Calgary is known for its driven entrepreneurs with world-changing ideas. It’s ranked among the top 50 ecosystems in the world for emerging start-ups. Still, it’s money that gets ideas up and running. Securing funding to make those ideas a reality can be a difficult feat. Enter venture capital (VC), early stage financing for start-up companies with long-term potential.
There are many reasons VC funding can come into play. Sometimes it’s because banks aren’t prepared to lend funds. Other times, highly established investors are wary of risk. Or, founders have raised all they can from friends and family. Venture capitalists look to take a chance on early ideas in the hope of a return on their investment. Alan Campbell, chair of the Venture Capital Association of Alberta (VCAA), says VC is often referred to as risk capital — a high-risk, high-reward asset class. As with most investments, venture capitalists take on some of that initial risk when they provide capital to early stage companies. “Venture capitalists aim to find the most promising entrepreneurs who have deep domain expertise and a passion for their business,” says Campbell. “They back those entrepreneurs with both capital and value-added support.”
Creating the Right Conditions for Venture Capital Deals
Partnering with the right venture capitalist is vital for entrepreneurs — they’re along for the ride for a long time. This is part of what the VCAA helps facilitate. It’s one of the many different players in Alberta’s innovation ecosystem. VCAA helps companies connect with support and capital opportunities that will enable them to scale to their full potential and also helps founders and investors find the right partnerships.
“VCAA aims to make it easier for the right founders to connect with the right investors,” says Campbell. “We create curated opportunities for our members to learn about and meet with founders whose companies meet their investment thesis. This means matching by stage, sector and also fit.”
The association hosts networking events to facilitate introductions between venture capitalists and entrepreneurs. It also has various programs to educate and expand its members’ knowledge of the current VC landscape and opportunities in Alberta. As VCAA celebrates 25 years, it’s hopeful that innovation will make for a better future in Alberta.
“We see the innovation ecosystem as a key way to build a more diverse economy in the province,” says Campbell. “Every aspect of the future everyone dreams of has an element of technological innovation, and Alberta has the right tools to be not only part of that positive change, but a driving force.”
Some More Major Players
VCAA also works closely with Alberta Enterprise Corporation (AEC). AEC was established in 2008 by the Government of Alberta to promote and provide more access to capital and investments in Alberta. Unlike VCAA, AEC does some actual investing. As a limited partner, AEC invests in VC funds with proven track records of success and commitment to Alberta. AEC’s funds and its partners have invested more than $1.2 billion into Alberta companies. Another source of funding is the Opportunity Calgary Investment Fund (OCIF), established in 2018 by The City of Calgary and managed by Calgary Economic Development (CED). The funding tool supports start-ups, entrepreneurs, VC firms and other ecosystem builders. OCIF has allocated more than $80 million to different projects and parties across the city, including Thin Air Labs, a venture capital firm that invests in local start-ups.
When Venture Capitalists Meet Entrepreneurs
Just as entrepreneurs pitch themselves to venture capitalists, VC firms also look for start-ups that fit their portfolios. “The nuance in this decision is typically a personal preference about the partnership between the founders and the VC,” says James Lochrie, managing partner of Thin Air Labs. “Since these investments can take up to 10 years to mature, VCs bet on founders they want to work with. The relationship is one of the most important parts of the decision-making process for VCs.”
Thin Air Labs, a member of the VCAA, invests in companies at pre-seed and seed stages (which means before and during the earliest round of funding, respectively). At these stages, start-ups have yet to solidly establish their business and come with a little more risk.
“It’s okay to approach investors before you are ready to start developing a relationship,” says Lochrie. “But if an entrepreneur is meeting an investor for the express purpose of landing an investment from them, they better have everything in order, because the investment process is designed to weed out weak hands.”
Tangible Local Impacts
In 2022, Thin Air Labs received $4 million from OCIF to kick-start its Fund I. The $20-million venture fund has now invested in more than 20 start-ups, about half of which are in the health sector.
Through Fund I, Thin Air Labs has invested in a handful of companies in the health sector like NanoTess, a start-up that developed advanced wound-care treatments. “When someone is suffering from an ailment like this, they only have one dream in life — to be healthy,” says Lochrie. “When NanoTess’s product grants that wish, that person can be free to dream about anything they want. This is the type of impact we want to create with our investments, because we believe it will also create significant investment returns.”
Calgary As a Growing Hub
It’s clear Calgarians benefit from a thriving innovation ecosystem, and it’s only growing. In the first half of 2024, Calgary placed third among major Canadian cities for VC dollars and deals. Notably, this was also the first time Calgary surpassed Vancouver.
“Rapid growth in the venture capital market is shaping Calgary’s future as a global destination for innovation,” says Brad Parry, president and CEO of CED and CEO of OCIF. “The recent surge in our investment landscape reflects strong confidence in our talent, infrastructure and Calgary’s limitless opportunities.”
Although Calgary is seeing a surge in VC investment growth and headlining deals, innovation and a trailblazing mentality have always lived here.
“Alberta is home to a population of resilient, hard-working, entrepreneurial individuals. It’s in the DNA of the province,” says Campbell. “What’s really special about Alberta, though, is the willingness and openness to support one another. The sense of collaboration and community has helped this province flourish, and we see that as one of the main drivers of the surging VC activity in the province.”
The Stats on This Risky Business
Between 2021 and 2023, the tech sector contributed $8.1 billion in value to the Calgary economy.
In the first half of 2024, Calgary placed third among major Canadian cities for VC dollars and deals. This is the first time Calgary has surpassed Vancouver.
In 2024, Calgary secured $630 million across 63 deals.
In 2024, Calgary attracted 75 per cent of Alberta’s VC deals.
