• Yannai Segal

Realistically: Can Calgary become a major Tech Hub?

Updated: 4 days ago

A question posed by Richard White

A response by Grant Sanden and Yannai Segal, Co-Founders of Enersoft Inc.

Enersoft is a Calgary-based applied technology company developing solutions for improved understanding of resource geology for the oil & gas and mining sectors. Enersoft pairs a robotized multi-sensor geological machine vision platform with a geoscientific AI computing platform for faster, cheaper, and better high-resolution replacements for traditional chemical and physical lab tests and fully digital geoscience and engineering workflows.

www.enersoft.ca

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Do you think Calgary can become a significant tech hub in North America?

If yes why? If no, why not?

Sort of. It’s a problem of comparative advantage.

Calgary and Alberta’s wealth are built on the back of the energy industry. For over 80 years money has literally poured out of the ground, even if it has taken a lot of smarts and hard work to make it happen. The sector which represents more than 25% of the Alberta economy1 is the reason Alberta’s median annual income is 15% more than the Canadian average2. Much of this wealth has gone to subsidize the rest of Canada, with many billions of dollars of transfer payments representing a 10% personal tax on Albertan’s personal incomes. For many, the call for Calgary to diversify into a Tech Hub is a call to reduce (or deal with the inevitable reduction of) the role oil & gas in our economy, and to replace it with something big and successful enough that it can maintain our high levels of prosperity.

The problem is that every city in the world is trying to diversify its economy, to save itself with innovation, to build its future of becoming a tech hub. Every college is starting a School for Advanced Digital Technology, every new downtown complex includes a tech hub with shared workspaces, an incubator and various entrepreneurial and technical mentorship and training programs. Calgary needs to do all these things, and do them well, to just to tread water in its battle to stay merely competitive with all these other cities. Calgary has seen great success with innovative companies from a variety of sectors, from biotech to fintech to warehouse automation, and there is certainly much being done to ensure that Calgary’s tech sector keeps up with the Joneses. But even if it does, this still represents a reversion to the mean – without the wealth generated by oil & gas Calgary is fundamentally no different than Winnipeg or Brampton, or Hartford, Salt Lake City, Grand Rapids, Tucson or any number of mid-sized cities trying to take the same route with their own economies, and it is inevitable that even with a flourishing tech sector we would see our relative prosperity trickle down towards theirs as we diversify away from oil and gas and look more and more like the rest of them.

So, tech and innovation are a necessary condition for ongoing viability, but not a means to true success and maintaining our status as Canada’s wealthiest province and massive contributor to Canada’s overall economic success.

But there is an alternative. An alternative where we become a major Tech Hub by leveraging our comparative advantage of having the world’s most advanced oil & gas companies and assets in our back yard and a huge pool of skilled, smart, and hard working professionals with deep insight into the problems facing this industry as well as technologies developed for oil & gas that can be applied to other sectors. An alternative where our Tech Hub is built around a core that develops the technologies that keep our energy industry as an engine of national wealth, even as we export these technologies to the global energy sector and to adjacent sectors around the world. Where Calgary becomes known as the Tech Hub for building better tools for finding, extracting, and processing energy in a more efficient and environmentally friendly way. Where geophysicists revolutionize medical imaging, oil sands geologists revolutionize nickel mining, and horizontal drillers bring the world geothermal energy.

So, while the powers that be should be doing their best to build Calgary’s generic tech prowess, it will be a huge missed opportunity if that is all we end up with. We should focus on building our broader tech sector around the special space where we have that comparative advantage, where we have few true global competitors and a fighting chance to be a true major Tech Hub.

If you are from Calgary, what has made you stay or return to Calgary.

If you are not from Calgary, what attracted you to move to Calgary? Why have you stayed? Are you considering leaving? Has Calgary met your expectations? If so how? If not, why not?

We are local co-founders of totally different backgrounds (Jewish kid from the suburbs and a farm kid from Strathmore) who met when we sat next to each other on the first day of engineering classes at the U of C over twenty years ago, stayed as friends throughout our careers, and got back together to do one more ‘group project’ as co-founders of Enersoft.

As entrepreneurs this is the only place where we had a fighting chance of building our business – where we know the people, understand the problems, and had the resources to take a shot at solving them.

But even if we could move elsewhere, why would we want to? Calgary is consistently ranked as one of the top places in the world to raise a family. We have clean and safe streets and parks, great schools, affordable housing, friendly people, nice weather, and the wonders of the Rockies on our doorsteps. We will never compete at hipness with the urban centers of downtown Vancouver or Toronto, but that is OK because those locations will never be able to compete with Calgary as a place to live while raising a family.

Popular perception of tech in media is unattached 20-somethings living it up in the big city working crazy hours and sharing tiny apartments. But most entrepreneurs only develop the skills, connections, and opportunities to build something great later in life with totally different priorities. We founded Enersoft well into our 30s after many years of work experience, with three kids each, and with lifestyles that perfectly fit Calgary’s vibe. And many of those 20-somethings seeking a stereotypical tech experience now will want to raise their own families and realize that Calgary is a much better (and more affordable) place to be to do that.

What are the 3 things Calgary could do make the City more attractive to tech entrepreneurs?

Intuition might be that to make Calgary more attractive to tech entrepreneurs we should make our city look more like where they are thriving now – San Francisco, Vancouver, and Toronto – with more urban development, a livelier nightlife, and more arts and culture. But while all those things are great, we’ll never out-compete the big cities at those big city things. Instead we should focus on maintaining and increasing our lead in what makes Calgary already so attractive for so many – affordable suburban housing, short commutes, low taxes, clean and safe streets and parks, great neighbourhood schools, fresh air, and a culture of reasonable working hours true work-life balance.

Maintaining affordability and a broader culture of work-life balance is also critical because it gives innovators the financial resources and free time to incubate their ideas into businesses.

What are the 3 biggest barriers/obstacle to Calgary becoming Tech Hub?

Calgary’s corporate and investor class still don’t understand tech, although that’s starting to change. Local executives with experience from running high-capital low-margin oil and energy service companies have limited ability to mentor (or consider investment in) tech startups with totally different business models.

Calgary’s big energy companies are struggling to engage with startups that move so much faster than they do (our experience was that we could usually build a solution in half the time a client would take to schedule a meeting to discuss the problem). This is a killer for startups serving the industry, as time wasted on sort-of and maybe engagements (also called a Canadian No) bleed all the momentum required to get to viability and scale quickly.

The current focus on ‘Cleantech’ is also a challenge to building a Tech Hub around serving the resource sector. Technology that makes hydrocarbon extraction more efficient will, by definition, have major environmental benefits through reduced land and water consumption and/or energy inputs per unit of hydrocarbon produced. But the commensurate reduction in cost per unit of hydrocarbon will always act as a negative carbon tax, incenting increased GHG production from consumption. We must fight to ensure that broader environmental benefits achieved by innovating a more efficient resource sector are considered Cleantech even in a GHG-focused world.

Is there a transformative idea that could be a game changer in Calgary quest to become a major Tech Hub?

A true commitment from Calgary’s major energy companies to embrace local tech innovation as collaborative fast-moving customers is the best chance that Calgary has for both achieving a major Tech Hub status, and for the industry to position itself for success in the challenging years ahead. This requires more than just lip services but concrete action – like changing complex procurement requirements, inflexible IP policies and ridiculous payment terms for local tech companies driving these much-needed innovations.

How can Calgary differentiate itself from other Tech Hubs? Is there an area of tech Calgary could/should specialize in?

As discussed above, our only chance to become a major Tech Hub and not just an also-ran among pretty much all mid-sized cities is to build around our existing comparative advantage of technical and business expertise for the global oil and gas business where we only compete with a few other cities globally (like Houston). This will support differentiation in other areas where we have a lot of expertise but also more competition, such as Agtech, as well as the broader tech ecosystem.

If we try and build a generic Tech Hub, our starting advantages should result in us doing pretty well relative to our peer cities, but our chances of building something transformative are slim.

How is Calgary perceived by your colleagues from outside the City?

We don’t get out much.

Can you describe your impression of Calgary in three words?

Friendly. Industrious. Common Sense.

Feel free to share any other thoughts/suggestions you have that are relevant to Calgary’s goal of becoming a Tech Hub.

We’ve benefited greatly from participating in many high-quality programs as part of the Calgary innovation community, including the New Energy Ventures competition and Creative Destruction Labs Rockies, and the support of many mentors who were generous with their time and expertise. But we have also noticed that, as with all gold rushes, the ecosystem quickly fills with grifters and rent-seekers working hard to separate entrepreneurs from their money (and equity) with not much to offer in return. Part of building a successful innovation ecosystem is keeping out this unsavoury element as much as possible.

© 2020 by Enersoft Inc. 

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