Edmonton tech startup disappointed after UCP freezes investor tax credit program

An Edmonton startup company is worried about its future success since the province has frozen some programs ahead of the October budget.

Yardly, a managed service marketplace that allows homeowners to order reliable snow removal and lawn care through monthly subscriptions, is particularly concerned that putting a hold on the Alberta Investor Tax Credit program will discourage potential investors.

CEO and founder Terry Song called the move “surprising and disappointing.”

“It’s not only from me; it’s also from the startup community here… they’re disappointed because we all think that we have great people, we have great community here.

“There’s a chance for Alberta to be leading on the innovative side across Canada, or even internationally,” Song said.

As part of a campaign promise, the United Conservative government is taking a close look at Alberta’s finances, and plans to release a budget later this fall.

“Our biggest priorities are getting Albertans back to work and putting our province on the path to fiscal balance,” said Justin Brattinga, spokesperson for the minister of economic development, trade and tourism.

“The Alberta Investor Tax Credit is a program that is being reviewed in order to ensure that it meets these priorities and a decision will be made for the October budget.”

Intake for the program has been on hold while the review is in process, he explained.

The previous NDP government rolled out the program in April 2016. The Alberta Investor Tax Credit offered a 30 per cent tax credit to investors who provide capital to small- and medium-sized Alberta businesses in information technology, clean technology, health technology, interactive digital media and game products, and post-production, visual effects and digital animation.

The Notley government said the tax credit would give incentives to invest in non-traditional sectors that offer skilled employment.

Yardly launched four years ago and has since grown from a team of two to a team of 10. It now employs 50 full-time contractors across Canada. Since 2015, it has expanded from Edmonton to 25 cities and towns in three provinces.

“Growth has been exponential,” Song said. “The amount of customers — we’re doubling or tripling year over year.”

In fact, the company just closed a $1-million seed round investment, which will help it expand into more major Canadian markets.

Song praises Edmonton as a great place to launch and grow a startup.

“We have great people, great talent and we also have great communities. Startup Edmonton, TEC Edmonton, the Venture Mentor Services from U of A — all these organizations are helping us in terms of our mentor needs,” Song said.

“I would say I got a lot of help from them and without their help, this exponential growth wouldn’t have happened.”

He says Alberta startups already face challenges attracting investment, especially from eastern Canada, and he worries the absence of this tax credit program will hurt the industry.

“Most of the venture capitalists in Canada are located in cities like Toronto and Montreal and they prefer to invest in companies that are nearby them,” Song said. “For example, when we were raising our seed round, I was able to get in touch with one of the most well-known venture capitalists in Toronto, and they were very interested in what we’re doing, but they didn’t really end up investing in us because they can only invest in companies that are located within a 2.5-hour flight from Toronto.

“Investment is crucial to startup companies’ growth, so I was hoping that programs like AITC could help Alberta companies to overcome that [disadvantage].”

Yardly is one of the local startups urging the government to re-establish the program.

“I heard the government is considering to reduce the tax rate for the corporations,” Song said. “I think that is good. But I think they shouldn’t be doing that at a cost of sacrificing programs that help startups. It’s like if you only have one bucket of water, you cannot just pour the water to a big tree and ignore all the small trees.

“We are costing the future of Alberta. We think that this program is crucial to Alberta’s future because startup companies are the future of the economy.”

He also stresses the need for diversification.

“Alberta is well known for its oil and gas economy, so I think it would be definitely beneficial for Alberta long-term to encourage more innovative companies that are not in the traditional oil and gas sector.”