Dear Premier Redford: Tax Credit for Investments in Technology Companies in Alberta?

An Open Letter to the Premier of Alberta, The Honourable Alison Redford:

“Albertaʼs challenge is to support a strong oil and gas industry and leverage the strength of this sector to broaden and diversify Albertaʼs economy.”

Government of Alberta Strategic Plan 2011-2014.

A grassroots movement to reach Premier Redford on the road to the Alberta general election this year has started in the form of a new websit,

You can sign the petition here

This very well-crafted discussion on the notion of some type of direct tax credit or flow-through share structure to help spur early-stage technology investment is 110% on target. It deserves to be read and considered. Kudos to Trent Johnsen (CEO and founder of Hookflash) and Pam Boytinck (from TechRev) for penning it.

It is getting some steam: the Calgary Herald reported today “Alberta Tech Firms Urge Province to Offer Tax Incentive,” with Calgary’s MoboVivo CEO, Trevor Doerkson as the poster-boy.

I have been a big fan of some type of investment tax credit or flow-through share structure for technology companies in Alberta for a long time. I first noted it in my Techvibes Jan 2008 post: “Calgary’s Simmering High-Tech Community Set To Explode” and again last year in part 2 of the “simmering” story.

In April, 2008, I reported “Premier Stelmach on Track to Invigorate Alberta High-Tech” based on a task-force report containing 7 recommendations to Doug Horner, then Minister of Education and Technology (May 2007). As I noted then “Task Force’s make their recommendations … and then wait for the political machinery to turn, if at all” and I had high hopes. 

A tax credit was part of that recommendation and it went nowhere, despite the efforts of Doug Horner. He is now the Deputy Premier of Alberta, and I sure hope this grassroots movement reaches his ears as well. It should be noted that Doug’s attempt for a tax credit was the second one over the last decade. While things are moving at the speed of light in the technology industry in Alberta, the government is still woefully out of step.

That being said, there is money flowing from public coffers. There is a shotgun spray of projects and funding and dozens of associations and such. There is the Voucher program so companies can get $10K and $50K tech grants; however several companies I know are bowing out because the process is very complex and weighty, the timing is many months after you actually need the money, and the approval process seems like a mysterious black box.

This is not unlike other programs that distribute government money through middle-men organizations in the tech sector here in Alberta.  Meanwhile, the tech entrepreneur is left looking through his couch cushions for coffee money.

Rod Charko and his team at the AEC (Alberta Enterprise Corporation) have done about as good a job as could be mustered with a $100M amount from 2009, most of which has been successfully spoken for with VC investments (Yaletown and Innovia, to name a couple)—and a bit carved out for early stage (stay tuned for a pending announcement!). This team also had the vision to help pull together the A100, support Startup Calgary and Startup Edmonton and re-spark the VCAA—all of which have/are changing the Alberta landscape.

Inherently, technology companies have two risks: making the product and go-to-market adoption. With oil/gas, there is one risk: making the product (i.e. finding it)—after that, the economics are a spreadsheet—distribution, marketing, price risk-modelling etc… is all a known.

So, investors here weigh the two options and simply pick oil and gas. Sure, there are some that dip a toe into tech — but I tell you — if a tech company could say to that investor: “If you invest $200K in our company, you’ll get an immediate return of $60K,” then we would see purse strings start to open.

Hmmm. Where have we heard those $$$ numbers before? Oh yeah: in B.C., where industry and government both agree that’s it one of the core foundations of the tech journey and success in the province.

A tax credit would mean the onus of diligence is on the private investor so the government is almost 100% assured that it’s not throwing good money after bad, and the cash gets into the entrepreneurs’ bank account THAT WEEK, not SIX MONTHS FROM NOW. 

That’s exactly what is needed: timely early stage seed investment so companies can get some traction, which then attracts serious round B money from angel syndicates and VC’s. This is a HUGE whole in this province, and a credit would go a long way to filling that whole.

Alberta is FULL of smart entrepreneurs and great technology, has some of the largest pools of private capital / investors anywhere, has active angel networks (Alberta Deal Generator and Venture Alberta) and we’ve been told time-and-time again that “it’s time to diversify to a knowledge based economy.”

Seems like a no-brainer to me. What are we waiting for? Please sign the petition. Get involved. Get Passionate. Make change. Right now.

Photo: Flickr