Q1§2014
$6.25
THE MAGAZINE OF CANADA’S PRIVATE EQUITY & VENTURE CAPITAL INDUSTRY
FOREIGN INVESTMENT Another Year of Surprises
PLUS: • Industry Pioneer Interview: CVCA’s First President • Ebbs & Flows in Debt for PE Deals • PE & VC Impact Studies • Retail VC Struggle for Survival
Published for CVCA – CANADA’S VENTURE CAPITAL & PRIVATE EQUITY ASSOCIATION
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CONTENTS COVER STORY
ARTICLES
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14
Infographic: The Real Impact of Venture Capital on Canadian Companies
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Having the Conversation What companies crave from private equity buyers
Foreign Investment Another year of surprises By Michael Coates
DEPARTMENTS
3
President’s Message
5
CVCA Board of Directors and Management
6
Fund News
10
People on the Move
By Tim Kiladze
By Peter van der Velden
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Private Capital Pioneer Insights An interview with CVCA’s first president, Gerry Sutton (1974 – 76)
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By Richard Kinlough
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The New Road Ahead Implications for Canada’s retail venture capital industry By Jenifer Bartman
By Steven Hnatiuk
CVCA Membership Benefits & Information Request Form
Private Equity Sponsors Accessing the Canadian Debt Market Contrasting mid-market lending environments – 2007 versus 2014
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VC is a Catalyst for High Growth A study conducted by Industry Canada and Stats Canada confirms the value of VC-backed firms By Gilles Duruflé
EDITORIAL BOARD Chair: Steve Hnatiuk, Lighthouse Equity Partners Chris Arsenault, iNovia Capital Jenifer Bartman, Bartman Business Advisory Grant Kook, Westcap Management Lauren Linton, CVCA Robert Montgomery, Achilles Media Rick Nathan, Kensington Capital Partners Gary Rubinoff, Summerhill Venture Partners Gregory Smith, InstarAGF Asset Management David Unsworth, RBC Venture Partners Peter van der Velden, Lumira Capital Mike Woollatt, CVCA Published by
701 Henry Ave. Winnipeg, MB R3E 1T9 Phone: 204-953-2189 Fax: 204-953-2184 www.lesterpublications.com President, Jeff Lester Vice-President & Publisher, Sean Davis EDITORIAL Editorial Director, Jill Harris Editorial Assistant, Andrew Harris ADVERTISING Sales Director, Danny Macaluso Louise Peterson, Larry Kiska, Walter Lytwyn DESIGN & LAYOUT Art Director, Myles O’Reilly John Lyttle, Gayl Punzalan, Jessica Landry, Crystal Carrette ACCOUNTING Nikki Manalo DISTRIBUTION Jennifer Holmes
Comments, questions and submissions are welcome, please send to the editor at privatecapitaleditor@cvca.ca
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© Copyright 2014 CVCA. All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of CVCA. Direct requests for reprint permission should be made to the president of Canada’s Venture Capital & Private Equity Association. Statements of fact and opinion are the responsibility of the authors alone and do not imply an opinion on the part of the officers or members of the Canada’s Venture Capital & Private Equity Association or Lester Communications Inc. Publication Mail Agreement #40606022 Return undeliverable Canadian addresses to: 701 Henry Ave., Winnipeg, MB R3E 1T9
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Private Capital § Quarter 1 § 2014
Printed in Canada. Please recycle where facilities exist.
President’s Message
Peter van der Velden,
President, CVCA
Welcome to the new and improved Private Capital ! sector. Highlights for 2013 included: investment capital deployed into Canadian-based innovation centric companies was up 31 per cent year over year to $2 billion; the biggest VC deal ever in Canada was completed in 2013 – for the first time, we had a private Canadian innovation company raising venture capital at the $1-billion valuation level; and the initial deployment of capital via the federal government’s Venture Capital Action Plan (VCAP) to a couple of the four named high performing venture funds (all CVCA members). Big deals always get the headlines, but it was also heartening to see that investment in seed stage companies was up meaningfully in 2013. Probably the most profound event in 2013 for Canada’s ecosystem was the recognition by our U.S. peers of the phenomenal opportunities north of the border. That recognition resulted in foreign funds flocking to the Canadian market – via either direct investments or via limited partner commitments to Canadian funds. In 2013, almost 40 per cent of all venture capital financings in Canada and 30 per cent of buyout financings included significant, largely American, foreign capital, a very big jump versus the prior period. As always, there were many themes our editorial team could have covered in this edition of Private
Capital, but given the surge in foreign investment, they thought it timely to provide an update on the evolving foreign investment rules and their role as one of the many contributors to making Canada a highly active investment market.
Celebrating 40 years As the CVCA continues to be deeply engaged with governments on the policies and regulations affecting our members and their companies, it’s important to acknowledge that 2014 marks the 40th anniversary of the CVCA. According to ancient lore, several VC fund managers made their first “organized” trek to the nation’s capital to meet with the thenFinance Minister 40 years ago. The meeting was apparently such a success that the returning managers decided it was time to launch a formal association. Over the intervening decades, much has happened in the world and in Canada’s venture capital and private equity industry. From a handPrivate Capital § Quarter 1 § 2014
PHOTOGRAPHY: KTSIMAGE/PHOTOS.COM
A
s you will soon see, your magazine has gone through an exciting transformation. Led by Steve Hnatiuk, CVCA’s editorial committee has been working with our new publisher, Lester Communications, to deliver in-depth, thought-provoking articles that will continue to set Private Capital apart as the insightful voice for Canada’s venture capital and private equity industry. It is a fitting time for a facelift for our magazine as our sector has also enjoyed a meaningful shift during the past three years. 2013 was a positive year for private equity investment in Canada, with $12.3 billion of capital deployed, but the real story in 2013 was that private equity funds shattered all records, raising a remarkable $16 billion of new capital. Even if we eliminate one mega fund, the reality is that the residual amount is still greater than total fundraising in any of the prior five years. In addition, while this year’s capital formation included a number of $1-plus billion funds, the balance of the capital raised was very well distributed throughout the entire PE ecosystem. While venture capital fund formation, particularly for private independent funds, remained challenging in 2013, there was also plenty of good news for the Canadian venture
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President’s Message
Probably the most profound event in 2013 for Canada’s ecosystem was the recognition by our U.S. peers of the phenomenal opportunities north of the border.
CVCA Annual Conference To celebrate our birthday, this year’s Annual Conference will be held in Ottawa from May 20 to 22 at the Ottawa Westin, located downtown and walking distance from Parliament. Our theme this year is “Positioned to Succeed” and appropriately, the theme revolves around our sport and our national obsession, hockey. In keeping with this theme, our 2014 Annual Conference organizing committee, led by Wally Hunter, has arranged for a pickup game between investors and the Ottawa start-up community on May 20. In addition, there will be a raft of NHL greats mingling with our 4
Private Capital § Quarter 1 § 2014
conference attendees, and we are planning a few surprises. Wayne Gretzky once said, “I skate to where the puck is going to be, not where it has been,” and Positioned to Succeed is all about doing just that – being pro-active and getting to where you need to be to score (win) before your opponents, and that that is exactly what we are doing as an industry. It is evident from our own research and from research we have conducted with partners (such as Statistics Canada, Industry Canada and The Conference Board of Canada) that our members most definitely know how to put the puck into the net. Our members are delivering on all the metrics that matter, building companies that excel in terms of growth, high value job creation and shareholder value creation. The simple reality is this: when entrepreneurs and business leaders partner with Canadian PE and VC firms, the results are outstanding both from a national and international perspective. CVCA members are out-performing on many levels, and that is good for all Canadians.
Welcome to the new CVCA CEO Finally, on behalf of CVCA’s Board of Directors, I am pleased to welcome Mike Woollatt as the association’s first CEO. I encourage you to get to know Mike in the coming months and I know Mike is committed to getting to know you. At the same time, on behalf of all our members and stakeholders, I would like to extend a warm and heartfelt thank you to Richard Remillard. While Richard will be leaving us during 2014, he has played an invaluable role in building our association during his 10-year tenure and, for that, many thanks are owed.
Peter van der Velden is CVCA’s managing general partner at Lumira Capital, one of Canada’s leading life science and healthcare venture capital firms. Peter has over 23 years of investment and operating experience and has participated in building companies from start-up through to expansion in the life sciences, information technology and consumer sectors.
PHOTOGRAPHY: NEVIN GIESBRECHT/PHOTOS.COM
ful of founding venture capital firms managing a few hundred million of capital, our industry has blossomed into a Canada-wide, multi-sector, multi-stage, multi-asset class with hundreds of managers, over $100 billion in capital under management, direct and indirect participation in thousands of businesses and the creation of hundreds of thousands of jobs. This association is very proud to be a part of that phenomenal success story.
CVCA 2013-2014 Board and Management Officers President: ............................................ Peter van der Velden, Lumira Capital Chair: ................................................... Gregory Smith, Instar Infrastructure 1st Vice President: ............................. Dave Mullen, Graycliff Partners Treasurer: ........................................... Pierre Schuurmans, Birch Hill Equity Partners Secretary: ............................................ Gary Solway, Bennett Jones LLP
Vice Presidents Jocelyn Blanchet................................. KPMG Gilles Druflè......................................... Independent Consultant Sarah Goel .......................................... EdgeStone Capital Tom Hayes .......................................... GrowthWorks Atlantic Edmund Kim....................................... ONCAP Grant Kook .......................................... Westcap Mgt. Ltd. Jeff Linner ........................................... PFM Capital Karamdeep Nijjar............................... iNovia Capital Michael Raymont................................ AVAC Paul Sparkes........................................ Difference Capital
Directors John Berton.......................................... Georgian Partners Richard Bradlow................................. Penfund Ross Bricker......................................... RB Limited Joseph Catalfamo............................... Summerhill Venture Partners Paul Day............................................... Export Development Canada Alain Denis.......................................... Fonds de solidarité (FTQ) Howard Donaldson............................ Vanedge Capital Joe Freedman...................................... Brookfield Asset Management Aki Georgacacos................................. Avrio Capital Michael Hollend.................................. Torquest Partners Wally Hunter....................................... EnerTech Capital Lorne Jacobson................................... TriWest Capital Partners Tom Kennedy...................................... Kensington Capital Partners Elmer Kim............................................ Roynat Equity Partners Genevieve Morin................................. Fondaction Don Morrison...................................... Novacap Dave Mullen........................................ Graycliff Partners Jerome Nycz........................................ BDC Whitney Rockley................................. McRock Capital Jane Rowe............................................ Teachers’ Private Capital John Ruffolo......................................... OMERS Ventures Rakesh Saraf....................................... Alberta Teachers’ Retirement Fund Pierre Shuurmans ............................. Birch Hill Equity Partners Lloyd Segal.......................................... Persistence Capital Partners Gregory Smith..................................... Instar Infrastructure Edward Truant.................................... Imperial Capital Mark Usher ......................................... Wellington Financial LP Peter van der Velden.......................... Lumira Capital Mike Walkinshaw............................... Stanley Hill Michael Woolhouse............................ CPPIB
Management Michael Woollatt............................... CEO Lauren Linton................................... Director of Marketing Kathryn Ryan.................................... Director of Operations Ted Liu.............................................. Research Director Andrew Keenan................................ International Trade Liaison Officer
Private Capital § Quarter 1 § 2014
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› fund news
Tricon: $334M for distressed real estate
Norethleaf closes first $218 with VCAP
Tricon raises $334M in final close of U.S. residential real estate fund
Lumira Capital closes $10M commitment from VCAP
Tricon Capital Group, a Toronto-based private equity firm focused on real estate, has closed its most recent U.S. distressed residential real estate fund, Tricon XI LP. An additional US$32 million in capital commitments has brought the fund’s total size to approximately US$334 million, which is the largest in the firm’s history. The final close of the partnership has increased Tricon’s total assets under management to more than $1.7 billion.
Canadian life sciences venture capital firm Lumira Capital has closed the $10 million capital commitment made to its latest partnership, Lumira Capital II, by the federal VCAP. In September, the $400-million VCAP awarded $50 million to four “high performing” Canadian funds, including the Lumira fund. The Toronto-based Lumira, which invests in North American companies in biotherapeutics, medical technology and health and wellness sectors, is also backed by Business Development Bank of Canada, Teralys Capital, Fonds de solidarité FTQ, Northleaf Capital Partners, Fondaction CSN and Merck & Co.
First VCAP fund-of-funds Northleaf Venture Catalyst Fund nets $218M in initial close The Canadian government has announced the launch of Northleaf Venture Catalyst Fund, the first market-based fund-of-funds backed by Ottawa’s $400 million Venture Capital Action Plan (VCAP) in partnership with the Ontario government. The fund, which will be managed by Toronto-based Northleaf Capital Partners, has raised $217.5 million in commitments in its initial closing, twothirds of which – or $145 million – came from corporate and institutional investors, including BDC Capital, Canada Pension Plan Investment Board, OpenText Corp and six of Canada’s leading banks. Northleaf Venture Catalyst Fund, which is targeted to raise $300 million in total, will make commitments primarily to Canadian venture capital funds, and direct investments in Canadian companies. The federal and Ontario governments have agreed to make a combined commitment of $1 for every $2 committed by private investors to the fund, up to a maximum of $50 million each. A second closing is anticipated later this year.
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Sprott’s $715M Korean fund
Private Capital § Quarter 1 § 2014
McRock Capital announces initial close of $50M industrial Internet fund Canadian venture capital firm McRock Capital has announced the initial close of its $50-million industrial Internet partnership, McRock iNFund LP. Capital committed was led by BDC Venture Capital with the participation of Canadian and U.S. institutional investors and family offices. The fund closing follows McRock’s announcement last month of a strategic partnership with GE Canada to help introduce a higher degree of connectivity and analytics of the digital world to resource sectors. Based in Toronto, McRock invests in Canadian and U.S.-based companies that are targeting large industrial markets looking to maximize efficiency by making their machines, equipment and devices run more intelligently.
McRock debut fund closes on $50M
Québec Manufacturing Fund nets $100M commitment from the Caisse de dépôt Canadian pension fund manager, the Caisse de dépôt et placement du Québec, has committed another $100 million to the Québec Manufacturing Fund LP (QMF), a private equity fund formed in 2006 to invest in Québec businesses in the manufacturing sector that present attractive opportunities and have the potential to make significant improvements to their operations. With assets under management now totaling $200 million, the Saint-Bruno, Que.-based QMF will enter its second phase of investment activity. Since its inception, the fund has completed investments involving five Québec manufacturers: Avant-Garde Technologie CMFA Inc., Ezeflow Inc., Fraco Products Ltd., Hason Steel Products Inc. and Liberty Spring Inc.
West Face: $400M in new debt fund
lion in commitments and an approximate hard cap of $150 million, completed its $50-million first closing in September 2013. Ironbridge began investing new partnership capital last October when the firm made a platform investment in Mississauga, Ont.-based Frischkorn Audio-Visual Corp, a provider of audio-visual services to corporate clients. The Toronto-based Ironbridge, which is managed by seven investment professionals, focuses on lower middle-market businesses operating in a range of industries, including manufacturing, distribution as well as consumer and business products and services.
West Face Capital raises $400M in first close of privately negotiated credits fund
The private equity arm of Sprott Asset Management will co-manage, along with Woori Asset Management, a US$750-million private equity fund on behalf of South Korea’s National Pension Service and the Korean Electrical Power Company. The fund will be focusing globally on investments in the natural resources and power sectors.
Canadian private investment firm West Face Capital has launched a new privately negotiated credits vehicle called West Face Alternative Credit Fund Group (West Face ACFG). The fund, which will be capped at $600 million, was initially closed with around $400 million in capital commitments. West Face ACFG will focus on investing in second-lien debt, unsecured debt, mezzanine financing, acquisition financing and bridge loans. The Toronto-based West Face Capital closed its West Face Long Term Opportunities Fund at $700 million in 2007.
Ironbridge Equity Partners raises $90M in second closing of Fund II
Company creation studio BrandProject officially underway with $12M consumer tech fund
In less than six months of marketing, Canadian private equity firm Ironbridge Equity Partners has completed the second close of Ironbridge Equity Partners II LP, raising $90 million in total. The fund, which is targeted at $125 mil-
BrandProject LP, a company creation studio and fund that makes early-stage investments in consumer products and technology, has officially launched. The firm is backed by over $12 million in commitments from BDC Venture Capital and other investors. With offices in Toronto and
Sprott to co-manage US$750M Korea fund
Private Capital § Quarter 1 § 2014
CHRIS SADOWSKI, OTMAR WINTERLEITNER, JUPITERIMAGES, BORZAYA, ALEXALDO, ALFABRAVOALFAROMEO, MICROWORKS/PHOTOS.COM
Ironbridge II nets $90M
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Greg Smith launches new infrastructure firm with AGF
New York, BrandProject will focus on seeding and mentoring Internet-enabled consumer products and services startups located in Canada and the U.S. Founded in 2012, BrandProject builds on the record of the consumer-focused Blackpoynt Brand Ventures. Both BrandProject and Blackpoynt were founded by Andrew Black, the former president and CEO of Virgin Mobile Canada.
Greg Smith to lead new infrastructure firm InstarAGF Asset Management Canadian investment management firm AGF Management Ltd. and Instar Group Inc. have launched InstarAGF Asset Management Inc., a new Toronto-based joint venture that will provide global institutional investors with access to infrastructure investment opportunities. The firm will be led by Gregory Smith, president and CEO of Instar, and formerly managing partner of Brookfield Financial’s Global Infrastructure Advisory Group. Smith was also previously president of Macquarie Capital Funds Canada Ltd, where he was responsible for Macquarie’s unlisted and listed Canadian funds business along with the active management of Macquarie’s Canadian assets, owned by offshore funds. AGF said it will be an active shareholder in the new venture, providing a range of operational services, working capital and seed capital investment.
Open Text launches $100M VC fund to invest in creative app development Open Text Corp. (NASDAQ: OTEX; TSX: OTC) has launched a $100-million venture capital fund focused on investing directly in entrepreneurs engaged in creative business application development. The Open Text Enterprise Applications Venture Fund, which is expected to close within the next six months, was announced concurrently with the initial close of the $300-million Northleaf Venture Catalyst Fund, a venture fund-of-funds backed by the Canadian and Ontario governments, and to which Open Text has also made a capital commitment. The company said that its new Enterprise Application Venture Fund builds on its AppWorks developer platform, established in November 2013. Based in Waterloo, Ont., Open Text is an enterprise information management and software company. 8
Private Capital § Quarter 1 § 2014
Open Text puts $100M up for enterprise apps
Bonnefield’s Fund III shoots past second close target, raises $261M Bonnefield Financial, a private equity firm that specializes in investing in Canadian farmland, has netted $261 million in the second close of its third partnership, Bonnefield Canadian Farmland LP III. The firm said the close was oversubscribed, and exceeded its original fund-raising target of $200 million. Fund III will focus on providing Canadian farmers with land-lease financing to support their growth and succession plans, as well as to help them reduce debt and improve profitability. Last July, Bonnefield completed a major agricultural land deal, acquiring assets in Dufferin County, Ont. from the The Highland Companies. With offices in Ottawa and Toronto, the firm has to date secured around 35,000 acres of farmland for farmers in Alberta, Saskatchewan, Manitoba, Ontario and New Brunswick.
Annapolis Capital sees initial close of Annapolis Investment LP VII at $152M Annapolis Capital, an investor in growth capital in the Canadian upstream oil and gas industry, has had a first closing of its seventh fund, Annapolis Investment LP VII, at $62 million, with a goal of $275 million. Founded in 2006 in Calgary, Annapolis has raised $600 million over six funds and is focused on investments in start-up and early-stage oil and gas exploration.
Onex may polish off $4.5-billion flagship fund by midyear Onex Corp’s flagship buyout vehicle Onex Partners IV LP is expected to reach a rapid close at or near its US$4.5 billion target by the middle of 2014. Onex Partners IV disclosed about US$3.1 billion commitments in a Form D filing on Dec. 16, 2013 with 38 investors participating in the offering. Among LPs participating in the fund, Maine Public Employees’ Retirement System approved a US$60 million commitment last year; the Los Angeles County Employees Retirement Association committed US$150 million to Onex Partners IV.
Fund News Waterton sees strong demand for $750M mining fund Waterton Global Resource Management has raised $300 million for its second mining and metals fund, and is expected to reach its $750 million target in the fourth quarter. The firm is anticipating a second close between $550 million and $600 million. Waterton, which is headquartered in Toronto, is targeting mostly European investors and doesn’t expect capacity for North American limited partners. The firm filed documents with the SEC in July indicating it had raised $300 million, while the firm’s debut precious metals fund closed on $200 million in 2010.
Brookfield
Brookfield
Toronto-based alternative assets manager Brookfield Asset Management announced that it has held the final close on its second infrastructure partnership, Brookfield Infrastructure Fund II, raising equity commitments totalling US$7 billion. This exceeds the fund’s original US$5 billion target. The pool, which has over 60 institutional investors, will focus on transportation, renewable power, utilities and energy assets in North and South America, Europe and Australasia. The latest partnership follows on the US$2.7 billion Brookfield Americas Infrastructure Fund LP, which closed in 2010.
XPV Water Fund II closes at $215 million XPV Water Fund II has reached a second close of $215 million early in 2014. Managed by Toronto-based XPV Capital Corp, the fund is focused on any technology or water-related business that addresses the production, management and use of water, or that improves industrial or other processes using water.
Toronto-based Northleaf Capital Partners raises $206M for secondaries fund Toronto-based private equity firm Northleaf Capital Partners has raised $206 million for its private equity secondaries fund. This figure surpasses the fund’s initial $200-million target. Northleaf Secondary Partners was launched to capitalize on investment opportunities in the current private equity secondary market.
Trez Capital closes fund IV at $91M Trez Capital announced early this year that it has had an initial closing of its fourth fund, Trez Capital Finance Fund IV LP, at $91 million. As a commercial mortgage lender, Trez Capital provides mid-market property developers with flexible short to mid-term bridge financing and is predominantly backed by Canadian institutional investors.
Georgian Partners Fund II raises $100M Georgian Partners Growth Fund II, managed by Toronto-based Georgian Partners, has raised $100 million in total in its first close. The fund, which is focused on investing in ex-
XPV II: $215M for water investment
pansion-stage enterprise software, Internet and information companies, received its lead investment from Toronto-based Northleaf Capital Partners.
Kensington Power Income Fund raises over $41M, deploys nearly half of capital
KENSINGTON smart alternatives
TM
Kensington Power Income Fund LP, which is managed by Toronto-based alternative assets manager Kensington Capital Partners, was recently closed. Launched in 2012, and focused on investing in mid-market power projects, the fund raised commitments totalling over $41 million. According to Kensington, the fund has already invested almost half of its capital in electrical generating assets in Alberta and British Columbia. Kensington plans to launch another power income fund for individual investors later this year.
JCM Capital launches PE fund targeting solar photovoltaic projects in emerging markets Canadian private equity firm JCM Capital has launched its Clean Power Infrastructure Fund, which is focused on providing construction and long-term equity financing for solar photovoltaic projects in emerging markets. The fund will invest in countries with suitable regulatory frameworks and electricity demand in Latin and South America and Sub Saharan Africa. The Toronto-based JCM said it has already secured a lead investor for the fund, which is targeted to raise US$150 million, and has obtained US$15 million in commitments that will go toward a US$50 million first closing later this year.
Covington completes merger of Covington Strategic Capital Fund and Covington Fund II The Covington Group of Funds announced late last year that the Covington Strategic Capital Fund was acquired by Covington Fund II. As part of the acquisition, SCF shareholders received Fund II shares in exchange for the SCF shares and became investors in Fund II Series I.
Private Capital § Quarter 1 § 2014
PHOTOGRAPHER: JUPITERIMAGES, TOMASSEREDA/PHOTOS.COM
Brookfield Asset Management closes $7 billion for second infrastructure fund
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› people on the move
OMERS CIO Latimer takes helm as Nobrega retires Canadian pension fund Ontario Municipal Employees Retirement System (OMERS) announced its chief investment officer, Michael Latimer, will take over as CEO of the global dealmaker when Michael Nobrega retires at the end of March 2014. OMERS, which manages the pension plan for Ontario’s public-sector municipal workers and has become a major investor around the world by virtue of its C$60 billion in net assets, said Latimer will become CEO on March 31. Nobrega has been CEO of OMERS since 2007 and has telegraphed his retirement since 2010, focusing on developing internal talent to take over the reins.
CPPIB chief investment strategist leaves for Alignvest Donald Raymond, senior vice-president and chief investment strategist at Canada Pension Plan Investment Board (CPPIB), has resigned his position effective March 31, 2014. CPPIB announced that he will thereafter assume a leadership role at Toronto-based alternative assets manager Alignvest Management Corp. as managing partner and chief investment officer. Raymond joined CPPIB in 2001 and was appointed to his current role in April 2010. CPPIB indicated that a process is currently underway to identify Raymond’s successor.
CPPIB appoints new CFO and COO The Canada Pension Plan Investment Board (CPPIB) announced new appointments to its management team. Among the changes, Benita Warmbold was named senior vice-president and CFO, to be responsible for all finance functions, while Nick Zelenczuk was named senior vicepresident and COO, to be responsible for operations, technology and planning functions.
BDC board to be chaired by Sam Duboc Sam Duboc has been named the new chair of the board of directors of the Business Development Bank of Canada (BDC). A senior private equity professional and founder, president and managing partner of Edgestone Capital Partners, Duboc has recently been the Clifford Clark Visiting Economist at the federal Department of Finance. In the latter role, he has been the federal government’s top adviser on the $400-million Venture Capital Action Plan (VCAP), announced in early 2013. BDC offers financing, subordi-
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nate financing, venture capital and consulting services to 28,000 small and medium-sized Canadian businesses.
VCAP panel chair changes to Annette Verschuren The federal Minister of Finance Jim Flaherty has named Annette Verschuren as the new chair of the Venture Capital Expert Panel. Verschuren is currently chair and CEO of NRStor Inc., a business focused on accelerating the commercialization of energy storage technologies. The panel was previously chaired by Canadian private equity professional Sam Duboc, who was recently appointed chair of the board of directors of the Business Development Bank of Canada (BDC). Established in May 2013, the panel advises the government on key issues of venture capital policy, including the $400-million Venture Capital Action Plan (VCAP), launched last year.
GE Antares lands Richard Kinlough as MD GE Antares Capital, a unit of GE Capital, recently said that it has hired Richard Kinlough as a managing director in its Toronto office. Previously, Kinlough founded and led CIT Group Inc.’s Canadian sponsor coverage team. GE Antares Capital is a middle-market lender to private equity-backed companies. Kinlough was co-president of Canadian private equity firm CCFL Mezzanine Partners prior to that firm’s acquisition by CIT Canada in 2006.
Cycle Capital recruits Roger Tambay as partner Roger Tambay has been appointed a partner at Cycle Capital Management, a Montreal-based venture capital firm focused on clean technologies sectors. Tambay has 20 years of experience with small, medium and large corporations, in a wide variety of industrial sectors. He held several positions at Eastman Chemical in Canada and the U.S. and, more recently, he was responsible for business development and operations at Balcan Plastics.
Sprott Resource brings on Michael Staresinic as CFO Sprott Resource Corp (TSX: SCP) announced this week that it has named Michael Staresinic as its new CFO. Prior to joining the firm, Staresinic was vice president of finance at Sprott Inc., and a member of the mergers and acquisitions team. The Toronto-based Sprott Resource is a private equity firm focused on investing in natural resource sectors.
Relay Ventures has promoted Alex Baker to partner. Prior to joining Relay in 2008, Baker worked as a management consultant at BearingPoint and PwC Consulting. Relay is an early-stage venture capital firm with offices in Toronto and Menlo Park, Calif. As a partner, Baker will continue to source opportunities; oversee Relay’s direct investments in a broad range of mobile payments, app and services companies; and actively participate on the boards of directors of portfolio companies.
role, he will focus on identifying and evaluating potential investments for the firm in Western Canada.
LX Ventures snags HootSuite founder as advisor LX Ventures said in late 2013 that it has named Ryan Holmes, founder and CEO of HootSuite, to its board of advisors. The appointment was effective December 9, 2013. Based in Vancouver, B.C., LX Ventures is a publicly traded accelerator that acquires, integrates and accelerates highgrowth technology companies.
iNovia moves Swan and Nijjar to partner posts
Kirchner Group adds Paul Kirkconnell
Canadian venture capital firm iNovia Capital has promoted two of its principals, Kevin Swan and Karamdeep Nijjar, to partner roles. The firm said these promotions are intended to pave the way for iNovia’s next phase of growth, support the growth of deal flow and its Canadian and U.S.based portfolio companies, which currently total 46, and evaluate over half a dozen potential exits in 2014. With headquarters in Montreal and managed capital totaling $275 million, iNovia is focused on making early-stage investments in digital media, SaaS, e-commerce and connected devices.
Paul Kirkconnell, the former executive vice president of the Business Development Bank of Canada (BDC), has joined merchant banking services firm Kirchner Group. Kirkconnell, who also has been managing director of healthcare funds at the Drug Royalty Corp., will be active in all aspects of Kirchner’s client services, including operational diagnostics, advisory, transition management, deal management and asset management. While at BDC, Kirkconnell was responsible for its venture capital business, including both direct technology investing and fund-of-funds activity.
Chrysalix attracts key execs to advisory board Canadian clean technology-focused venture capital firm Chrysalix Energy Venture Capital has appointed a new advisory board that includes Paul de Martini, former CTO of Cisco Systems; Mark Dudzinski, former CMO of GE Energy; and John Thompson, former vice president of technology and development at Teck Resources. The purpose of the board is to advise Chrysalix on sustainable innovations that address challenges facing such industries as oil and gas, electric power and mining. Chrysalix said two additional members are expected to join the advisory board within the next quarter.
Signal Hill adds VP business development in Calgary Canadian mid-market private equity firm Signal Hill Equity Partners has expanded the Calgary office it opened in May 2013 with the hire of Brent Bieber. Bieber, who previously worked in the investment banking groups of Paradigm Capital and CIBC World Markets, will assume the position of vice president of business development. In this
Investissement Québec adds head of Seoul office In conjunction with the opening of an office in Seoul, South Korea, Investissment Québec has announced that the new office will be led by Dongho Lee. A native of Seoul, Lee is a graduate of Georgetown University and boasts many years’ experience on Wall Street and at large Korean corporations, including Samsung and LG. Investissement Québec’s mission is to foster the growth of investment in Quebec, thereby contributing to economic development and job creation in every region.
Onex names David Hirsch and Tawfiq Popatia as MDs Canadian private equity firm Onex Corp. has announced the promotion of two senior investment professionals, David Hirsch and Tawfiq Popatia. Hirsch, who joined Onex in 2003 after working at J.P. Morgan Partners and CIBC World Markets, has been appointed managing director with a focus on European deal opportunities. Popatia, who worked at Hellman & Friedman and Morgan Stanley before joining Onex in 2007, has also been appointed managing director with a continuing focus on transportation-focused industries.
PHOTOS BYMACIEJ NOSKOWSKI & ZHU DIFENG / PHOTOS.COM
Relay Ventures promotes Alex Baker to partner
Private Capital § Quarter 1 § 2014 11
Private Capital Pioneer Insights An interview with CVCA’s first president, Gerry Sutton (1974 – 76) By Steve Hnatiuk, Lighthouse Equity Partners
I
n 1974, Gerry Sutton, the first president of CVCA, pulled together a fledgling industry association representing an asset class that hardly anyone had heard of. At the time, Gerry was president of the Canadian Enterprise Development Corporation. Four decades later, CVCA members collectively invest billions of dollars annually across every industry and geography in Canada, and have a reach that extends around the world. And foreign PE & VC investors flock to deals across Canada in ever-increasing numbers. I recently had the great pleasure of connecting with our first CVCA president. Now retired, Gerry reflected back and shared insights on what has changed and, very interestingly, what has not in the past 40 years of private capital in Canada.
How do you feel about your time as head of CVCA and as an active PE or VC investor in the Canadian market? Would you do it all over again? Sutton: Yes. It was an exciting time; there was never a dull moment. I met some fine people – I also met a few crooks. What is the most significant way that the PE and/or VC industry changed since you were CVCA president? Sutton: It has become much, much larger, and more involved with the business community. What were the biggest challenges our industry faced during your time as CVCA president? Sutton: The reason we formed the association was because the federal government was seriously contemplating taxing our capital gains as income – which would be the death of venture capital. Also, Revenue Canada was taking an unreasonable stance on the cost of write-offs. For example, if an investment was not publicly traded, they threatened to apply a discount of 20 per cent; if it didn’t pay a dividend, another discount of 20 per cent; if you were a minority shareholder, another 20 per cent was knocked off. 12
Private Capital § Quarter 1 § 2014
I thought it necessary to form an association of the venture capital groups at the time in order to approach Ottawa with some strength and to overcome hostility. What are your views on Canada’s largest institutional investors/pension funds establishing active direct investing programmes? Sutton: There is nothing new in that. It happened during the ’60s and ’70s but my recollection is that most of them were wound up. The problem is that, in venture investing especially, it is a small activity in a large company. It becomes an orphan – even sometimes a nuisance. What about the involvement of government(s) in the venture capital/private equity business? Sutton: Governments have got involved, but to my knowledge never successfully. What are your thoughts on the geographic scope of investing and fundraising then versus now? Sutton: I don’t think there should be any restrictions geographically, provided there is a way out. We were free to invest anywhere in Canada and also in
Pioneer Insights
“The best returns have always been from backing good people rather than good ideas. That will never change.” – Gerry Sutton the United States. In the U.S., it was usually in partnership with other groups. In this way we could keep abreast of developing technologies. We could invest in Europe, but the problem there was an exit strategy at that time. Where do you think the best returns in private capital investment will come from over the next decade? Sutton: The best returns have always been from backing good people rather than good ideas. That will never change. What advice would you give to GPs who are building their firms today? Sutton: Firstly, keep your partners informed and treat them with respect. Secondly, your reputation will spread around the financial community. Any other comments or insights you’d like to share with investors in, and influencers of, the private capital business today? Sutton: I was often asked, “What do you do when an investee runs out of money and asks for more?” We would ask ourselves two questions: Are the reasons we invested
in the first place still valid? And secondly, do we still have confidence in management? If the answers to both were “yes,” we would continue to provide support. If the answer to the second question was “no,” then we would try and bring in new management – but that was usually difficult. For a time there was a tendency to organize venture fund partnerships with a limited life, usually 10 years. To my mind, that is too short a time. The problem investments show up quickly; the outstanding successes take years to mature. Although these days, software companies seem to soar almost overnight so perhaps there has been a change. If you had it to do all over again, how might you have approached the industry differently knowing what you know now? Sutton: I would not have changed anything.
Steve Hnatiuk is chair of Private Capital magazine’s editorial board and a member of CVCA’s Government Relations Committee. Steve is managing partner of Lighthouse Equity Partners, a buyout firm focused on lower middle market businesses located in Western Canada.
Private Capital § Quarter 1 § 2014 13
THE REAL IMPACT
OF VENTURE CAPITAL ON CANADIAN COMPANIES IN 2013
2.0B
$
IN VENTURE CAPITAL (VC) WAS INVESTED IN CANADIAN COMPANIES
31% MORE
THAN THE YEAR BEFORE AND AT ITS HIGHEST LEVEL SINCE 2007
WHERE THE DEALS FLOW Over half of VC was invested in Information and Communication Technologies
54%
The least of VC dollars were invested in Life Sciences
24%
British Columbia
8% Alberta
2%
1%
ManitobaSaskatchewan
13%
Atlantic
35% Ontario
30% Quebec
Investments in Alternative and Clean Technologies
more than tripled
(from $90 M in 2012 to $324 M)
INCREASED ACCESS TO CAPITAL
FOREIGN INVESTMENT CAPITAL
ONTARIO, QUEBEC AND BC RANKED AMONG THE
OVER LAST YEAR
REGIONS FOR VC IN
MORE THAN DOUBLED (FROM $384M TO $828M)
TOP 10
NORTH AMERICA
THE AVERAGE FINANCING ROUND INCREASED
BY NEARLY 50% SINCE 2009
(FROM $3.3M TO $4.9M)
HIGH–GROWTH AND SUCCESSFUL EXITS AHEAD HOOTSUITE RAISED $171M — THE LARGEST DEAL RECORDED IN THE CANADIAN MARKET DOLLARS INVESTED IN BRITISH COLUMBIA MORE THAN DOUBLED (FROM $198M TO $478M)
2013
CANADIAN-BACKED EXITS WERE UP 19% OVER LAST YEAR THE VENTURE CAPITAL ACTION PLAN IS EXPECTED TO ATTRACT UP TO $1B IN NEW PRIVATE SECTOR INVESTMENTS
In Canada, a vibrant VC ecosystem is strongly correlated with the success of early-stage companies. Our best-in-class companies profoundly impact the local economy and are being recognized more and more by global investors for their innovation and high-growth potential.
VC BACKED COMPANIES OUTPERFORM, OUTCOMPETE AND OUTLAST VC BACKED FIRMS ›
VS
‹ NON BACKED FIRMS
STRONGER REVENUE
137%
NON BACKED FIRMS VC BACKED FIRMS
ALMOST
2.5X
56%
THE SALES GROWTH YEAR 2
YEAR 1
YEAR 3
YEAR 4
GREATER EMPLOYEE GROWTH NON BACKED FIRMS VC BACKED FIRMS
YEAR 5
51%
42%
34%
7%
4%
-4% YEAR 1
YEAR 3
YEAR 5
GREATER HIGH VALUE EMPLOYMENT AVERAGE WAGES
GROWTH IN AVERAGE WAGES
$66,000
$43,000
29%
19%
MORE INVESTMENT IN R&D
$2M
NON BACKED FIRMS VC BACKED FIRMS
$629,000 HIGHER LONG TERM SURVIVAL RATES
98% 94%
NON BACKED FIRMS VC BACKED FIRMS
MORE THAN
3X
SPENT ON R&D
NON BACKED FIRMS VC BACKED FIRMS
76%
91% 80%
61% YEAR 1
YEAR 3
YEAR 5
www.cvca.ca @CVCACanada
Driving Innovation and Growth
Established in 1998, the purpose of CVCA’s “Deal of the Year” Award competition is to promote, highlight and celebrate the achievements of CVCA member funds who have had outstanding investment successes. The selection process focuses on CVCA members with the most significant investment return realized primarily during the calendar year 2013, from January 1, 2013 to December 31, 2013. The CVCA celebrates two annual Deal of the Year award winners − one for venture capital and another for private equity.
Established in 2010, CVCA’s “Community Leadership” Award honours individual CVCA members who have given back to the community. This Award serves to highlight that, in addition to supporting Canada’s economic productivity, our members also foster strong corporate social responsibility as a foundation to building solid, vibrant communities.
Cast your ballots today! Visit http://www.cvca.ca/about/Awards.a
Cast your ballot and find the winners among us! Deadline is Friday, April 4th, 2014.
Established in 1992, CVCA’s “Entrepreneur of the Year Award” promotes, highlights and celebrates the achievements of Canadian entrepreneurs who lead private equity or venture-backed Canadian companies (funded by CVCA members). The selection process focuses on individuals whose entrepreneurial spirit, drive and success personify the qualities that all venture capital or private equity investors seek to find in their portfolio companies.
NEW IN 2014! CVCA is pleased to announce that it has partnered with BDC to launch the inaugural BDC Innovation Award. This new award will recognize an early-stage Canadian company that has demonstrated the ability to bring innovation to market, reshaping a sector or industry in a new or unexpected way. Applications for all awards close at midnight EST on Friday April 4, 2014. All winners will be announced at CVCA’s 2014 Annual Conference taking place May 20-22, 2014 at the Westin Ottawa.
aspx or send a nomination request form to awards_prix@cvca.ca
Foreign Investment Another year of surprises By Michael Coates, Hill+Knowlton Strategies Canada
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[Kevin] Lynch points out that it is not the ownership of capital that the government should be primarily concerned with, but the behaviour of capital.
I
t’s been just over a year since Prime Minister Stephen Harper revised Canada’s foreign investment policy with new rules governing state-owned enterprises (SOEs) and higher review threshold limits. Shortly after those changes were announced, I wrote an article in which I concluded, “Each new [foreign] acquisition will likely write a new chapter in [the] unpredictable evolution of Canada’s investment policy.” Indeed, this continues to be the case. There have been three major developments over the past year that have driven a further evolution in Canada’s investment policy: the decline in Chinese investment since the CNOOC Limited-Nexen transaction; the use of the national security test to screen out or deter unwanted investors; and a further adjustment to Canada’s foreign investment review thresholds.
The China question The growth of Chinese foreign investment is raising public policy concerns around the globe as democratic countries try to reconcile the need to develop Chinese trade and investment relationships with the politics of working with a regime where the rule of law is secondary to party policy. As The Economist noted last year, since the 2008 global financial crisis, all countries seem to be putting up barriers to trade and foreign investment. But it is Canada, the United States and Australia who seem to have the greatest concerns about China. Private Capital § Quarter 1 § 2014 19
According to the Bank of Montreal, Chinese SOEs currently own 10 per cent of the total reserves Canada’s oil sands, with other SOEs accounting for an additional two per cent. Some critics of the new SOE guidelines have publically expressed concern that restricting SOE enterprises has cooled potential Chinese investment. Former Industry Minister Jim Prentice, now vice chairman of CIBC, said in a speech last fall that large SOEs have emerged as a dominant form of international capital, especially in the energy sector, and Canada should not be intimidated by their presence. These views may not be shared unanimously. In implementing the new SOE guidelines, the government was responding to vocal domestic concerns raised by industry, academia and NGOs, and in the media. A powerful lobby of Canadian oil interests encouraged the federal government to let the Nexen-CNOOC deal proceed, but only if restrictions on further SOE investment were implemented. Some in Canadian industry claimed to be very concerned about what they saw as the capital cost advantages SOEs have over the private sector. Others said that keeping SOE investment out makes it easier for Canadian companies to acquire properties. 20
Private Capital § Quarter 1 § 2014
A voice of reason in this debate has been Kevin Lynch, former clerk of the Privy Council and current vice chairman of BMO Financial Group. Lynch points out that it is not the ownership of capital that the government should be primarily concerned with, but the behaviour of capital. For example, to date, CNOOC has kept every promise it made to the Canadian government, including obtaining a listing on the TSX despite being very thinly traded. Contrast this with U.S. steel, which – after making explicit employment and operational undertakings to the federal government when it acquired Stelco – closed most operations within a year, settled a messy lawsuit with the government and announced last fall that it was permanently closing its Canadian operations. Meanwhile, the Chinese government is moving to address growing barriers to outbound investment by SOEs and is countering perceptions of capital cost advantages by tacking additional taxes onto SOE profits. By 2020, Chinese SOEs will be expected to hand over 30 per cent of their profits as dividends to the central government. Private-sector business will also be given greater opportunity to invest in SOEs and do business in areas dominated by them.
National security test The government started using “national security” in earnest as a screening mechanism for foreign investment in 2013, perhaps in part because it has the added benefit of not requiring the government to provide any specific reasons for its concerns. In a much-discussed case last fall, the government formally rejected the acquisition of the Allstream Division of Manitoba Telecom Services Inc. by the Egyptian investment group Accelero Capital Holdings. From what we can decipher from Minister James Moore’s statement on the matter, the government was concerned about the national security implications of a foreign buyer operating a national fibre network that provides critical telecommunications services to the Government of Canada. Soon after that, the government also made it clear that it was not comfortable with a possible sale of BlackBerry to the Chinese computermaker Lenovo or any other stateinfluenced acquirer. What was noteworthy here is that the government opined on a potential investor before it even had the opportunity to submit an application. The upside for the government and the aspiring investor, however, was that both were
Foreign Investment
Based on country of origin, the practical implication of this policy change is that, within a few years, the vast majority of foreign investments will be executed without a review.
able to avoid a potentially embarrassing and protracted public debate. Expect to see – or, rather, “not see” – more of this.
Adjusting foreign investment thresholds On a more positive note, 2013 ended with an important liberalization of the threshold level at which all investments by non-SOEs are reviewed, due to looming provisions of the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU that will affect other free-trade agreements. As part of CETA, Canada agreed to increase the foreign ownership threshold limits for all European transactions to C$1.5 billion over the two years after the agreement comes into effect. Grandfathering provisions in all of our major free-trade agreements, including NAFTA, mean our other favoured trading relationships will automatically be granted the same privileges. Significantly, however, SOE thresholds are not affected and remain fixed at $344 million. Based on country of origin, the practical implication of this policy change is that, within a few years, the vast majority of foreign investments will be executed without a review.
A question of balance The recent controversies surrounding foreign investment have proved embarrassing for both the government and prospective investors as the current Investment Canada review process, with its legislated timetables, can turn a foreign investment into a “competition” that media love to cover. Companies now feel compelled to increase the types of undertakings they are making to demonstrate their commitment to the Canadian economy, and indeed to society. These often go far beyond capital and employment guarantees and now commonly include listing on the TSX, establishing regional headquarters or world product mandates, and making philanthropic donations – all in an attempt to pass a public litmus test about the benefits of foreign ownership. The contracted duration of these undertakings is also lengthening. None of this is helpful in demonstrating that Canada welcomes foreign investment. Clearer rules may provide less risk to investors, but the government believes it is more politically vulnerable if transactions like the PotashCorp or CNOOC deals capture the attention of the public. Looking at the policy
changes overall, it is apparent that any foreign transaction of significant size will continue to carry a high level of political risk if it becomes part of public discourse. This is particularly true if the transaction is by a SOE, and even more so if it is a Chinese SOE. We can also expect the continued use of the national security test to screen out unwelcome investors owing to the lack of justification required from the government. There is unlikely to be any deviation from this tactical approach to policymaking as long as the current government is in power. The prime minister is clear: he wants flexibility in the rules. The question remains, however, whether there is enough predictability in the rules to entice foreign investment, particularly in the energy patch. Michael Coates is chairman and CEO of H+K Strategies Canada. An experienced strategist, he has extensive experience counseling companies on political risk and designing and executing public affairs and public relations campaigns for complex transactions. He is also a member of the board of Candu Inc.
Private Capital § Quarter 1 § 2014 21
Private Equity Impact Report
Having the Conversation What companies crave from private equity buyers By Tim Kiladze, The Globe and Mail
W
hen Cody Church gets serious about buying a company, he always runs through what seems like the simplest of tasks. Early in the negotiations, just as he and his potential partners are getting to know each other, Church outlines – in as much detail as possible – who will play which roles in the new relationship. While a broad division of labour is generally well understood from the get-go, many of the finer details fall into a grey area. Without a conversation, it’s often unclear who will serve as the contact with the commercial banker, or who will pitch potential business partners as the company restructures or grows. Defining such roles so early on can sound silly, but 16 years in the business taught Church, who co-founded TriWest Capital Partners in Calgary, that doing so is absolutely crucial. Without the conversation, there can be huge problems down the road because the human ego is a tricky beast. “Knowing who’s going to do what is critically important,” he said.
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Corporate executives resoundingly agree. Recently, the CVCA commissioned The Conference Board of Canada to conduct research on the ways in which private equity backers enhance the companies they buy. The resulting report – derived from interviews with executives from 35 companies that have, or had, private equity backers – offered critical insights into precisely what portfolio companies want and appreciate from fund managers. High on that list was a thorough conversation about the precise division of labour. Other preferences include freedom to run the day-today operations, as well as a detailed breakdown of how the private equity process works, including guidance on when an exit can be expected. What follows is an explanation of these insights, with added commentary from veteran fund mangers.
agers: don’t be shy about offering yours. However, limitations are necessary. Management teams are often so preoccupied with putting out daily fires that real, meaningful change can take time – and it probably won’t come easily, a fact private backers tend to gloss over. That doesn’t mean fund manages have to rest on their laurels. But some compassion goes a long way. “If it was easy, your three competitors would have already done it,” said Church. “Moving an organization and building a great company is very difficult.” Even the way in which you deliver messages can be critically important. Being suggestive, rather than demanding, can work wonders. Instead of declaring, “We have to replace X this year,” ask, “What do you think about X?”
Know your limits
Have the hard conversations early
Almost unanimously, the chief executive and financial officers who were interviewed acknowledged that they lacked strategic focus and financing smarts. Their message to fund man-
Sometimes the original management team just won’t cut it. “You can have all the strategy that you want… but if you don’t have the
“You can have all the strategy that you want… but if you don’t have the right team, then creating value becomes very difficult.” “You better make sure that what you’re telling us is true,” is what he tells potential partners early on. Once due diligence kicks into high gear, he adds, it will only get ugly if any cover-ups are revealed.
Outline a clear division of roles
right team, then creating value becomes very difficult,” said Joe Lucke, co-founder of Vancouver’s Lighthouse Equity Partners. When a change is necessary, it can be difficult to strike up the conversation, but the longer you wait to have it with your new partners, the harder it will be. And believe it or not, companies appreciate a head’s up, rather than being blindsided with news after a partnership has already been inked. Even when personnel overhauls aren’t on the agenda, companies stressed that they value detailed procedural chats early on. When does an exit normally come? What happens if the market turns sour? For most sellers, the buyout is the only one they’ll be a part of in their lifetime. Coach them through it, and set expectations. It can even pay to be blunt – especially when dealing with entrepreneurs. Elmer Kim, managing director at Roynat Equity Partners, often deals with this set of owners because his firm buys companies that have $5 million of EBITDA or under. He’s learned to deliver a harsh, but necessary, message.
No matter how simple it seems, buyers often refrain from outlining roles at the outset of the relationship. That’s a big mistake. If you wait until you start to work with a company, “it’s not as easy as it sounds,” according to Church. Without a clear understanding of who will do what, egos can be easily bruised – often by accident. An example: private equity funds typically borrow from the same lender for a few different acquisitions. Sometimes a fund manager will chat with his or her commercial banker about a certain portfolio company, and over the course of the conversation end up addressing all of the outstanding loans, affecting multiple firms. If chief financial officers don’t know from the beginning that their fund manager will handle the banking relationship, they can feel like important financial decisions are being made behind their backs – even if that was never the intention.
Teach them to market themselves Executives interviewed by The Conference Board of Canada made it crystal clear that they not only struggle to understand how the private equity process works, they often don’t even know who potential buyers are. Quite simply, they need all sorts of advice. As a portfolio manager, taking the time to offer that advice can be frustrating because you want to strike deals, not hold hands. But keep in mind that a company you help pre-
pare for a buyout could always look like a better opportunity in a few years’ time. Because Kim deals with entrepreneurs who rarely have succession plans in place, he has to spend a chunk of his time dishing out advice. Over the years, he’s found a few key things that sellers often need to hear: plan an internal transition three to five years in advance, because if you retire and all your clients depart with you, there’s no business to buy; and hire a sophisticated adviser, because that way when you do have an attractive business to sell, the adviser can independently assess whether or not the potential buyer’s requests are reasonable. Fund managers can also find another key lesson on this front. If companies admit they’re hard to find and don’t know where to search for backers, buyers should understand the need to become experts in specific markets, otherwise they’ll never know what’s available for sale. Lucke found that a geographic focus works best for his firm, which is devoted to deals in Western Canada. If something comes up in Saskatchewan, not only will he hear about it, but he also has a board that understands the market and can help determine whether there’s much value in the opportunity. Without the expertise, you can be left guessing, he says. If someone on the other side of the country approaches you with a deal, you have to wonder: “Why did I get the call? Are they having trouble selling the business?”
PHOTOGRAPHER: STOCKBYTE/PHOTOS.COM
− Joe Lucke, Co-Founder, Vancouver’s Lighthouse Equity Partners
Tim Kiladze covers banking and capital markets for The Globe and Mail. Before joining the Globe, he worked on Bay Street in investment banking and fixed-income sales and trading.
Private Capital § Quarter 1 § 2014 23
Private Equity Sponsors Accessing the Canadian Debt Market Contrasting mid-market lending environments – 2007 versus 2014
Risky Business
Percentage of U.S. buyouts that left target companies with debt greater than six times the company’s annual earnings* 60%
By Richard Kinlough, GE Antares Capital
P
rivate equity sponsors looking to finance new acquisitions in the Canadian and U.S. midmarkets have historically faced dramatically different terms and conditions in these respective geographies. Material differences have existed through past cycles, from the very frothy 2005 to 2007 period, before the 2008 “correction,” to the more sober 2008 to 2010 era and back to a more heady 2013-14 market. So, what is similar and what is different today than in the 2007 precorrection days? We all remember the borrowerfriendly times back in 2007, when sponsor-backed transactions in the U.S. buyout market attained and quite often – as the graph below highlights – surpassed leverage of 4.0 times senior / 6.0 times total. These lofty leverage levels more than offset the increase in purchase price multiples, resulting in diminishing equity contributions, some as low as 20 per cent of the total capital structure. Senior pricing in the U.S. mid-market at the time was at 10-year lows, at times dropping to the L+250 levels. With metrics such as these, sponsors were having a field day. Total U.S. mid-market sponsor loan volumes, according to S&P Capital IQ, ranged
24
Private Capital § Quarter 1 § 2014
between $21 billion to $25 billion during the 2005 to 2007 period. In late 2007, the tide began to turn. With the proliferation of sub-prime mortgages, securitizations of said mortgages, the bursting of the housing bubble and the collapse of hedge funds managed by Bear Stearns, the U.S. market began to “correct,” marking the beginning of the sub-prime mortgage crisis. Loan volumes for sponsor-backed mid-market transactions dropped materially from $20.9 billion in 2007 to $5.0 billion in 2008. Pricing jumped appreciably and borrower-friendly structures all but disappeared. Liquidity became the top priority and default rates were back on the radar screen. The subprime mortgage crisis turned into a full-blown financial crisis, signaled by the fall of Lehman Brothers. Midmarket leveraged lending in the U.S. all but dried up, falling to $2.2 billion in 2009. Total leverage dropped below four times and pricing rose to L+600 or more. In Canada, the mid-market in 2007 never got as aggressive as in the U.S., likely the result of a more conservative banking system. Total leverage never reached the sixes, peaking but not exceeding five times total, with senior pricing in the BA+250 to 300
40
27%
20
2000 ‘02 ‘04 ‘06 ‘08 ‘10 ‘12 *Earnings before interest, taxes, depreciation and amortization Source: S&P Capital IQ LCD The Wall Street Journal
range. Because the Canadian midmarket was not as aggressive as in the U.S., the correction was not as severe. By the end of the fourth quarter in 2008, pricing increased 100/150 bps to BA+450 / 500, while leverage came down a turn to around 2.0 times senior / 4 times total. One would wonder if the cycles go on repeating the highs and lows caused by similar market conditions experienced in the past. What is different about this 2013-14 market? There are notable differences that are impacting both markets: ›› Unprecedented regulatory pressures south of the border are seeking to deter behaviour seen as potentially harmful to the broader financial system. As reported in a recent Wall Street Journal article1, “the regulators demanded banks comply with guidance
rent deals needing to be meaningfully higher, ranging from 35 per cent to 50 per cent of any given capital structure.
Debt
us optimistic the next cycle is still years away and will be far more moderate.
References The current takeaway should be that the Canadian and U.S. mid-market buyout environments today are very similar to one another. We expect banks will ultimately maintain discipline, making deals leveraged greater than six times the exception compared to the norm in 2007. Robust liquidity levels present in the market today, however, may spur non-bank lenders to be more aggressive as they chase attractive yields. While market participants typically have short memories, regulatory pressure, higher levels of contributed equity and an economy which is far from overheating make
[1.] Wall Street Journal, Jan. 21, 2014 article by Gillian Tan
Richard Kinlough is managing director at GE Antares Capital, a unit of GE Capital. GE Antares Capital is a leading middle-market lender to private equity-backed companies, and is active across a wide range of industries. Prior to joining GE Antares Capital, Kinlough lead CIT’s Canadian sponsor coverage team for seven years. Previously, he was co-president of CCFL Mezzanine Partners for 14 years, where he invested $370MM of subordinated debt in 25 Canadian middlemarket companies.
PHOTOGRAPHY: LIGHTSPRING/SHUTTERSTOCK.COM
published in March 2013 saying they should avoid financing takeover deals that involve putting debt on a company of more than six times EBITDA.” This action was likely motivated by evidence highlighted in the graph on the previous page. “In 2013, the percentage of new U.S. leveraged buyouts with a Debt-to-EBITDA ratio above six times was, at 27 per cent, the highest it has been since 2007, when the percentage reached 52 per cent, according to S&P IQ LCD.” The regulators seem intent on nipping overly aggressive lending practices in the bud. This will impact both the U.S. and Canadian buyout markets. ›› This is particularly meaningful given that the border, for all intents and purposes, is not much of a factor for U.S. and Canadian private equity firms looking to buy companies in both jurisdictions, and financing these buyouts from Canadian and U.S. lending sources. The material differences in lending terms and conditions that existed in the previous cycle have nearly evaporated. The exception to this convergence is smaller, mid-market all-Canadian bank club deals that may be one half to a full turn of leverage lower than larger mid-market PE transactions, where Canadian and U.S. lending sources are needed to fill a financing program. In the former category, recent all-senior financings satisfied by Canadian bank clubs came in at 3.5 to 4.0 times leverage, and priced in the BA+ 325 / 375 range. On recent larger, broader financed deals, incorporating components of senior and junior capital, leverage nearly reached U.S. levels at 3.75 times senior by 5.5/5.75 times total, with pricing at or slightly above BA+400. ›› A further factor bringing the terms and conditions of the two geographic markets in closer proximity, and different from the previous cycle, is the amount of equity from PE sponsors in cur-
Private Capital § Quarter 1 § 2014 25
Retail
Implications for Canada’s retail venture capital industry By Jenifer Bartman, Jenifer Bartman Business Advisory Services
26
Private Capital § Quarter 1 § 2014
The 2013 federal budget announced the progressive elimination of the LSVCC tax credit program over 2015 to 2017, leaving an asset class that once raised billions with an uncertain future.
R
etail venture capital in Canada, where tax credit eligible money is raised from individual investors, has been a controversial topic over the years. Since the launch of the first Labour Sponsored Venture Capital Corporation (LSVCC) in the early 1980s, retail funds appeared across the country, providing investors with access to federal and provincial tax credits and investing capital into young companies seeking to drive Canada’s innovation economy forward. With the announcement of the “Sunset Clause” in Ontario in 2005, eliminating the provincial tax credit for retail funds over a five-year period and the significant decline of fundraising levels in the aftermath, many were left wondering what the future might hold. The Venture Capital Action Plan (VCAP) initially arrived on the scene as part of the 2012 federal budget, allocating $400 million in new capital over a seven to 10 year period, with the objective of attracting an additional $800 million from the private sector. The 2013 federal budget announced the progressive elimination of the LSVCC tax credit program over 2015 to 2017, leaving an asset class that once raised billions with an uncertain future. With limited venture capital dollars being raised in recent years and a lack of specific details around how and when the bulk of VCAP dollars will flow, there is a climate of uncertainty around what the impact might be on VC funds and, ultimately, the companies in which they invest. Reflecting on an asset class that has been a part of Canada’s venture capital landscape for 30 years, opportunities for involvement in the future may become apparent, as further details around VCAP come to light.
The good Canadian retail venture capital has made a significant contribution to the financing of Canada’s early stage companies, including: ›› In terms of investment, from 1996 to 2012: Retail venture capital funds invested $7.8 billion into 2,419 Canadian companies, representing 53 per cent of all VC-backed companies in Canada at the time1 In technology sectors alone, retail funds invested $5.5 billion in 1,190 companies, or 45 per cent of all Canadian VC-backed companies at the time1 ›› In terms of exits, from 1999 to 2013: (i) of the 29 companies that exited by sale with a purchase price in excess of $200 million, 19 were backed by retail funds; and (ii) of the 37 companies that undertook an IPO in excess of $30 million, 22 were backed by retail funds1 Over this timeframe, it stands to reason that the level of fund manager expertise was increasing, as part of the typical growth and development of a young industry. This is reflected in the trend of shifting the investment strategy to focus on later stage co-investment and investing indirectly in specialized private sector venture capital funds, thereby becoming a supplier of capital to the broader VC industry. As an example, Quebec retail funds have committed $830 million to 59 private independent funds, of which 29 are based in Quebec, 10 in the remainder of Canada and 20 in international locations.3 Retail venture capital funds have played a key role in generating inPrivate Capital § Quarter 1 § 2014 27
Retail vestment in areas that are typically underserved. As an example, retail funds in Saskatchewan have invested an average of $80 million per year over the last three years and $600 million in 193 companies since inception, while leveraging significant co-investment from outside of the province. Saskatchewan’s residents and economy have benefitted, in terms of companies being able to remain in the province and the employment that has been generated as a result.2
Retail venture capital funds have played a key role in generating investment in areas that are typically underserved. The criticisms Although varying themes may exist, criticism of retail venture capital funds includes poor performance levels, inappropriate structures and governance models, fund managers lacking the necessary expertise and funds being too small to provide a sufficient amount of capital to support the developmental needs of early stage companies. Research into these areas, among others, indicates that although there is room for improvement, a number of the typical criticisms may not be entirely valid (and, at a minimum, are outdated). Consider the following: ›› Although the performance of Canada’s retail funds has been poor, it has been comparable to the rest of the Canadian venture capital industry. The net 10-year return as of June 30, 20054 for retail funds was -1.4 per cent, compared to private independent funds at -3.9 per cent, other captive funds at -3.6 per cent and an overall industry return of -3.0 per cent. The issue of poor performance is not due to the retail sector alone, but rather is driven 28
Private Capital § Quarter 1 § 2014
by broader factors, including timing, fund size and a lack of experienced fund managers during the period.5 ›› Given that the Canadian venture capital industry is significantly younger than that of the U.S. and Europe, it is not entirely surprising that the level of experience and expertise among fund managers would require additional development. This issue, however, is not unique to the retail segment, as other venture capital funds in Canada were arguably facing the same challenges, especially back in the 1980s and ’90s. ›› The structure and governance model of some retail funds may have been less than ideal, in terms of areas such as fee arrangements and independence. Although this criticism should not be generalized to all retail funds, even a limited incidence of this type of weakness can reflect poorly on a broader group. ›› Although some retail funds have been challenged by a lack of size and ability to provide the degree of capital that early stage companies often require in order to fully develop, research has indicated some improvements in this area. In addition, considerable consolidation occurred in the industry several years ago, reducing the number of small funds. Despite the foregoing, the retail venture capital industry has been challenged by an overall decline in appeal from the channels in which capital is raised, a situation that has been difficult to overcome. The reality of this type of circumstance is that it can be difficult to find a way forward, regardless of positive achievements and the presence of change.
The future It’s no secret that Canada is significantly underserved in terms of venture capital, lagging behind that of key global markets. Early stage companies that seek to drive the innovation that Canada requires in order to be globally competitive have a criti-
cal need for financial support, particularly in terms of venture capital. Under the circumstances, Canada needs more venture capital, not less, so it’s important that new initiatives such as VCAP truly represent an incremental source of capital, particularly given the phase out of retail tax credits. Retail venture capital funds have demonstrated the ability to support private (non-retail) funds, invest in and play a key role in developing early stage companies and effectively benefit regions that are typically underserved. The opportunity to work in concert with VCAP in some manner seems worthy of consideration, to preserve and continue to grow these important strengths. Funds that have had some success and continue to have the opportunity to reinforce their achievements through good performance may be well positioned for collaboration going forward. Change and evolution are often two-fold, where the increase in ability that is gained through experience raises the opportunity to develop and implement strategies that better serve the future. This occurs in many industries and is a necessary part of growth. Blending the best of both worlds into the future may be an important step in moving Canada’s venture capital industry forward as a whole.
References [1.] Thomson Reuters [2.] Thomson Reuters and Saskatchewan retail funds [3.] Retail Funds and Teralys [4.] Represents the only hard data that compares retail venture capital with the rest of the Canadian venture capital industry undertaken by Thomson Reuters in 2006 for the CVCA. [5.] Review of Main Criticisms Concerning VC Investment by Canadian Retail Funds (G. Durufle, 2013)
Jenifer Bartman, CA, CMC, is the founder and principal of Jenifer Bartman Business Advisory Services. An executive in the venture capital industry for over nine years, she now works with companies in transition, including those seeking early stage financing.
VC Impact Study
VC is a Catalyst for High Growth A study conducted by Industry Canada and Stats Canada confirms the value of VC-backed firms By Gilles Duruflé, Canada’s Venture Capital and Private Equity Association (CVCA)
Do VC-backed firms outperform? A simple question, difficult to answer Venture capitalists claim that they play an essential role in the economy by selecting, financing and adding value to high growth potential companies, generating superior growth, high quality employment and innovative R&D intensive activity. Is this true? Do VC-backed companies really outperform comparable non VC-backed companies? This fundamental question has been asked all over again in most OECD countries and series of studies have tried to answer it1. There are obviously great successes of Canadian VCbacked companies, such as Smart Technologies, Q1 Labs, Enobia, SXC Solutions and possibly Hootsuite, to name a few. But does this mean that on average the whole portfolio of VC-backed companies outperforms other comparable companies? Answering this question based on robust data and solid methodology is not easy for the following reasons: 1. Following VC-backed firms over time is not easy: firms may change names, disappear or be acquired; 2. Obtaining detailed economic data on these firms (employment, revenue, sales, earnings, assets, R-D spending) is not easy as most of these firms are still private; 3. Defining a set of comparable firms and obtaining data on them is not easy as most of these firms would also be private and there are no accessible databases with
detailed economic information from which one could select them. To try and address these challenges, a first generation of studies, generally sponsored by industry associations, has relied on surveys of VC-backed companies, with the help of association members. The study published by CVCA in 2009, as most studies available at that time, was of this kind. These surveys deployed a lot of effort to retrieve information and were conducted in the most possible rigorous way. Nevertheless, they faced some limitations: ›› They cannot be exhaustive (response rates are usually 15 to 30 per cent), nor randomized, and responses could be subject to various biases, most notably survival biases (i.e. there is a good probability that failing companies will be underrepresented) ›› Responses are self-declaratory, so their quality and accuracy cannot be controlled ›› In order to obtain responses, these surveys ask for only a limited set of variables – usually employment and revenue or sales, for a limited number of years (usually two, from beginning to end) In addition, as they do not have access to detailed data on a set of comparable companies, these studies only produce either gross impacts or comparisons with statistics Private Capital § Quarter 1 § 2014 29
of sectors of the economy: ICT, life sciences or even the whole private sector – which are not really comparable. This does not mean that these studies were worthless. Their results were meaningful, but there remained some uncertainty concerning their accuracy and the margin of error surrounding them. The new methodology developed for the present study on the performance of Canadian VCbacked companies is clearing this uncertainty, and the good news is that it confirms the results of the previous study.
A rigorous methodology backed by Statistics Canada databases and state-of-the-art econometric analysis In order to avoid these pitfalls, the study recently released by CVCA and Industry Canada2 relies on a totally different approach3: starting from the list of VC-backed companies present in the Thomson Reuters database, (i) it linked them with the different databases run by Statistics Canada which include the Corporate Income Tax Returns (T2), Statement of Remuneration Paid (T4) and the Business Registry (BR), (ii) it did a thorough longitudinal and exit analysis in order to be able to track companies over time and (iii) it built a subset of VC-backed companies for which it had detailed data over five years and was able to match them with comparable companies based on industry, age, total assets, sales, employment, wages, retained earnings, revenues, net income, R&D expenditures, whether the firm received IRAP funding and whether the firm was an R&D performer. With such a methodology: ›› There is no respondent bias ›› Data is detailed, longitudinal and accurate, based on the robustness of Statistics Canada databases ›› VC-backed companies are compared to a sample of comparable companies Exhibit.1: Average Revenue Growth
Exhibit.4: Average Asset Growth
30
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›› The data set is robust and large enough to apply sophisticated econometric analysis ›› There cannot be any temptation of massaging the results as, for strict confidentiality reasons, Statistics Canada runs the computation and does not give any access to individual data
VC-backed firms do outperform by a wide margin The econometrical4 study compared the growth rates of VC- and non VC-backed companies over periods of one, three and five years after the first VC investment. Results are statistically significant5 and speak loud and clear: VCbacked companies outperform by a wide margin as highlighted by exhibits 1 to 6. ›› Strong impact on economic growth as measured by growth in revenue, sales and assets: over five years, VC-backed companies grew their average sales by 137 per cent and their average assets by 51 per cent vs. 56 per cent and 1 per cent respectively for non-VC backed companies (exhibits 1, 2 and 4); ›› Strong impact on employment: VC-backed companies’ average employment grew by 51 per cent over a five-year period vs. 4 per cent for non VC-backed companies. In addition, the average wage grew faster in VC-backed companies (29 per cent over five years) than in non VC-backed companies (19 per cent): VCbacked companies generate more jobs and better paid jobs (exhibits 3 and 5). ›› Positive impact on R&D: VC-backed companies’ average R&D expenditure grew by 25 per cent over a oneyear period vs. 9 per cent for non VC-backed companies (exhibit 6).
Exhibit.2: Average Sales Growth
Exhibit.5: Average Wage Growth
Exhibit.3: Average Employment Growth
Exhibit.6: Average R&D Expenditure Growth
VC Impact Study They represent a significant part of the economy 2,762 companies were identified in the Thomson database as VC-backed companies that received a VC investment between 1990 and 2009. Out of these, 1,545 could be linked to the Stats Canada databases and were part of the Master Research Database of VC-Backed Firms that was set up for the study. 675 of these companies were still operating as independent companies in 2009 and provided their number of employees through the corporate income tax filings. These 675 companies had 45,570 employees in 2009: 22,177 in ICT (9 per cent of total ICT employment in Canada), 3,011 in life sciences and 20,382 in other sectors. These numbers underestimate the total footprint of VCbacked companies in the Canadian economy, as only 1,545 companies out of 2,762 are part of the Master Research Database.
Successful collaboration with Industry Canada and Statistics Canada Last but not least, it is worth highlighting the very successful collaboration between Industry Canada, Statistics Canada and CVCA that made this study possible. From different angles, CVCA and Industry Canada both wanted to test the claim that venture capital industry is a catalyst for high growth and for that reason deserves a support from government until its funding ecosystem becomes truly sustainable. Industry Canada set up the team for this study and provided the access to Statistics Canada’s databases. CVCA and Statistics Canada were part of the steering committee and provided advice along the process. The answer is clear: yes, the venture capital industry is a catalyst for high growth; VC-backed companies outperform comparable non-VC backed companies by a wide margin.
These results confirm those from previous studies
References
These results are similar to those obtained in the U.S. with a similar methodology6, not only in terms of direction (VC-backed companies outperform) but also in terms of order of magnitude (large). Interestingly enough, they also confirm the results of the previous CVCA survey-based study on the impact of venture capital on the Canadian economy that was conducted in 20097. For reasons listed above, this study focused only on sales and employment and its results were similar in the orders of magnitude for sales and employment average annual growth rates of VC-backed companies (tables 1 and 2).
[1.] See, for example, in Canada, the U.S. and the U.K.: ›› CVCA, “Why Venture Capital is Essential to the Canadian Economy – The Impact of Venture Capital on the Canadian Economy”, 2009 ›› NVCA, “Venture Impact – The Economic Importance of Venture Capital Backed Company to the US Economy”, Edition 6.0, 2011. This study is updated every two to three years ›› BVCA, “The Economic Impact of Private Equity in the UK”, 2007 ›› BVCA, “Exploring the success of venture capital-backed companies”, Experian, 2012 [2.] The Performance of Canadian Firms that Received Venture Capital Financing, Industry Canada, CVCA, June 2013 [3.] This approach took inspiration from the methodology first developed by a team led by Harvard’s Josh Lerner for the World Economic Forum (2008, 2009 and 2010) to assess the economic impact of private equity. This methodology links PE databases to the longitudinal database of the U.S. Bureau of Census in order to retrieve detailed information on buyout companies and to pair these companies with non-PE backed companies that were comparable at the time of investment. It was then replicated by other US academic studies. [4.] The construction of the data set and econometrical study were conducted by a team of Industry Canada economists in collaboration with Statistics Canada: Ryan Kelly and Hancook Kim, Venture Capital as a Catalyst for High Growth, Industry Canada, Economic research and policy branch, Working paper 2013-01 [5.] Results were positive but not statistically significant for average wage growth over a three year period and for R&D expenditure growth over three and five year. All other results are both positive and statistically significant. [6.] Manju Puri and Rebecca Zarutskie, “On the Lifecycle Dynamics of Venture-Capital- and Non-Venture-Capital-financed Firms”, NBER Working Paper No w14250 [7.] Gilles Duruflé, et al. Why Venture Capital is Essential to the Canadian Economy: The Impact of Venture Capital on the Canadian Economy, Canadian Venture Capital and Private Equity Association (CVCA), 2009.
Table 1: Comparison between the 2013 and 2009 studies Average annual growth rates: employment 2013 Study
VC-backed companies (%)
After 1 year
34.4
6.6
After 3 years
12.3
-1.2
After 5 years
8.5
0.7
2009 Study
VC-backed companies (%)
2003-2007 (4 years)
17.1
Control group (%)
Canadian private sector (%) 1.9
Table 2: Comparison between the 2013 and 2009 studies Average annual growth rates: sales 2013 Study
VC-backed companies (%)
After 1 year
48.7
2.2
After 3 years
26.0
13.8
After 5 years
18.9
9.3
2009 Study
VC-backed companies (%)
2003-2007 (4 years)
32.0
Control group (%)
Canadian GDP (%)
Dr. Gilles Duruflé is an independent consultant advising venture capital and private equity funds, institutional investors and governments. He is also executive and vice president of the Quebec City Conference and president of its Public Policy forum on Venture Capital and Innovation. He is a vice president of Canada’s Venture Capital and Private Equity Association (CVCA).
6.0
Private Capital § Quarter 1 § 2014 31
You Need CVCA CVCA Needs You About CVCA The CVCA was founded in 1974 and is the association that represents Canada’s venture capital and private equity industry. Its members are private equity and venture capital firms and other organizations that manage pools of risk capital designated for investment in venture capital, buyouts and mezzanine funding and other forms of private equity in Canada. With over 2,000 members, the CVCA represents the majority of Canadian organizations who are active in venture capital and other forms of private equity invested in Canada-based companies. CVCA’s members manage over $105 billion.
Benefits The principal benefit of belonging to the CVCA comes from adding your voice to setting the agenda for the only organization in Canada solely dedicated to pursuing growth opportunities for the Venture Capital and Private Equity industry as a whole. As a highly regarded, professional organization, the CVCA includes the large majority of industry participants – private and public sector firms as well as professional advisors. CVCA’s members actively collaborate to increase the flow of capital into the industry and expand the range of profitable investment opportunities. This is accomplished by CVCA undertaking a wide variety of initiatives, ranging from developing comprehensive and accurate performance and valuation statistics to promoting the industry’s interests with governments and regulatory agencies.
Specific benefits include ›› ›› ›› ›› ›› ››
Government influences and access Networking Events Publications and research reports Recognition Array of services and programs
Membership types Full Member – Canadian organizations with risk capital funds under management Partners – Service providers and advisors International investor members Industry affiliates
For pricing information and membership application forms, visit www.cvca.ca/membership 32
Private Capital § Quarter 1 § 2014
MEMBERSHIP INQUIRY FORM I’m interested in learning more about becoming a member of CVCA. Name: Address: City: Province: Postal Code: Telephone: Email: Which membership category would you like to receive information on? ❑ Full member ❑ Partner ❑ International Investor Member ❑ Industry Affiliate Please complete this form and mail to: Exchange Tower, 130 King Street West, Suite 2260, P.O. Box 487, Toronto, Ontario, M5X 1E5, Canada or fax it to (416) 487-5899.
Contact us: P: 416-487-0519 | F: 416-487-5899 Email: cvca@cvca.ca
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