Sensei Partners

ACVC: An Alberta Advantage

Patrick Yam
Executive Founding Partner, Sensei Partners LLC
Co-Founder and Co-Chairman, Alberta California Venture Channel

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.