Alberta-based technology companies remain optimistic despite their poor expectations for the sector and ongoing struggles to raise venture capital, according to a just-released fourth annual report on the industry.

The Alberta Technology Report, produced by Ernst & Young LLP, mirrors last year’s report in pinpointing one of the biggest aggravating factors to technology executives and entrepreneurs hunting for new capital.

Only 21 per cent of the more than half the 168 tech companies that returned completed surveys reported they planned to pursue venture capital in the coming year, and analysts suggest there is widespread pessimism about the availability of funding.

“The message is that the venture capital sources in this province are not as well represented as in other provinces,” says Ian Robinson, the Alberta leader of Ernst & Young’s Calgary technology, communications and entertainment industry practice. “There’s a consistent struggle that entrepreneurs have outside of the oil and gas (sector) in raising capital they need for ventures.”

Ian Robinson

None of the survey respondents plans to launch an IPO in the next year, and only 14 per cent plan to do so within three years.

Robinson says Alberta companies need to be more creative in sourcing needed capital, and adds some incentives – such as those offered by scientific research and experimental development (SR&ED) and industrial research assistance (IRAP) programs – are often overlooked by many firms.

“Some of these companies are obtaining SR&ED grants in the range of $10,000 to $2 million per year, with an average receipt of $257,000,” Robinson told Business Edge.

“Only 24 per cent of the companies reported benefiting from the SR&ED program this year, so you wonder why more of these companies wouldn’t be attempting to access these funds and obtain financing through that means.

“The entrepreneurs need to make sure they tap all available sources.”

Other findings of the report released last week:

* 26 per cent of respondents received funding from employees, friends and families in 2002.

* 61 per cent of small firms responding derived all of their 2002 revenue from Alberta, compared to 46 per cent for medium-sized companies and 18 per cent for large firms.

* 31 per cent of tech companies surveyed said using the web and e-commerce has become an effective way of reaching their target audience.

* Nearly two-thirds of Alberta technology companies are more than five years old, with the same percentage reporting their products and services are on the market and generating revenue.

* 78 per cent of sales made by high-tech companies go to other businesses rather than to consumers, with the energy industry providing the leading market, followed by health care and government.

“It’s a positive and clear representation that companies are focusing on the Alberta marketplace and the businesses that will buy their products, Robinson said.

The survey also revealed that Alberta’s technology sector is nothing but resilient in the face of depressed markets and the drought of venture capital.

Respondents indicated they expect their employee levels will double from 2001 levels in 2003, with revenue forecast to grow from 14 per cent two years ago in 2001 to 20 per cent in 2003. More than half believe the global economy is on the road to recovery.

Even the Kyoto accord failed to puncture their expectations. A full 56 per cent of respondents see opportunity in the international climate change accord, particularly in developing and selling new products as a result of its ratification.

The technology companies tapped for the study originated from several sources, including the Calgary Council for Advanced Technology (CCAT), the Information, Communications & Electronic Technologies (ICET) Alliance, Calgary Technologies Inc. and the Edmonton Tech Presidents Club.