Alberta's tech sector hit by layoffs after boom investment year

Last week, Calgary-based tech firm Benevity, a company which provides software to manage charitable donations and grants, laid off 14 per cent of its staff, citing current market conditions.

The news came a little more than two years after the company became a tech "unicorn" after reaching a $1.1-billion US deal with British private equity firm Hg Capital LLP.

The layoffs, of course, will significantly impact the lives of the 137 people who will now be searching for employment, but they don't exist in a vacuum. All around the globe, tech companies have been announcing massive layoffs since last summer.

On Friday, Google's parent company, Alphabet Inc., said it would eliminate about 12,000 jobs. That move was preceded by significant layoffs at Microsoft, Amazon, Facebook, Twitter and Shopify.

In Alberta, investment in the tech space attracted more than $500 million in investment through the first three quarters of 2022, according to briefed.in.

But investment slowed as the year went on, with $205 million in the first quarter and $268 million in the second, dropping to $31 million in the third.

Scott Crockatt, vice-president of communications with the Business Council of Alberta, said global market forces were at play in what one might call a "tech winter."

"In tech all over the world, we long prioritized growth over profitability in the moment. And then that really flipped, all over the world, you can almost put your finger on it about three quarters ago, with a new prioritization of strong fundamental business models," he said.

"And Alberta is not immune to that. So, we've seen some of those changes and layoffs happening in businesses in Alberta as well."

In announcing the layoffs last week, Benevity CEO Kelly Schmitt wrote the company had significantly increased the size of its team to meet demand, but over the last nine months, macroeconomic conditions had changed dramatically and slowed demand.

"Although we continue to experience healthy year-over-year growth, the hard reality is that as a company, we are overbuilt for current market conditions," Schmitt wrote.

The burgeoning tech industry in Alberta has often been cited as a potential sector for oil and gas workers to pivot to in the future.

Crockatt said there's a set of profitable technology companies in Alberta, with strong underlying businesses, which are undergoing a right-sizing approach right now, with less of a focus on aggressive growth.

"I'd argue that there's more of those businesses in Alberta, in Calgary, that have that strong underlying business model," he said.

"Then, you're seeing another tech story, with other companies that had a much less strong underlying business model. And they need to do a more radical transformation. The best example of those would be fake crypto-related businesses."

Some see opportunity ahead

Brett Colvin is the CEO of the Calgary-based startup Goodlawyer, an online marketplace for micro-legal services.

He said his company, which employs 20 people, hasn't been impacted by the recent rash of layoffs — and, in fact, he has his eye on scooping up talent.

"Even with the big tech companies in the States, they hire a lot from Canada. So reducing their headcount opens up the talent market," he said. "For startups like us, I think it provides a huge opportunity to bring people onto your team that just weren't available a few months ago."

Though the tech winter may have dried up investment in the province, James Lochrie, a Calgary-based investor and the managing partner of Thin Air Labs, said Alberta has some unique differentiators owing to elements of its industrial and energy-based economy.

"That's where the base of the economy lies, and a lot of innovation comes out of that. And because of the newness of that type of innovation, and the problems they're trying to solve — they haven't been solved by a lot of jurisdictions in the world — I think we continue to see a general increase over the next three to five years in the sector," he said.

In the meantime, others expect the near future will pose challenges and bring additional layoffs as the space continues to adjust.

"Very few industries are going to be moving in an upward, linear trajectory forever. There's going to be ebbs and flows," said Eric Myers, who teaches finance at Mount Royal University in Calgary.

"I think that's exactly what we're seeing in the tech industry as a whole."