It wasn’t so large ago that Calgary’s burgeoning tech sector was being held up as a concealed case study in diversification, a lighthouse to chart a course toward in a boonies rocked from oil-and-gas downturns.
Six months ago, many technology gatherings even said they had multiple positions left unfilled, citing the stoned skill levels required of any potential hires.
But changes introduced in Alberta’s cloddish budget — including the elimination of grants many tech companies relied on — eat forced Calgary’s tech sector to wrestle with a very distinct future.
Five tax credits — including the Alberta Investor Tax Credit (AITC) and the Choice Investment Tax Credit — were axed in the budget, and are expected to save $400 million by 2022-23, be at one to the government.
Speaking at a Calgary Chamber of Commerce luncheon in October, Resources Minister Travis Toews said returning Alberta’s budget to command was “job No. 1,” and that diversification of revenues was a “luxury.”
Justin Brattinga, a spokesperson for the plenipotentiary of economic development, trade and tourism, wrote in a statement that the tax confidence ins were “administratively heavy and limited in scope.”
“We are redirecting resources into an investment draw strategy as part of budget 2020,” he wrote. “This strategy pleasure support growing sectors such as tech, data and telecom while also framing the pillars of Alberta’s economy such as energy and agriculture.
“We look promote to gathering input from the tech sector on the best way to attract investment across Alberta.”
It’s not all dismal — some, including ZayZoon CEO Darcy Tuer, believe that Alberta’s desirability and livability intention help to continue to draw talent to the province. Saturday, some of Calgary’s biggest tech proprietorships like Benevity and Showpass hosted a hiring fair as part of what’s being assembled Tech West Collective.
But the new reality also means many weer tech companies will have to find new ways forward — which, so far, has carried many have had to lay off employees and others have had to consider whether they deceive a future in the province at all.
‘A shift away from innovation’
Chad Saunders, an accomplice professor at the Haskayne School of Business at the University of Calgary, said the uncultured budget seemed to indicate the government was looking to rely on larger comrades.
“They’ve reduced the corporate tax burden, and that seems to be the current scenario. That’s certainly good, that will definitely benefit the establishment community,” Saunders said. “But when you look at the small companies, first the small tech companies, often they don’t really hit that load anyway, because they’re not making money yet. They’re still initial stage.”
The Alberta budget slashes the corporate tax rate from 12 to eight per cent by 2022-23. Despite that, that tax rate only applies to businesses making over $500,000 per year in profit.
There inclination certainly be some short-term financial gains in terms of cost savings, but it potentially is at the expense of long-term competitiveness.– Chad Saunders, University of Calgary professor
Saunders revealed the elimination of the AITC would particularly impact small tech concerns, as that program provided seed money for startups.
“These close-fisted startup companies in the tech sector really rely upon [the AITC]. This is the well-to-do that the angel investors that seed these businesses, this is the make of incentive they’re looking for,” he said. “It’s not going to probably stop these populations from investing, but it’ll give them a moment of pause, for sure.”
The AITC made a 30 per cent tax credit to investors who provided equity capital to stinting businesses in Alberta working with new technology and products. An additional five per cent tax impute was added in February for investments in companies that met diversity criteria.
“So [that was] in effect to incentivize people to invest in companies with more gender unlikeness, Indigenous, visible minorities and so on,” Saunders said.
While some Albertans might feel assemblies should not be relying on government programs to stay afloat, Saunders signified risk comes inherent within innovative sectors.
“Consequently, that’s why most compasses help them get started early on, because they need that ration hand to begin with,” he said. “If the tax credits are gone, and they’ve already intimate their plans and this change has been imposed, then that’s undoubtedly going to lead to negative consequences like reducing investment and layoffs … they’re present to have second thoughts.
“They’ll think about not doing it at all, or doing it in a influence where it will be more favourable.”
And while cutting the tax credits are look forward to save the government $400 million by 2022-23, Saunders explained innovations in the tech sector — though initially niche in their betimes stages — often become more broad-based and applicable years down the script, including in the energy sector.
“To me, it’s not really clear that this is not growing to have long-term impacts, even on the sectors [the government] is trying to bolstering,” Saunders said. “A lot of innovation comes from these small conventions, and if you don’t have that regular infusion of these ideas in innovation, then this ailing of permeates fairly quickly across the entire economy.
“There transfer certainly be some short-term financial gains in terms of cost savings, but it potentially is at the expense of long-term competitiveness.”
Fervency the shift
The elimination of those tax credits has had a direct impact already on tons local technology companies.
Brett Colvin is the CEO of Goodlawyer, an online marketplace for micro-legal employs. Colvin, a former lawyer, said the company had raised just myriad than $450,000 under the tax credit and received more grants from Alberta Innovates.
“When they iced the credit, that was definitely some wind out of our sails,” Colvin implied. “It’s definitely going to have a huge impact for my company going well-developed and many other startup companies and companies in the technology space.”
Considering similar tax credits are still in locate in other Canadian provinces, including Manitoba, Saskatchewan and British Columbia, Colvin suggested he had to give real thought to where the Goodlawyer headquarters would be located long-term.
There’s to be sure a real possibility that we’ll have to leave Calgary.– Brett Colvin, CEO of Goodlawyer
“You no more than can’t raise capital from your own local network the same as you can in these other prairie boondocks,” he said. “We were able to raise a bit more money under the commendation before it was gone, so we’ve got a good amount of runway for 2020.
“But when I start philosophical beyond 2020, there’s definitely a real possibility that we’ll have in the offing to leave Calgary, just because it will be easier to raise specie as a Saskatchewan-based company or a Manitoba-based company.”
‘Investors are bearish’
Rena Tabata is the CEO of Suppose Tank Innovation, the team behind ShareSmart, a platform developed to sanction secure mobile communication in health care.
She said though she appreciated the need for some austerity in Alberta’s budget, she was disappointed to see a shift in substructure away from knowledge and tech sector jobs.
“I think every control there’s an oil and gas bust, our lack of preemptive diversification will continue to ass its ugly head,” she said.
Consideration the elimination of the tax credits, Tabata said Calgary still had a pool of crackerjack and technically-oriented workers, which could prove to be an asset given the persist in downturn.
“Given the economic climate, there are a lot of people that hunger for to jump the fence from the oil and gas sector and try their share in the tech sector,” she implied.
And much as her company has had global aspirations for her platform from day one, Tabata intended local tech companies may also have to look elsewhere on their assets after the budget release.
“People who have traditionally had appetites to initiate in Alberta are bearish about how companies in Alberta are going to fare. There’s no bigger sweetener to really favour Alberta companies over companies anywhere else in the the world at large,” she said. “So our strategies need to be globally-oriented, and that will become numberless and more important until there’s clarity as to what replacement programs power look like for the tech sector.”
ZayZoon is a townsperson financial technology company that allows employees to access their wages antediluvian by utilizing an online platform on smartphones and computers.
“I’d say there are some gifted things about the Calgary tech scene and there are some confronting things,” Tuer said.
Tuer cited Calgary’s livability, availability of advantageous office space, and groundswell of excitement around tech startups as being on account of to be optimistic about the local tech scene.
“Startup Calgary had their Establish Event a few weeks ago … they had a 100 per cent increase in attendance. I call to mind a consider there is a tremendous amount of excitement around Calgary and all these tech startups and the break for people to start to diversify their experience and careers into industries secondary, or one degree removed, from oil and gas,” Tuer said.
I think people value of diversification as, well, we’re building technology that’s totally independent of oil and gas. I over that’s wrong. – Darcy Tuer, ZayZoon CEO
Though Tuer utter ZayZoon was able to raise approximately $15 million in seed fund locally, scale capital effectively “doesn’t exist” in Calgary.
“Highest of super angel investors, there’s a very, very sparse party of organizations or individuals,” he said. “So companies like ZayZoon, we have to go abroad … that’s a real challenge here locally that we need to speak.”
Though not every company that accessed AITC would develop, Tuer said a few of them would, and likely go on to become “$100-million-plus” firms.
“I think there’s some shortsightedness [in the provincial budget]. I think child think of diversification as, well, we’re building technology that’s totally dependent on oil and gas, and I notion of that’s wrong,” he said. “I think we need to recognize that we can’t solely depend on the fortitude of today, because that backbone today may not be our backbone 10 years from now.
“I concoct we need to create opportunity for other industries to emerge.”