhancing the
probability of success for Alberta's entrepreneurs.
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