It was a rather jolly meeting — the Yellowhead Brewery event-pub quite packed, the beer flowing. All kinds of technology/biz folks were renewing acquaintances.
The occasion was the release of a report commissioned by the Downtown Business Association, called Accelerating Tech in Downtown Edmonton.
The get together had a right to its jolliness. As was detailed in a recent Hicks on Biz column, Edmonton’s technology/artificial intelligence/machine learning sector has, at long last, reached critical mass. Enough technology-based companies are now making enough money to significantly grow in scope and employment.
That said, there’s an annoying Catch 22 to technology-innovation business development.
Every time something starts up, governments (or government-funded agencies) feel an overwhelming need to throw a whack of money at it.
Agencies are allegedly set up to assist these hard-working entrepreneurs — Edmonton Economic Development Corporation, Health City, Start-Up Edmonton, Innovate Edmonton, TEC Edmonton, Alberta Innovates, the list goes on and on.
But these not-for-profit agencies immediately devour half the government money in administrative costs! CEOs are paid $300,000 a year, full-time consultants make six figures a year in return for 9-to-5 jobs with weekends off and gold-plated benefits.
Off the consultants go to advise some poor schmuck who has mortgaged his house and is working 100 hours a week with no pay to get his start-up company off the ground. What’s wrong with that picture?
The “economic developers” get ants in their pants when reminded of some of the realities of the technology sector: Namely that Edmonton’s most successful technology companies have rarely aligned themselves with “service providers.”
The Big Three at the start of the technology wave (all since sold, but still here under different names and management) were the video-game company BioWare, the telecommunications software company Saville Systems, and do-it-yourself tax-return software company Intuit. All started with one or two employees. None of them relied on “service providers” to any degree.
The Downtown Business Association report is quite good — within its downtown bias of course. It makes a few sensible recommendations, specifically urging downtown building owners to get on with renovations to accommodate the needs and desires of the 21st Century workforce.
But the report is very much status quo, accepting the idea that full-time “economic developers” are somehow necessary for the “ecosystem”, the “collaboration” and the “relationships”.
In fact, high-tech companies are just like every other business. They might collaborate here or there, but 99% of their focus is on themselves. Talking over lattes isn’t the best use of their time. If they don’t focus on making their mousetrap cleaner, greener, safer, faster and cheaper than the competition’s, their company will fail.
They must find investors. They have to fight, claw, battle just to stay alive for the five years or more it takes any new business to go from an idea to viable, revenue-earning products that maybe, one day, somehow, will make the original entrepreneurs rich, to hopefully stay and grow in Edmonton
After the report presentation, a few high-tech entrepreneurs and service providers took part in a panel. It was Chris LaBossiere, CEO of Yardstick, who spoke the truth: That service providers, government-funded business incubators and accelerators inevitably morph into being more concerned about their own survival (with those big, fat, guaranteed salaries) than their clients.
LaBossiere went on to say that if government money was simply given directly to start-up companies rather than funneled through service providers, incubators, accelerators etc., as a city we’d probably get better results.
The high-tech service providers and start-ups looking for government cash, spurred by opposition MLAs, have been squawking about the freeze imposed by the still-young UCP government on funding/tax rebates for the technology sector.
Let’s not be stupid! Of course the new government would impose a temporary moratorium! It has radically different ideas about “economic development” than the previous one. The UCP government needs to determine its own course of action.
Maybe, just maybe, the current funding system will be blown up, replaced with assistance that’s leaner, faster, cheaper — giving money directly to risk-taking entrepreneurs, not the service providers.
I am on holiday for the month of September. Hicks on Biz will resume Oct. 4 online, Oct. 5 in the print edition of the Edmonton Sun.