Alberta’s start-up pipeline needs Jason Kenney’s attention, too


This is the third in a series of columns about the new Alberta economy.

Canada’s best technology entrepreneurs are some of its worst lobbyists.

They say they are too busy building globally competitive companies to spend time with bureaucrats and politicians. Then they complain when the members of outfits such as the Canadian Federation of Independent Business, Unifor, and the Dairy Farmers of Canada get all the the attention in election platforms, budgets and trade agreements.

It will require sacrifice, but the up-and-coming innovators of Calgary and Edmonton probably should plan to spend some time at and around the legislature in the months ahead.

Here’s why: Jason Kenney, who soon will be their premier, didn’t sound like a friend in his victory speech on April 16. That doesn’t make him an enemy, but Alberta will need more than a neutral party running economic policy if it wants to replicate the success that British Columbia, Ontario and Quebec have had in creating poles in the global innovation economy.

“We’re on a knife’s edge in terms of urgency,” Jim Gibson, a partner at Thin Air Labs, an advisory and investment firm, told me in an interview in Calgary on April 4. “We’re 10 years late to a 20-year plan.”

Those who grew up hearing about the “Alberta advantage” or “Canada’s Texas” might be surprised to learn the province is a laggard in anything entrepreneurial. Maritimers went down the road for jobs in oil and gas, but Alberta always appeared to have more going for it than that. The University of Alberta is home to some of the world’s most famous data scientists, and the University of Calgary also is a magnet for bright students. When human capital mixes with financial capital, good things tend to happen.

“Any place that has a couple of great universities and a good flow of immigration is going to generate other things,” Stephen Poloz, the Bank of Canada governor, told reporters in Washington on April 13 when asked about Alberta’s prospects beyond bitumen.

But Alberta isn’t generating other things as quickly as Canada’s other economic engines.

One of Poloz’s favourite proxies for the innovation economy is hiring by companies involved in what Statistics Canada calls “computer systems design and related services.” The category still is relatively small; it represents about two per cent of all service jobs. Still, these positions pay well, and growth is exponential. But Alberta is missing out. The province ended 2018 with about 18,800 “computer systems” jobs, a two per cent increase from the previous year. Growth in B.C., Ontario, and Quebec was 3.6 per cent, 9.4 per cent, and 11.4 per cent, respectively, according to StatCan’s monthly survey of company payrolls.

“You have to diversify,” Ashif Mawji, venture partner at San Francisco-based Rising Tide VC, an investment firm, told me in an interview in Edmonton on April 5. “We haven’t really done that here.”

Kenney didn’t have much to say about economic diversification on election night, implying that the voters to which he is most beholden are uninterested in the subject. The leader of the United Conservatives said in passing that efforts to diversify must continue, but that was it. Most of the rest of his remarks revolved around oil, natural gas and pipelines.

That could trouble some of Alberta’s tech entrepreneurs, as many of them were starting to find it easier to get the attention of policy makers, investors and talent in their oil-obsessed province. No one was cheering the collapse of oil prices, but there was a feeling that the four-year slump would create space for other industries to emerge.

“The silver lining of this downturn is we have to reinvent ourselves,” Cory Janssen, the co-founder and chief executive of AltaML, an Edmonton-based artificial-intelligence (AI) firm, told me in an interview on April 4.

Kenney’s focus is on fighting for the status quo, not reinvention. The thrust of his economic agenda is coaxing more investment and hiring out of legacy industries, not fostering emerging ones. It’s a bet on the recent past, not the future.

Navdeep Bains, the federal innovation minister, has a deep well of cash to pump into the tech industry, but Alberta’s next government is setting up to go to war with the Trudeau government. Kenney’s promise to slash business taxes won’t mean a lot to fast-growing tech companies; many of them aren’t yet profitable, and they tend to cluster where talent is thickest, not where the taxes are lowest. Even the United Conservatives’ pledge to balance the budget could hurt Alberta’s chances of building a vibrant technology scene because rival jurisdictions have decided to throw money at the next generation of world-beating companies rather than fret over the ills of public debt.

“We need to stop worrying about it” for now, Tara Kelly, chief executive of Calgary-based Splice Software, one of Canada’s fastest-growing companies, said of the tendency of Alberta politicians to advocate austerity. “Why are we playing with one less card in our deck?”

There is no template for creating tech hubs. Some gurus say the harder you try, the more likely you will fail. So maybe Kenney’s emphasis on a classic business-friendly formula of low taxes and less regulation will be enough to turn Calgary into the next Austin, Texas and allow Edmonton to catch up to its AI rivals in Toronto and Montreal. The new government also promises to make it easier for international students and entrepreneurs to get visas, which could deepen Alberta’s pool of talent.

Gibson says tech clusters need three things: talent, money, and policy. He reckons Alberta’s glut of petrochemical engineers can be turned into software engineers without too much difficulty, and that families that got rich from digging holes in the ground can be persuaded to bet on things like AI and biotechnology.

That leaves policy. “The Alberta advantage was tax rates, it wasn’t innovation policy,” Gibson said before the election.

What is the next premier talking about? Tax rates, not innovation.

  •Email: | Twitter: CarmichaelKevin

Source: Financial Post

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