The unprecedented boom in Alberta’s oil and gas industry is making it hard for the province’s technology firms to secure financing, according to a study released today by Ernst & Young LLP.

The funding difficulty has many firms thinking about leaving the province.

Virtually every respondent (99%) believes the province’s economy is strong, yet nearly half have considered or would consider relocating outside the province, the study found.

“There’s a sense among Alberta’s technology entrepreneurs that because of the high returns in the oil and gas sector, the available capital out there is being reinvested in the energy markets rather than the tech sector,” said Terry Booth, executive director in Ernst & Young’s technology practice, in a release.

“So, despite believing that the Alberta economy will continue to experience considerable growth, 49% of our respondents felt the competition for financing – either from equity groups or government – is a major competitive disadvantage in growing a technology business here. Astonishing, however, is that of the companies surveyed that actually tried to raise capital last year, nearly two-thirds were successful. This figure demonstrates that funding is available but companies need to be diligent in finding these sources.”

As with results from previous years’ surveys, the latest findings show that Alberta’s technology firms continue to use family and friends, and private or angel investors as the most common sources of financing. A full 87% of the companies surveyed plan to find an alliance or merger partner within the next three years and 67% will seek angel or private investment. Thirty-eight per cent will seek financing from a venture capital firm.

Three-quarters of respondents also consider an inability to access government grants and funding for research and development as an obstacle to their companies’ growth.

Alberta’s market size is another concern for technology companies.

Additional barriers to growth cited include the growing strength of the Canadian dollar against the U.S. dollar, as well as rising interest rates.

The good news is respondents consider the strength of global markets as a positive factor which will drive future growth in Alberta’s technology industry. Overall, the province’s technology community remains optimistic, even as companies continue to struggle with the unique challenges of doing business in Alberta.

The Alberta Technology Report 2006 is based on a survey conducted in September 2005 by Ipsos Reid, involving the leaders of companies from a wide cross-section of the Alberta technology sector. The report captures the opinions of 128 of Alberta’s high-tech company leaders.