California dreaming: New Alberta-California Venture Channel opens doors for western high tech. (Government Issues).

Alberta-based high tech companies were given a significant boost earlier this year by the creation of a new province-wide venture linking Alberta and California. The Alberta-California Venture Channel gives high tech firms access to specialized mentoring, investment dollars and expanded markets south of the border.

High tech businesses south of the border are finding Canada a lot more attractive these days. Earlier this year, a Boyd Co. survey suggested that Calgary, Ottawa and Toronto will likely see more interest from U.S. firms hoping to set up north of the border. Although favourable exchange rates and lower benefit costs were cited as the major reasons for this shift, some companies and investors are looking above the 49th parallel for groundbreaking research and development as well. Sun Microsystems, for example, recently invested more than $1 million in Alberta's research and educational institutions.

All of this suggests that the timing is perfect for the venture channel.

The next step

The venture channel introduces Alberta-based high-tech companies that have already received financing from a source in Alberta to venture capitalists and investors in Silicon Valley.

"The University of Alberta and the University of Calgary, among others, have brought us some great research. But we didn't have the basket of investors to go to once they reach the stage where they need to take the next step in the development process," explains Randy Thompson, president and CEO of VentureAlberta and a key private sector driver in the development of the channel. He acts as a consultant to the parties involved and a liaison with important U.S. participants.

The provincial government has been examining the problem of sparse investment dollars for a number of years. A number of initatives exist to address it, including an annual Banff Venture Forum, connecting Alberta's companies with venture capital. "Four or five years ago, we were running venture forums like the Banff event in various cities," says Mel Wong, executive director of the Alberta government's innovation and science department, which is facilitating the project. "Then we created a panel of big players in the business world to consider how to raise more awareness of the opportunities in Alberta. This included John Roth, when he was still with Nortel, Richard Taylor, and Jozef Strauss of JDS Uniphase. They advised Alberta to build connections with Silicon Valley. We needed to attract people who would normally invest closer to home, one or two hours drive from their own office, and interest them in the advantages available in Alberta.

"It's about building relationships," says Wong. And with stronger relationships comes a boost in Alberta's investment climate.

"We are blessed with excellent partnerships in Silicon Valley," says Thompson. "We did an environmental scan of the Valley, forming key relationships through a number of technology missions to the region over a two-year period. This was capped by a reception in California and the announcement of the channel in late January."

Some investors have also attended Alberta-based events such as the Banff Venture Forum and the Economic Development Edmonton Investor Forum, held last spring. Confirmed California participants in the channel include Sensei Partners LLC, CrossFire Ventures, and the Angel Capital Network.

The rules, the pitch

Two nanotechnology companies have already made presentations at the recent Nanosig conference in California as participants in the channel. In September, several California partners in the exchange will arrive in Alberta for presentations by four pre-screened companies. After that, an Alberta-only venture forum will take place in California, to which organizers hope to attract 40 or 50 attendees. In all, there are currently about 25 Alberta-based firms that hope to benefit from the process.

Thompson says that both the federal and provincial governments have offered significant support for the project. "Innovation and Science has supported and facilitated the process as it moves forward," Wong says. It has been up to Thompson, however, to bring the Alberta investors in, make sure they understand how the process works and prepare them for the process of pitching ideas to U.S. investors.

Although there are rules to being involved in the venture channel, they are pretty straightforward:

* The company must have at least one round of financing in Alberta -- this keeps the deal local and addresses many people's concern that financing from south of the border might mean losing the company to a head office in the U.S.;

* That investor has to come with the company to Silicon Valley for presentations to other possible investors;

* Every participant has to go through a day of screening;

* A fee is attached; and

* Each participating company must fly to California to make its pitch.

Nobody is making outlandish claims about the potential of this venture channel, but everyone involved is aware of the positive signs coming from the U.S. right now about investing in Canada. "There's no question, the value of the dollar is attracting people," confirms Thompson.

Wong's aspirations for the channel are simple. "If these companies can find new advisers, new board members or joint venture partners, venture capital, that's what we expect to get out of it." With that, the province will reap more than business. It will boost its tech and investment image substantially.

For more information on the Alberta-California Venture Channel, Alberta companies can contact Randy Thompson ([e-mail]).

Robert Colman ([e-mail]) is the Editor-in-Chief of CMA Management magazine.