Action 2
Action 2: Alberta Enterprise Corporation
View All
What is the Board’s role?- The primary role of the board includes hiring and providing long-term direction to the CEO, and overseeing the strategy set by management.
- The first order of business for the new board will be to recruit a Chief Executive Officer. The Corporation will then begin the work of finding fund managers to co-invest with.
- The resulting venture funds, once fully invested, will then be open for business – entrepreneurs may approach them for investment on commercial terms. The corporation will begin operations once key management has been hired.
- The Board will be actively involved in networking and promoting the AEC, addressing stakeholder issues, risk management and compliance. Acting as the Investment Committee, they will be responsible for evaluating fund management and making important investment decisions. In addition, Board Members will carry a much heavier work load prior to the hiring of the CEO.
Who are the Board Members? The following individuals have been appointed by the Lieutenant Governor in Council to the inaugural Board of the Alberta Enterprise Corporation:
- Chair - Paul Haggis, former CEO, Ontario Municipal Employees Retirement System;
- Vice-Chair - Barry Heck, President and Principal Partner, El Merchant Capital;
- R. Geoffrey Browne, Managing Partner and Principal, MWI & Partners Inc.;
- Vicky Sharpe, Ph.D, President and Chief Executive Officer, Sustainable Development Technology Canada; and
- Brad Zumwalt, Founder and Partner, Zinc Ventures.
How were the Board Members selected? - An executive search firm retained by Advanced Education and Technology (AET) reviewed over 250 candidates, including applicants and recruited candidates.
- Candidates were selected through a competency focused process and evaluated on a scale against eligibility criteria such as venture capital/fund management experience, knowledge-based industry experience, and quality and depth of their networks.
- A preliminary slate of 24 candidates for the director positions was then narrowed down by a board selection panel to a short-list of four primary candidates recommended to Minister Horner.
- A Board Selection Panel comprised of leaders in the Alberta investment community provided advice throughout the process and confirmed the final recommendations for the Director positions.
- The process was important to get the best people to lead this new initiative for Alberta.
Why were these particular individuals chosen? - The retention of highly qualified, well-respected board members has been identified as a key success factor for the AEC.
- The board members have extensive experience and depth, coming from executive positions with organizations actively involved in technology, venture capital and private equity.
- In addition, each of the selected candidates indicated that they have time available to fulfill the active engagement and networking required of the board in the early stages of the Corporation’s mission.
Who do the Board Members report to? - The Alberta Enterprise Corporation is accountable to the Minister of Advanced Education and Technology.
- The governance model that seemed to be most appropriate for Alberta, and has shown the most success in other jurisdictions was a model that balanced an appropriate level of accountability with distance from government—a corporation.
What are the next steps to launch the Alberta Enterprise Corporation? The first order of business for the new Board will be to recruit a Chief Executive Officer. The Corporation will begin operations upon the hiring of key management.
Why is the Alberta Enterprise Corporation necessary? Our investment of $100 million is part of our action plan to help technology companies grow. Several reports say that technology companies have difficulty growing because of challenges in raising technology-focused investment capital, in spite of the large amounts of capital available in the province. These reports include:
- Alberta Advanced Education and Technology’s “Value-Added and Technology Commercialization Task Force Report” (2007)
- Calgary Economic Development’s “Financing Our Future Report” (2007), and
- Alberta Economic Development Authority “Access to Capital Task Force Report” (2003).
How will the Alberta Enterprise Corporation help companies to grow? The fund will increase access to venture capital for technology companies, and build a provincial community of financial professionals experienced in technology deals.
What is the benefit to entrepreneurs? This approach offers entrepreneurs access to a number of firms to approach for venture capital, and a range of management and technological expertise.
What are the steps to launching the Alberta Enterprise Corporation? The first step to launching the fund was to complete the legal frameworks enabling the Corporation, including legislation we passed in spring 2008 allowing the formation of the Alberta Enterprise Corporation. The next step was to recruit a Board of Directors. The Board will now begin the process of recruiting a CEO. The Corporation will then begin the work of finding fund managers to co-invest with. The resulting venture funds, once fully invested, will then be open for business – entrepreneurs may approach them for investment on commercial terms.
Why is a strong technology-focused venture capital industry important in Alberta? We have built a strong R&D system in Alberta, but we don’t have an environment – an ecosystem - that stimulates commercialization and company creation. Alberta has been attracting a very small portion of the venture capital invested in Canadian technology ventures. So we end up being exporters of great ideas and great intellectual property that have consumed significant upfront public investment without an opportunity to realize an economic benefit.
How will the Alberta Enterprise Corporation work? The Alberta Enterprise Corporation will administer a fund-of-funds with each sub-fund targeting investments in individual companies in priority, underserved sectors, including life sciences, ICT, environmental technologies and nanotechnology. By distributing investments across a number of funds that focus on areas of technology expertise, risks are reduced through diversification. This approach leverages private investment expertise to ensure that industry drives the development of the venture capital markets.
What is the Alberta Enterprise Corporation Act all about? Legislation passed in Spring 2008 created the $100 million Alberta Enterprise Corporation, a fund designated for co-investment in a number of early stage venture capital funds focused on advanced technology sectors. The act is all about attracting private and investor dollars and expertise. It is part of our long-term action plan to help early-stage technology companies grow.
How was the decision made to establish the Alberta Enterprise Corporation? The decision to invest and to attract additional venture capital was made after more than 10 years of studies, representations from industry, committees and reports. We went to great efforts to consult with a diverse group of stakeholders including academics, business leaders, tax experts, economists, entrepreneurs and financers. The legislation was endorsed and proclaimed in the legislature in 2008.
In addition to the Alberta Enterprise Corporation, what other ways will Alberta bring technology to market? The Alberta Enterprise Corporation is only part of our long-term vision. Alberta is ensuring success by providing support through a coordinated range of other initiatives:
- Implementing a science and research experimental development tax credit;
- Strengthening access to regional business development services;
- Introducing new technology development advisors;
- Offering innovation vouchers to assist companies in accessing technology-specific supports;
- Preparing products for market through enhanced product commercialization centres;
- Creating a demonstration fund for testing new products;
- Expanding the IVAC Capacity Builder program for pre-commercial and seed stage technology companies; and,
- Supporting youth technopreneurship.
Can government support for venture capital really work? No other jurisdiction has been able to launch a successful venture capital sector without some kind of government involvement. That includes jurisdictions like California and Boston, who have now developed self-sustaining private capital investment communities. Similar fund initiatives are underway in British Columbia and Ontario to address gaps in each province’s venture capital markets.
How will the Alberta Enterprise Corporation manage investments? The Alberta Enterprise Fund will be independently managed at arms-length from government. Guided by its own expert Investment Committee, fund management will have expertise in early stage finance for high-tech industries, allowing them to choose investment funds wisely.
How will the Alberta Enterprise Corporation choose which sub-funds to invest in? The Alberta Enterprise Corporation will invest in several different Investment Funds, becoming one of a number of investors (limited liability partners) in the fund. It is expected that the Alberta Enterprise Corporation share in any given fund will not exceed 33%. The Investment Funds, under the management of experienced General Partners, will be required to:
- have a local presence,
- target investment in priority, underserved sectors (e.g., ICT, Life Sciences, environmental technologies and nanotechnology), and
- make investments in individual companies.
Why was a corporation necessary to administer the Alberta Enterprise Corporation? Several types of governance structures were evaluated including the governance structures administering the Alberta Heritage Fund and the Alberta Investment Management Corporation (AIMCO). The governance model that seemed to be most appropriate for Alberta, and has shown the most success in other jurisdictions was a model that balanced an appropriate level of accountability with distance from government—a corporation.
Where did the $100 million come from? Budget 2008 allocated $100 million from surplus and savings for the Alberta Enterprise Corporation.
Will investment funds be allowed to invest outside of Alberta? We would prefer the funds to be invested in Alberta companies, but it’s not a requirement. The corporation was established at arms-length from government and thus, must choose its investments wisely in the same manner as other funds. What Alberta is doing to ensure companies in our province qualify for financing is to help them become investor-ready through a wide range of coordinated actions including SR&ED tax credits, innovation vouchers, demonstration grants and easy access to technology-focused business development services.
How will the Alberta Enterprise Corporation develop a provincial venture capital industry? A provincial venture capital industry will be developed through a variety of activities including data collection to document deal flow in the province, organizing investment forums and facilitating the development of Angel Investor Networks.
How does the Alberta Enterprise Corporation compare to the venture capital funds set up in BC and Ontario? All of the venture capital funds have a similar objective—the creation and growth of companies in priority advanced technology sectors. The Alberta Enterprise Corporation is different in that Alberta’s fund is administered by a corporation at arms-length from government, while the BC and Ontario funds are managed using different models.
What is venture capital? Venture Capital is defined as money made available (in exchange for equity position) for startup firms and small businesses with exceptional growth potential. Managerial and technical expertise are often also provided in addition to venture capital investment.
Why does a company need venture capital? Companies who have sufficient investment capital have improved cash flow and can spend more time developing their technology, product and market plans rather than spending time to raise capital.
Why does Alberta need more venture capital? Improved access to Alberta-based capital may reduce pressure on Alberta companies to locate near high tech clusters in other jurisdictions within North America to attract investment.
Why doesn’t Alberta have more technology-focused venture capital? Investors familiar with oil and gas and real estate investment are often reluctant to invest in technology companies, since they don’t understand the technology itself, or the nature of technology as a business, and the associated risks.
In addition to increased access to capital, what are the other benefits to Alberta? Technology investors are often themselves successful entrepreneurs, able to serve as mentors to researchers and innovators. These investors know what ideas will meet a market need and then how to successfully bring the idea to market. They can offer valuable advice when challenges occur, avoiding the premature closure of a company and the loss of expertise and technology.
What will motivate investors in traditional sectors to consider investments in advanced technology sectors? Investors who are interested in diversifying into technology investments have indicated that the presence of a lead investor would give an increased level of confidence in moving some of their investment capital into these unfamiliar sectors.
Establishing the corporation signals the support and commitment of government to stimulate venture capital activity in Alberta and may encourage investors in traditional sectors to consider investing in venture funds in which Government is a lead co-investor.
Why does Alberta need a provincial tech-based investment community? A vibrant province-wide technology investment community will make it easier to find co-investors for technology venture deals. This is known as deal syndication. Venture funds look for partner funds to syndicate deals as part of their strategy to diversify and reduce risk. It will be easier for external investors who are interested in investing in Alberta to partner with an experienced local lead investor to oversee the investment and provide local connections. The development of a tech-focused investment community will help technology companies find investment as there will be more than one source of capital available to them. In addition, supporting professionals such as lawyers and accountants will become more experienced in structuring venture deals, and companies will be able to get specialized advice.
How will a strengthened venture climate industry help to build a workforce that is highly skilled? The Alberta Enterprise Corporation will be mandated with leading the development of a vibrant community of professionals supporting technology-focused venture capital investment, including CEOs, senior managers, lawyers, accountants, experienced board members and other business professionals.
Will the attractive investment package help keep Alberta companies from being bought by foreign companies and leaving Alberta? Yes, in fact, by making locally managed venture capital available, the Alberta Enterprise Corporation will make it easier for companies to stay in Alberta.
