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LESSONS LEARNED AND LOOKING AHEAD
After more than a decade of experience investing in VC funds, many lessons have been learned and improvements implemented. The Canadian VC industry has matured, leading to investment terms being standardized.
We have created new investment vehicles to fill gaps. We have adapted investment terms to meet changes in the market, and we continuously update our due diligence process to meet best practices.
This year we have seen a major reduction
in Venture Capital investments across North America, and we experienced the failure of Silicon Valley and Signature banks. Though these events were major, Alberta weathered relatively well. In reflecting on the past year’s performance, there are however a number of lessons learned. Our approach is working. We have been successfully meeting our annual KPI targets, catalyzing a Venture Capital industry in Alberta and amplifying our capital by investing in funds that match the stage and sector capital needs of startups in the province and stimulating investment in Alberta companies. Based on data from AEC and CVCA, the amount of capital and number of companies funded in 2022/23 is greater than ever. In addition, our financial metrics show that the total value of the portfolio currently exceeds the total cost of the portfolio – and that we are currently on track to return to the Province its investment capital. Based on this learning we are not suggesting any major changes to our strategies going forward; however, some minor tweaks and sub-strategies will be introduced.
We have had success in the past investing
in Alberta-headquartered fund managers, however at the start of the year only one manager remained active in Alberta. It has been difficult to find Alberta-based fund managers who meet all of our investment criteria. This lesson resulted in a new sub- strategy: involving investment in Alberta-based micro funds. With two new Alberta-based funds in our portfolio this year, one being a
micro fund, we will review this strategy as these funds mature. We will also tweak and clarify the difference between the micro fund category and our regular fund investments.
The “J-curve” effect does have a real influence on AEC’s financial metrics, given the greater demand for capital of funds in the earlier years of a fund’s life before it achieves significant investment success. This should be factored
in when reviewing AEC’s KPIs and needs to be clearly communicated to our stakeholders as this may not broadly understood.
We aim to use data to drive our strategies, however there is still a lack of data, both relating to the demand and supply of capital. As a result of this learning, we have implemented a number of initiatives, including StartAlberta. com and active engagement with the CVCA data committee. In 2023/24 we will work even more closely with StartAlberta.com, continuing to refine and improv the data collection and we will conduct another deal flow study.
Diversity, Equity and Inclusion continues to grow in importance in the VC and PE industry. As a result, we have become signatories, to the ILPA Diversity in Action initiative, we have implemented changes to our due diligence questionnaire, and we have created a DEI strategy for AEC. It is important that we live by our own values, having a diverse team. At year end, our team consisted of 55% females.
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