In 2008, the Alberta government planted a seed of diversification as it looked to grow the province’s knowledge economy. Rather than take a conventional approach and invest directly in a handful of companies or offer industry-wide financial incentives, the provincial government decided on a “fund of funds” initiative, setting up an investment corporation which would invest in venture capital firms looking to put money into Alberta’s tech sector.
Thus, the Alberta Enterprise Corporation (AEC) was born, with a small amount of funding and big dreams.
The amount of money at the disposal of AEC is $175 million. Yet, the AEC has been able to punch above its weight — for every dollar it has invested, four dollars have entered the Alberta economy. According to Kristina Williams, president and CEO of AEC, it has managed this through strategically-sized investments in strategically-sized venture capital firms.
“Normally we go into funds that are between $100 million and $150 million in size,” she says. “You get the best ROI for about $10 million. You can attract the fund here and get some say in it.”
Ten years later, the results speak for themselves. AEC investments have catalyzed almost half a billion dollars of investment in 40 of the province’s tech companies – not to mention the creation of 1,300 direct high-tech jobs and an estimated 1,700 indirect jobs. The AEC has invested in more than 15 different venture capital funds and has already had 13 profitable exits, earning more than $25 million in distributions.
The AEC’s success has resulted in success for Alberta’s tech sector and for venture capital firms backing Alberta tech companies. Williams, who was the AEC’s second hire and has served as its chief executive since 2014, credits much of its success to the choice of a “fund of funds” model.
“It’s been seen as a best practice model, irrespective of political colour,” says Williams, pointing out that the AEC has received government funding from Progressive Conservative and NDP governments in Alberta, and that federal governments of different stripes have constructed similar programs.
The AEC’s capital is almost totally allocated at this point. While it waits for the rest of its investments to generate returns so the capital can be reinvested, its focus will shift from analyzing opportunities and making investments to monitoring investment performance and providing advice. Williams says the next 10 years will likely look very different than its first 10.
“The Canadian market is starting to mature,” says Williams. “Our success stories are starting to trickle out in a new way, but we are by no means done.”