Presentation to Government of Alberta - Economic Caucus on benefits of technology tax credit to accelerate economic diversification - January 2016

1. January 12, 2016
Trent Johnsen
Enhanced Opportunity and Quality of life for
all Albertans with Venture Tax Policy

2. 2
jan 12 2016
agenda
introduction the Problem Solution Conclusions
1 2 3 4
Trent Johnsenpresenting

3. introduction

4. ● Economist by education; University of Calgary
● Currently Founder, Chair and CEO of Hookflash, global leader in real-time
communications software working with Microsoft, Google, Cisco
and others on new voice and video technology
Hookflash is a Distributed Team of 10 developer/engineers: – Canada, U.S., Serbia, UK
● Founded, built and sold three previous technology companies
■ Alberta based paging, mobile and Call Centre provider
■ National Voice over IP (VoIP) Telco serving small medium business in 6 cities
■ International Data Backup and Internet Storage provider
○ sold for $62 Million
● Board Member of Innovate Calgary (Joint Venture of University of Calgary, Calgary
Chamber of Commerce and City of Calgary)
● A100 Member - A100 members expand networks, connect people and share experiences
to help the next generation of entrepreneurs thrive in Alberta
Trent Johnsen

5. the Problem

6. You guys have a big Problem . . . “a crisis”

7. And I’m here to tell you about another one

8. Alberta Missed the Bus
to the 21st Century
We’re as much as a Decade behind in the “Internet economy”
- where all the growth will be for the next decade.

10. ● World’s largest taxi company owns no taxis (Uber)
● Largest accommodation provider owns no real estate (Airbnb)
● Largest phone companies own no telco infrastructure (Skype, WeChat)
● World’s most valuable retailer has no inventory (Alibaba)
● Most popular media owner creates no content (Facebook)
Alberta (& Canada) are being left behind . . .
Digital Disruption has Already Happened
(“Software is Eating the World”)
● World’s largest movie provider owns no theatres (Netflix)
● Largest software vendors don’t write the Apps ( Apple and Google)

11. The economic impact of the Internet is getting
bigger—just about everywhere— and it already
has an enormous base. In the U.K., for example,
the Internet’s contribution to 2010 GDP is more
than that of construction and education.
In the U.S., it exceeds the federal government’s
percentage of GDP.
BOSTON CONSULTING GROUP
THE INTERNET ECONOMY IN THE G20
“

12. The Internet economy in the developed markets of
the G-20 will grow at an annual rate of 8 percent
over the next five years, far outpacing just about
every traditional economic sector, producing both
wealth and jobs.
Alberta GDP Growth is forecast at less than 1%
BOSTON CONSULTING GROUP
THE INTERNET ECONOMY IN THE G20
“

13. Market Cap - Company Value in $ Billions - January 10, 2015
Wealth Creation and employment in the 21st Century is driven by
innovation - Not Extraction
*Uber is 6 years old with a
higher valuation than
Alberta’s largest energy
companies. Uber was
founded by Garrett Camp
of Calgary, now living in
San Francisco, CA

15. “never let a good
crisis go to waste.”
Winston Churchill

16. Entrepreneurism is the key
to Alberta’s economic
revival . . . one never knows
where another Silicon
Valley will spring up.
PREMIER RACHEL NOTLEY
NOVEMBER 5, 2015
“
Leadership recognizes this:

17. Executives from two of Alberta’s
largest and most entrenched
industries – oil production and power
generation – will sit on a new
economic advisory panel charged
with finding strategies to diversify the
province’s economy.
GEOFFREY MORGAN
NATIONAL POST, OCTOBER 2015
“
But is at risk of making the same
mistake as previous governments . . .

19. At least 3 previous government Blue Ribbon panels have recommended technology tax credits including the
most recent - May 2007: Final Report to Minister Doug Horner from it’s own“Task Force on Value Added
and Technology Commercialization” led by David Martin, founder of Smart Technologies:
“Action must be taken in order to build a broad‐based economy and to overcome current reliance on
commodity resources. Albertans must be in control of their own destiny.”

20. Alberta government implemented recommendation #1 in September 2009
January 2016: still no Venture Tax Credit

21. What’s so great about a Venture Tax Credit?
Let’s look at the BC experience

22. Solution

23. What is a Venture Tax Credit?
Venture capital programs encourage investors to make equity capital
investments in British Columbia small businesses that will enhance and diversify
the provincial economy. The government recognizes that creating new small
businesses and expanding existing ones will contribute to a healthy economy.
These programs give small business continuous access to early-stage venture
capital to help them develop and expand. *
“
● http://www.mit.gov.bc.ca/icp/VCP/index.htm

24. How Does the Venture Tax Credit Work?
Individual investors are entitled to a 30 percent refundable tax
credit on the value of their investment, up to an annual
maximum tax credit of $60,000. Corporate investors are
entitled to a 30 percent non-refundable tax credit on the value of
their investment, however, there is no tax credit limit. Both
individual and corporate investors can carry unused portions of tax
credits forward for four years.*
“
● http://www.mit.gov.bc.ca/icp/VCP/index.htm

25. BC implemented their Venture Tax Credit in
2001 and conducted an extensive assessment
on results from 2001 thru 2008.

26. Highlight Conclusions from Hellmann Schure Report - 2010
“Over the period 2001-2008, investments made in 517 companies received a total of $191M provincial and $65M
federal tax credits. These companies generated an estimated $379M in provincial and $368M in federal taxes.
● for every $1 of provincial tax credits issued, recipient companies generated $1.98 in provincial taxes
● for every $1 of Canadian (i.e., combined provincial and federal) tax credits issued, they generated $2.92 in
Canadian taxes. In short, the BC tax multiplier was 1.98 and the Canadian tax multiplier was 2.92.

27. Highlight Conclusions from Hellmann Schure Report - 2010
“it should be mentioned that the benefits of the program are likely
to extend to the BC economy more broadly.
One important benefit is the legacy created by successful companies in the program.
Companies that are acquired typically retain some local presence, their managers
frequently move on to play leading roles in new start-ups, and their investors may
reinvest part of their gains into the next generation of start-ups.
As per the previous quote from Premier Notley
“. . . one never knows where another Silicon Valley will spring up.”

28. And look what’s happened in Vancouver . . .
“Along with the local expansion of
Microsoft, Amazon and Sony Digital Works,
the tech industry is transforming British
Columbia’s economic capital:
The sector is estimated to occupy almost
40 per cent of downtown Vancouver
commercial real estate and employed
86,800 people provincewide in 2013 –
more than forestry, mining and oil and
gas combined.
(welcome to the 21st century)

29. “The BC technology industry is reaping the benefits of
past investments. An engine of growth in BC today, the
technology sector is one of the strongest contributors to
provincial GDP and creates jobs that pay 66 percent
higher wages than the industrial average. BC’s
technology sector also has a significantly higher overall
economic impact than the province’s primary resource
industries. By incenting private investment in the sector,
the introduction of programs such as the Small Business
Venture Capital tax credit, the angel tax credit, have
played significant roles in driving the successes we see
today.”
KPMG BRITISH COLUMBIA
TECHNOLOGY REPORT CARD 2014
Most Recent Data on BC Venture Capital Tax Credit

31. Alberta made the Report . . .
that’s us in green at the bottom with the lowest Venture Capital per capita

32. Conclusions

33. How can I put this
eloquently?

36. clean, high-paying
knowledge based jobs
- capital formation
- investment knowledge
- wealth creation
innovation and
growth
global market access
Venture Tax Credit Policy is not about money for tech companies
It’s about building a better future for all Albertans by incenting capital to participate
and succeed in the 21st Century “Internet” economy - “capital formation”

37. “When all is said and done, a lot more is usually said than done.”
Summary
● there are no “losers” with a Venture Tax Credit; everyone benefits
● it’s not a mutually exclusive, single solution. It’s one lever in the ecosystem
● Government doesn’t have to pick winners - it encourages investors make market
driven decisions, develops tech investment knowledge and capital formation
● based on 15 years of data from BC - government is basically getting $2 to $3 in tax
revenue for every dollar of tax credit provided
● it “de-risks” early stage tech investment for investors with a 30% credit and will
encourage traditional energy/commodity investors to diversify
● it’s time to act - Albertans have talked about diversification for decades and failed to
act, now we’re in crisis
How can we get it done quickly?

38. thank you | Q & A
38
Trent Johnsen | Calgary
trent@hookflash.com
@trentjohnsen

39. 39
Why specifically a “Technology” tax credit?
- the “Innovation Driven Enterprise”

40. 40
investing in exponential growth
Innovation Driven Enterprise