A new report on the health of Alberta’s tech sector is signalling promising growth, but also raises concerns about its ability to penetrate international markets and attract venture capital investment.

The 2001 Alberta Technology Report, released last week by Ernst & Young LLP and Ipsos-Reid, surveyed senior executives from 191 companies from a cross section of the Alberta technology sector.

It concludes that while the province’s technology firms are reporting steady growth and improved profitability, raising sufficient growth capital continues to be a problem – and the answer may be tied to the sector’s ability to achieve significant globalization.

“If Alberta technology companies want to become world-class leaders, they need to increase their reach outside the province,” said Russ Matichuk, founder and CFO of Edmonton-based B2B software company Celcorp. Inc, and president of the Information, Communications and Electronic Technologies Alliance (ICET).

Matichuk said tech companies need to focus not just on attracting funding to the province’s still-fragmented tech sector, but finding senior-level advisors to help them drive new business relationships at local and international levels.

“An awful lot of money is getting invested right now in research in the province, sponsored by the provincial and federal governments,” he added. “It’s fabulous news that money is getting focused on the technology sector . . . however, you can’t disproportionately focus on the research side and ignore the commercialization aspect.”

The report also raised a red flag in the area of venture capital investment. Ian Robinson, an Ernst & Young partner who leads the firm’s Technology, Communications and Entertainment industry team in Calgary, noted that Alberta generates 14 per cent of the national Gross Domestic Product, yet receives only two per cent of the venture capital money being invested in Canada.

As a result, he said, tech companies may be forced to look at alternative strategies such as mergers, or even selling their businesses, to achieve growth. “Clearly, the use of such strategies will affect the long-term viability of the technology sector in our province,” he said.

However, the head of a group representing Calgary’s advanced technology sector believes Alberta’s high-tech export markets will continue to grow.

“Our high-tech companies are increasingly getting their revenues from export markets, which is a very good sign,” says Lynn Sutherland, president of the Calgary Council of Advanced Technologies (CCAT). “We were incubated on the oil and gas industry, but now we’re looking more globally.”

Sutherland says she was concerned by the report’s findings that only half the companies surveyed said their companies were adequately capitalized, with 69 per cent indicating access to capital was significant to the future of their companies. The chief concern cited was the difficulty in raising investment capital.

“That is the concern in the short term – ICT investment money is going to be a lot harder to come by over the next little while,” says Sutherland.

Other findings included:

* 60 per cent of companies expect to have more employees than last year;

* 70 per cent anticipate higher profits than last year;

* 34 per cent of companies say they have increased R&D spending in the last year.

Although Alberta may be on the short end of venture capital funds invested in Canada, a new joint study released last week by professional services firm Deloitte & Touche and the Canadian Venture Capital Association (CVCA) says investors have a bright view of the economy.

The report shows the more than 900 Canadian venture capitalists surveyed are expecting a return to the economic growth seen 18 months ago.

“Our last survey indicated genomics and biotech-health care companies would be the biggest recipients of new VC money,” said CVCA president John Eckert. “This new data shows this trend continuing in 2002, with almost 60 per cent indicating they plan to increase their investments in these areas.”

About 52 per cent of the survey’s respondents indicated manufacturing would be a hot area for venture capital investment, while more than half also intended to reduce or keep constant the amount of money they invest in Internet, semi-conductor and telecom-related companies.