June 25, 2021

Weekly EconMinute—Venture capital investment

In this week’s EconMinute, we’re talking about venture capital investment.

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2020 was not a bad year on all accounts: venture capital (VC) investment—investment which helps to get new ideas off the ground—was the second highest on record in Canada and the highest ever in Alberta.

Venture capital investment is important for a couple of reasons.

First, it is a signal of investor interest—more funding shows that investors recognize the potential of both the business and the jurisdiction. Second, it drives economic growth—companies with venture capital funding tend to increase employment more and faster than otherwise similar businesses who do not.

  • In total, VC amounted to about $4.4 billion in Canada in 2020, surpassing every year in recent history except for 2019.
  • Alberta set a new record, attracting more venture capital funding in 2020 than ever before. However, it still lags other provinces in this area.
    • Based on Alberta’s share of national GDP, it should bring in about $728 million in VC annually. In reality, it brought in $455 million, 37% less than its “fair share.”
    • Notably, BC is doing exceptionally well in this space—raising 55% more than expected based on the size of its economy.
  • Most of Alberta’s VC in 2020 was in Information and Communication Technology (ICT), a trend across provinces. Even so, the opportunity of VC funding is not just for tech companies, but for businesses that are using tech—be it artificial intelligence, robotics, DNA sequencing—to transform their business and industry.
      • Notably, Quebec has also shown an ability to attract VC in clean tech.
      • In Alberta, this could mean not just growing new industries, but transforming its traditional sectors of energy, manufacturing, and agriculture.

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