Tech sector welcomes ‘angel tax credit’ for tech start-up investments

A provincial tax credit aimed at boosting technology startups in their early stages will allow those companies to court capital investment, says the chief executive officer of co.labs.

“The first round of investment a company in tech gets almost exclusively comes from friends and family or angel investors,” Jordan Dutchak said, referring to the new tax credit announced by the province in the recent budget as the “angel tax credit.”

The new Saskatchewan Technology Start-up Incentive is a non-refundable tax credit equal to 45 per cent of qualifying investments in small tech startups that have fewer than 50 employees and are incorporated and headquartered in the province, with the majority of staff and operations located here.

The small tech startups have to be developing new technologies or using existing technologies in a new way to create new products, services or processes.

Van Isman, CEO of the Saskatchewan Opportunities Corporation, which operates as Innovation Place, said the tax credit will provide an incentive to invest in tech companies.

“The easier that people can raise money for a startup, the easier it is for them to get going,” he said.

One of the difficulties tech companies face is securing the funding they need between the time of launch until the time the company is operational and able to make ends meet, he said.

“Through the mechanism that was created through the budget (April 10), it appears there’s going be greater incentive for people to make those investments with some tax relief,” Isman said.

“It’s a bit of a cushion, a shock absorber, if you will, for the people that are going to be investing in those companies, which should free up some capital, make an opportunity for those tech companies to access investment resources.”

Saskatoon-based 7shifts employs more than 50 people, but its CEO, Jordan Boesch, said there are a “ton” of startups in the province that can take advantage of it. He

said it’s not easy to attract capital on the Prairies — he had to head to the Bay area for a while to raise capital and come back to Saskatchewan.

“There’s more startups than people are realizing; there are more startups than ever happening out of the Prairies. I think it speaks to what people are seeing and everyone wants these companies to be successful and help out along those lines. We want to make sure that they’re being supported,” he said.

“The industry is really booming. I think it really speaks to how fast it’s moving and that we give it every opportunity that we can to make it succeed in the same fashion that Silicon Valley has.”

Dutchak said a healthy tech ecosystem has three components: capital, community and talent. The introduction of the STSI helps with access to capital, and the Saskatoon-based hub has been helping link startups with each other and to mentors, which speaks to the community aspects.

When co.labs was launched about a year ago, the bulk of its funding came from the province. Dutchak said the company is now working with more than 37 other small companies and recently launched a seed accelerator.

The next step is to foster the access to talent, he said, adding the issue isn’t the calibre, but the quantity of talented people in tech. The next phase is to focus on getting more students into STEM fields, and more graduating from local post-secondary institutions and looking at doing things like retraining people in other fields, which are not as in demand, such as technical engineering, he said.

He sees tech becoming one of the prominent sectors in Saskatchewan’s economy, standing alongside agriculture, mining and other traditional sectors, Dutchak said.

He noted one indication of the growth in tech locally is the uptick in activity in the sector last year.