Calgary plans to pour millions into a tech fund to encourage innovation

By Ashley Standberry, (CNN) — The city of Calgary is hoping to start a culture of local start-ups backed by private capital and venture capitalists. Officials here plan to publicly invest millions of dollars…

Calgary plans to pour millions into a tech fund to encourage innovation

By Ashley Standberry, (CNN) — The city of Calgary is hoping to start a culture of local start-ups backed by private capital and venture capitalists.

Officials here plan to publicly invest millions of dollars into a venture capital fund that will focus on the city’s growing tech sector.

“If you look at what’s happened over the last 20 years … there has been a proliferation of new kinds of jobs, new kinds of industries, new kinds of potential sources of revenues,” Calgary Economic Development Chair Thomas Dang told CNN. “And that means that from a population standpoint, the economic pie is getting bigger, so it will be more important to focus on investing in that.”

Canada’s capital of Alberta has seen its share of tech successes recently, like the game-changing social networking site UpGlide, the home security device Blackberry and the first globally successful mobile payment service PayPal.

The city hopes the investment in a fund, which would be backed privately as well as by public money, will boost Alberta’s reputation as a location for tech and life sciences companies.

Public money is not the main source of any funds raised through the tech fund, which officials hope to announce soon.

“When you talk about the venture capital investment side of things, we have two kinds of funding, the public and the private,” said Calgary Economic Development spokeswoman Tracey Reinsch. “And the city’s commitment is to be behind a public-private partnership.”

The seed funds that are used by venture funds are the source of most start-up money, said Reinsch.

“So a lot of private funds come in to seed these ideas and support some early-stage technology companies,” she said. “When you try to look at the overall pie, public money will not be the biggest piece.”

Officials think that the venture fund, which will be a hybrid of public and private funds, will open up the tech sector to new capital from outside the province.

“We don’t see that’s going to be an issue,” Reinsch said. “Lots of regional funds are used in Alberta, but they are regional funds. It does not mean that fund is tied to Calgary. We believe that with private and public capital, we’ll be able to really grow what we have here.”

But venture capitalist Sean Rea says that from a purely economic point of view, his firm likes to see public investment in tech, so long as it does not overpower private venture dollars.

“We’ve made deals with so many companies where we’ve seen very little angel money or seed capital investment from local angel investors, and I think that’s a key difference between Calgary and other places and places where it’s local,” said Rea, who is based in Toronto. “If they’re getting investment from a local investor or local Angel, it’s going to be a more normal kind of funding for them.”

A significant chunk of the money raised through the fund will likely go toward the backing of companies that are already operating in Calgary and are already bringing in revenues, Rea said.

“We really like to see the public investing in companies that have a big idea,” he said. “It’s hard to get that kind of early stage funding to many businesses nowadays.”

Dang, however, said that there are plenty of early-stage businesses that don’t have venture capital backing, including the growing financial technology business that is being developed by one of the city’s leading universities.

“There are new opportunities for creating new jobs, new revenue streams and new businesses,” Dang said. “It’s something for Calgarians to look forward to.”

By Ashley Standberry

The-CNN-Wire

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