Building the Economy of Ideas

Insiders’ perspectives on what’s right – and wrong – with Alberta’s innovation system

Oct 1, 2009  

The Financier Bruce Alton

For most of the past 20 years, Alton has consulted, worked for, invested in and started different tech companies in Edmonton. In 2008 he became chief operating officer of Touchstone Holdings Ltd., a company primarily invested in traditional industries such as real estate and oil and gas but looking to branch out.

We have a private equity group looking at technology. If you want to have success, these technology ventures have to be seen in the same light as oil and gas or real estate ventures. If I have to convince my partners we’re going to invest in a technology company, it’s got to have the same attributes as a successful investment in oil and gas or real estate or manufacturing. A lot of technology companies don’t get it. Often the excuse is, “They don’t understand the technology, so they didn’t invest.” That’s your job! If you want investment, you’ve got to compete against those other investment opportunities.

On the one hand a lot has happened over the last 20 years [in Alberta]. On the other hand not much has happened, in the sense that the technology industry really is a rounding error in the size of our traditional industries.

In the 1990s I partnered with Bruce Saville, who probably had the most successful technology business here [Saville Systems]. Bruce showed that you can have a big success here. The thing that’s always bothered me about that particular success – not the success itself – was that he was funded by a venture capital firm in Washington, D.C. At one point the company was probably worth a billion dollars, at least $700 or $800 million, and when it was sold to ADC Telecommunications, Bruce did well, the other investors did very well, the VCs did really well – they made millions and millions of dollars – but all that money flowed back to Washington, D.C. It always bothered me that that success never got fully recycled in Alberta.

It’s not just access to capital. There’s all these items there. We have to improve access to capital, we have to have the skill sets, we have to have the R&D infrastructure. But the question in my mind is, To what end? What are we trying to accomplish?

We talk about technology commercialization. I think that’s the wrong approach. I think we should be talking about product development. You might argue that’s semantics and they mean the same thing. I would say no, it doesn’t. In reality, you and I buy a product. We don’t buy technology. The great example is the BlackBerry. This device has hardware, software, but it also has a package, it has a warranty, it has a brand name, it has a distribution channel. That’s what we ultimately buy. That’s what the company was founded to do. If you want to generate an economic return on that investment in research, development and technology, there’s 10 other things that have to make a complete product. We don’t think enough from that perspective.

I chair the board of nanoWorks, which is a program that funds nanotechnology research to solve Alberta’s business problems, for example oil and gas and construction applications. You look at Syncrude. You talk to [former CEO] Eric Newell. He says what got the cost of extracting a barrel of oil from the tarsands from 40 bucks to 10 bucks was technology. In the 1980s you had a non-existent forestry industry here, and technology taught them how to pulp an aspen tree. Technology allowed them to make oriented strand board. A lot of people think of technology as people in white lab coats, but it’s adoption and adding value to existing industries.

The venture capitalists are a key piece. A good VC will create deal flow. They’ll put all the players together and fund it. You can’t mandate that to happen. Government can’t do it.

We have to focus on our strengths. We have tried to focus on biotechnology but really when you compare us to San Diego or probably 20 other places, we’re not world class. In the MNT [micro- and nanotechnology] field, it’s small but we have a base here of facilities and companies and researchers that just doesn’t exist anywhere else.

You look at the [provincial] budget and we have a $5-billion cut in revenues because you’ve got a cyclical natural resource revenue. The message is that we have to diversify the economy, we have to build these other kinds of companies.

Current Issue