Private Capital | Q3 2015

Q3 2015 ■ $6.25

THE MAGAZINE OF THE CANADIAN VENTURE CAPITAL & PRIVATE EQUITY INDUSTRY

MILLENNIAL

MOVEMENTS Their influence on future investment trends: James Coulter discusses at the 2015 CVCA Annual Conference

Plus • The Grexit: Fine-tuning of economic policies trumping honesty in Europe • Family offices represent potential as LPs for CVCA members

SAVE THE DATE CVCA ANNUAL CONFERENCE CANADA’S LARGEST GATHERING OF PRIVATE CAPITAL PROFESSIONALS

DATE

May 24th – 26th, 2016

LOCATION

Toronto, ON

VENUE

The Westin Harbour Castle

CONTACT

events@cvca.ca to enquire about sponsorship and speaking opportunities

2016

Published for

372 Bay St., Suite 1201 Toronto, ON M5H 2W9 Phone: 416-487-0519 Fax: 416-487-5899 www.cvca.ca

EDITORIAL BOARD Chair: Steve Hnatiuk, Lighthouse Equity Partners Jenifer Bartman, Bartman Business Advisory Grant Kook, Westcap Management Robert Montgomery, Achilles Media Gregory Smith, InstarAGF Asset Management David Unsworth, Information VP Peter van der Velden, Lumira Capital

Published by

701 Henry Ave. Winnipeg, MB R3E 1T9 Phone: 204-953-2189 Fax: 204-953-2184 www.lestercommunications.ca President, Jeff Lester Vice-President & Publisher, Sean Davis

CONTENTS COVER STORY

ARTICLES

8

12

DEPARTMENTS

2

Editorial Director, Jill Harris Editorial Assistant, Andrew Harris DESIGN & LAYOUT Art Director, Myles O’Reilly Crystal Carrette, Jessica Landry, John Lyttle, Gayl Punzalan

16

CEO’s Message

3 5 7

CVCA Board of Directors and Management

People on the Move

Jennifer Holmes 2015 CVCA.

Canadian Private Equity Investment Activity – First Half 2015 Canadian Venture Capital Investment Activity – First Half 2015 The Grexit Fine-tuning of economic policies trumping honesty in Europe

By Aki Georgacacos

20

Fund News

DISTRIBUTION

© Copyright

14

By Mike Woollatt

Director of Business Development, Jeff Wall EDITORIAL

Millennial Movements James Coulter’s thoughts on Millennials and their influence on future investment trends, as discussed at the 2015 CVCA Annual Conference

A Family Affair Notes from the Opal Financial Group’s Family Office & Private Wealth Management Forum

By Mike Woollatt

22

Avrio and Clairvest Honoured for Top Private Capital Deals of 2015 CVCA announces venture capital and private equity “Deal of the Year” Award recipients

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 CEO of the Canadian Venture Capital & Private Equity Association.

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Comments, questions and submissions are welcome. Please send to the editor at privatecapitaleditor@cvca.ca.

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Please recycle where facilities exist.

Private Capital § Quarter 3 § 2015

ABOVE: IDELDESIGN/SHUTTERSTOCK

Aki Georgacacos, Avrio Capital

1

CEO’s Message

Mike Woollatt, CEO, CVCA

Election Time I t’s election time again! And by this point, it not only feels long, it is – the longest since 1872, in fact. So you’ll be forgiven if you decided not to read this simply because it started with “election.”

However, I just wanted to highlight for our members that we at the CVCA are watching the election closely and engaging with political parties on issues that affect our industry. At the time of writing this, the parties have outlined some policies in our areas and stayed mute on others. For instance, the NDP and Liberals have committed to bringing back the Labour Sponsored Venture Capital Tax Credit, and the Conservatives have underscored their commitment to the Immigrant Investor Program.

There are a number of other issues that we have also been monitoring and engaging in where we can during an election, including the competitiveness of taxation in our sector, entrepreneur and small business support, the Venture Capital Action Plan and the need for governments (both provincially and federally) to continue

Safe travels!

Mike Woollatt CEO, CVCA

Overall, our industry is well positioned with all the parties and we are optimistic about our government relations endeavours after the election.

ALEXANDRU NIKA/SHUTTERSTOCK.COM

2

to be steady partners of the venture capital industry, amongst others.

Overall, our industry is well positioned with all the parties and we are optimistic about our government relations endeavours after the election. And for good reason.

Our industry is a major source of innovation and growth in Canada, something that is sorely needed now as the traditional Canadian economy falters. Innovation and growth are at the top of all the parties’ agendas. It will be our job to help ensure those like-minded agendas turn into positive and meaningful policy in the years after this election is finally over. n

Private Capital § Quarter 3 § 2015

CVCA Board of Directors 2015–16 OFFICERS Dave Mullen, Highland West, Chair Peter van der Velden, Lumira Capital, Past Chair Pierre Schuurmans, Birch Hill Equity Partners, Treasurer Gary Solway, Bennett Jones LLP, Secretary

VICE-PRESIDENTS Jocelyn Blanchet, KPMG LLP, Vice President Gilles Duruflé, Independent Consultant, Vice President Grant Kook, Westcap Mgt. Ltd., Vice President Gregory Smith, InstarAGF Asset Management, Vice President

DIRECTORS Alain Denis, Fonds de solidarité (FTQ), Board Rob Barbara, Build Ventures, Board John Berton, Georgian Partners, Board Ross Bricker, Optimum Technology Fund, Board Joseph Catalfamo, Summerhill Venture Partners, Board Paul Day, Export Development Canada, Board Howard Donaldson, Vanedge Capital, Board Joe Freedman, Brookfield Asset Management, Board Aki Georgacacos, Avrio Capital, Board Cheryl Brandon, Waterton Global Resource Management, Board Michael Hollend, TorQuest Partners, Board Wally Hunter, EnerTech Capital, Board Lorne Jacobson, TriWest Capital Partners, Board Tom Kennedy, Kensington Capital Partners, Board Edmund Kim, ONCAP, Board Elmer Kim, Roynat Equity Partners, Board Erik Levy, CPPIB, Board Jeff Linner, PFM Capital, Board Geneviève Morin, Fondaction, Board Dave Mullen, Graycliff Partners, Board & Chair Karamdeep Nijjar, iNovia Capital, Board Rob Normandeau, SeaFort Capital, Board Jerome Nycz, BDC, Board Marc Paiement, Novacap, Board Michael Raymont, AVAC, Board Whitney Rockley, McRock Capital, Board Jane Rowe, Teachers’ Private Capital, Board Rakesh Saraf, Alberta Teachers’ Retirement Fund, Board Pierre Schuurmans, Birch Hill Equity Partners, Board & Treasurer Lloyd Segal, Persistence Capital Partners, Board Kent Thexton, OMERS Ventures, Board Edward Truant, Imperial Capital, Board Mark Usher, Wellington Financial LP, Board Peter van der Velden, Lumira Capital, Board & Past Chair Mike Walkinshaw, Fronterra Ventures, Board

MANAGEMENT Mike Woollatt, CEO Kieran Lawler, Director of Communications Ashley Smith, Communications Associate Ted Liu, Research Director Andrew Keenan, International Trade Liaison Officer Elaine Bedell, Operations Manager Lauren Hart, Events Manager Emily Gallant, Manager, Membership & Sponsorship

Private Capital § Quarter 3 § 2015

3

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› fund news OMERS Ventures II closes $260M with expanding base of new LPs OMERS Ventures has successfully closed Fund II, its second venture capital fund, with $260 million in commitments. The OMERS pension plan participated alongside co-investors BMO Financial Group (BMO) and Cisco investments in the fund. The fund will focus on Canadian tech companies.

Vistara Capital Partners launches with $100M debt/growth fund for mid-later stage technology Vistara Capital Partners has held the second and final close for its inaugural fund, Vistara Capital Partners Fund I LP. The fund reached its full $100 million fundraising target just four months after commencing.

Focused on mid- to later-stage growth companies over a broad cross-section of technology and technologyenabled service sectors, the fund will invest between $5 million and $15 million per company in private or public companies, with additional co-investment capacity through its network of LPs.

VCAP-backed Kensington Venture Fund completes $237M third close

in promising VC funds and technology companies in IT, telecommunications, energy, cleantech and digital media sectors.

With this second close, total investor commitments to the fund have increased to $239 million. The fund will remain open to new accredited and institutional investors until it reaches its maximum size of $300 million.

Northleaf Venture Catalyst Fund completes another close with total commitments of $264M Northleaf Capital Partners, Canada’s largest independent global private markets fund manager, has announced that Northleaf Venture Catalyst Fund (NVCF) recently held another closing adding Ontario Pension Board (OPB) as its newest investor.

Total commitments from all investors now amount to $264 million.

NVCF has built a distinctive and well-diversified portfolio of investments since its launch in January 2014, having committed to six leading venture capital fund managers (XPV Capital, Georgian Partners, Versant Ventures, Golden Venture Partners, Version One Ventures and Relay Ventures) and completed five direct investments in innovative, high-growth Canadian companies (Wattpad, Vision Critical, Silanis, eSentire and FreshBooks).

PRESSMASTER/SHUTTERSTOCK.COM

Kensington Capital Partners has held a third close of the Kensington Venture Fund, a fund of funds investing

Fund News

Private Capital § Quarter 3 § 2015

5

Fund News Whitecap Venture Partners reaches $100M target in third fund Whitecap Venture Partners has secured $100 million in commitments for Whitecap III, the venture capital firm’s third fund.

LPs in the fund include Kensington Venture Fund, Bank of Montreal (BMO) and several high net-worth families and family offices.

Whitecap III launched at the end of April 2015 with $70 million in commitments and reached its $100-million target six weeks later. The diversified early stage (Series A) venture capital fund is focused on information and communications technology (ICT), medical tech and food tech, three industry sectors where Whitecap has built domain knowledge and has demonstrated success.

Rowanwood II hits $26M first close for early stage digital health and B2B

ARC Financial raises $1.5B for eighth energy fund ARC Financial Corp., a Canadian private equity manager focused on energy, has announced the close of ARC Energy Fund 8 with $1.5 billion of committed capital.

The fund was oversubscribed with the majority of the capital coming from investors in ARC’s earlier funds.

ARC’s investment strategy remains consistent with prior funds with an exclusive focus on Canadian growth exploration and production and oilfield service companies. n

MATEJ KASTELIC/SHUTTERSTOCK.COM

iGan Partners announced the launch of its second Rowanwood Ventures Fund, Rowanwood Investment Fund

II, LP (Fund II), a $50-million Canadian early stage venture capital fund focused on the converging digital health and Internet/software sectors.

Rowanwood Ventures raised $26 million for the first closing of Fund II, receiving support from iGan Partners and leading family offices who also supported the Rowanwood Ventures team through co-investments under the former fund.

Fund II will continue investing in Pre-Series A and Series A opportunities in digital health and B2B software.

6

Private Capital § Quarter 3 § 2015

› people on the move

Kensington Capital Partners has opened an office in Calgary to expand and capitalize on new tech sector opportunities in Western Canada. The Calgary office will be led by senior vice president Michelle Scarborough.

Scarborough is the chair of the National Angel Capital Organization (NACO), founder of the Women’s Angel Network in Canada and formerly founder and managing partner of Fronterra Ventures.

for BDC Capital’s Growth and Transition Capital (GTC) division. He will focus on growing GTC’s investment portfolio in the British Columbia and Northern Canada region.

Whitecap Resources adds Daryl Gilbert to board Daryl Gilbert has been appointed to the board of directors for Whitecap Resources Inc. Gilbert, a managing director at JOG Capital, will also serve as a member of the Corporate Governance & Compensation Committee and chair the Health, Safety & Environment Committee.

CPPIB appoints Patrice Walch-Watson to senior management team

Damien Steel promoted managing director of OMERS Ventures

The Canada Pension Plan Investment Board (CPPIB) has appointed Patrice Walch-Watson to its senior management team as senior managing director-general counsel and corporate secretary. Previously a partner at Torys LLP, Walch-Watson will manage CPPIB’s legal department as the pension fund manager’s activity expands into new markets and sectors.

OMERS Ventures has appointed Damien Steel to managing director. Steel has been on the OMERS Ventures team since its inception in 2011, previously serving as director.

He has led the investments and serves on the board of portfolio companies Fusebill, Klipfolio and Leadsift. He also led OMERS Ventures investment in PasswordBox, which was acquired by Intel in 2014.

Northleaf adds Kristin Shearer to private equity team

GreenAngel appoints Michael Walkinshaw as CEO

Kristin Shearer, previously a manager in the M&A transaction services group at Deloitte LLP, has joined Northleaf Capital Partners’ private equity team as an associate.

Michael Denham appointed BDC president The Business Development Bank of Canada (BDC) has appointed Michael Denham president. Previously, Denham acted as president of AquaTerra Corp. Denham has held various senior leadership positions in the past at firms such as Accenture PLC, CGI Group Inc., Bombardier and McKinsey & Co.

BDC names Matt Price managing director in Growth and Transition Capital division Matt Price, previously with the investment banking group at Scotiabank, has been appointed a managing director

Michael Walkinshaw was appointed to the position of chief executive officer of GreenAngel Energy Corp. Walkinshaw, a managing partner at Fronterra Ventures, has been a director of GreenAngel since 2014. Prior to that he served as CFO at Chrysalix Energy.

Kensington appoints Harold Huber as senior vice-president Kensington Capital Partners Limited has announced the appointment of Harold Huber as senior vice-president. Huber was formerly at Torys LLP where he was a partner and acted as legal counsel for Kensington’s infrastructure business. He has been working in the acquisition and development of energy and infrastructure projects in North America for over 30 years with extensive senior experience in power, oil and gas and pipeline sectors. n

Private Capital § Quarter 3 § 2015

YANLEV/SHUTTERSTOCK.COM

NACO chair Michelle Scarborough hired in opening of Kensington Capital’s Calgary office

People on the Move

7

MILLENNIAL MOVEMENTS “ What we have to challenge ourselves to do is wake up every morning and invest, which is what we all love to do. But we also have to invest a little bit in the future of thinking about how this industry is going to evolve.”

– James Coulter, Co-Founder, TPG Capital

8

Private Capital § Quarter 3 § 2015

Cover Feature

James Coulter’s thoughts on Millennials and their influence on future investment trends, as discussed at the 2015 CVCA Annual Conference

I

nvestors seeking the next big investment trend should look no further than the Millennials in their lives, according to an investor behind one of the world’s largest private equity firms.

James Coulter, co-founder of Texas-based TPG Capital, said consumption habits of the increasingly influential generation are one area his firm is monitoring closely these days in the fast-growing and intensely competitive private equity world.

“What we have to challenge ourselves to do is wake up every morning and invest, which is what we all love to do.

But we also have to invest a little bit in the future of thinking about how this industry is going to evolve,” Coulter told a packed room over lunch at the 2015 Canadian Venture Capital and Private Equity Association (CVCA)’s conference in Vancouver on May 20.

“We have to really look at this Millennial generation and think about how they’re going to react to different types of products and different types of shopping patterns,” said Coulter. “We as an industry have to step back and try to sort out all of these shifts and what they mean for this $2-trillion industry that is incredibly dynamic and incredibly positive for our economy.”

TPG, a leading global private investment firm with $67 billion (U.S.) of capital under management, is known for its unique and sometimes contrarian investments. An example is the recent purchase of Montreal-based entertainment company Cirque du Soleil, along with investment partners Caisse de dépôt et placement du Québec and China’s Fosun International Ltd. According to the extensive list on its website, TPG’s portfolio includes companies such as the Creative Artists Agency, J Crew and car-sharing service Uber, to name just a few.

Coulter, who lives in San Francisco and has three children in the Millennial age group, said the up-and-coming generation is “fundamentally challenging us to rethink a lot of the investing we are doing.”

“We constantly have to be doing new things,” added Coulter, who has a net worth of $2.2 billion (U.S.) according to Forbes.

Just as generations are changing, so too is the private equity market. It has also expanded from a U.S.-focused business to one that’s increasingly global.

“In about 2009–10, the texture of the industry began to change in a number of ways,” said Coulter. “I think when we look back on this, we’ll see that, somewhere in that timeframe, we entered a new generation of private equity and alternatives.”

The veteran investor also highlighted some trends he sees as driving change in the private equity world, including a shift out of funds, increased market complexities, a supply-demand crisis and new markets and new tools.

Private Capital § Quarter 3 § 2015

9

Cover Feature

“ We as an industry have to step back and try to sort out all of these shifts and what they mean for this $2-trillion industry that is incredibly dynamic and incredibly positive for our economy.”

– James Coulter, Co-Founder, TPG Capital

“All of this complexity and all of this growth over the last 20 years isn’t going to stop here,” Coulter told the captive audience at the CVCA event. “In fact, I think the next 20 years are going to have similar dynamics of change, opportunity and challenge.” n

Things just got real serious, real fast.

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10

Private Capital § Quarter 3 § 2015

ENJOYING THIS ISSUE OF PRIVATE CAPITAL? This CVCA magazine is proudly published by Lester Communications Inc.

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INDIVIDUALS / FAMILY OFFICES

Alberta

GOVERNMENT

FUND OF FUNDS

UNDISCLOSED

CORPORATION / FINANCIAL INSITUTIONS / INSURANCE

PENSION

3

2

$

289M 212M $ 154M $ 100M $ 90M $ 65M

$

SOURCE

$568M

PRIVATE FUNDS

RETAIL FUNDS

GOVERNMENT FUNDS**

# FUNDS

19

UNDISCLOSED

FUND OF FUNDS

79 484

65

39

BRIDGE

30 31

OTHER

18

118

244

939

242

$ MIL RETAIL FUNDS

PRIVATE FUNDS

12 5

14 9

25

CANADIAN VC STAGE TYPES

19

$14 M

$ RAISED

$531 $217

910M $

$547 M

289M 212M $ 154M $ 100M $ 90M

11

161

* SUM OF ALL DEALS INVOLVED

$ MIL* 66 64 51 95 43 42 39 36 28 28 24 21 15 8

New Brunswick

EXCLUDES RETAIL FUNDS

$6M

# CLO

CORPORATION / FINANCIAL INSITUTIONS / INSURANCE

12 5 2

SHOPIFY INC.

DAVIDS TEA INC.

ACHIEVERS

CHANGO INC.

137

155

188

204

DEAL SIZE

* INCLUDES ALL PARTICIPATING INVESTORS

INITIAL CLOSE (8 FUNDS, 8 CLOSINGS)

51 $20 $27 Newfoundland & Labrador

ALL FUNDS**

(6 FUNDS, 8 CLOSINGS)

SUBSEQUENT CLOSE

$

51 $75 $68 $

CLOSING ($M)

FUND SIZE ($M)

1201 - 372 BAY STREET, TORONTO, ONTARIO M5H 2W9 WWW.CVCA.CA

MEDIAN

14

$

AGRI BUSINESS

$303 M

# CLOSINGS

939

244

# TOTAL DEALS 6 3 3 2 2 2 2 2 2 2 2 2 2 2

9

# FUNDS

78

TOTAL

31 118

18

4 TOTAL $

VC FIRMS SR ONE BESSEMER VENTURE PARTNERS ATLAS VENTURE ORBIMED ADVISORS, LLC COMMONANGELS VENTURES DOMAIN ASSOCIATES, L.L.C. PAPPAS VENTURES ADVANCED TECHNOLOGY VENTURES (ATV) GE VENTURES LLC FF ASSET MANAGEMENT LLC CHARLES RIVER VENTURES (CRV) SALESFORCE VENTURES FELICIS VENTURES INTEL CAPITAL

$244M Quebec

1

GOVERNMENT

TOTAL

LATER STAGE

SOURCE

EARLY STAGE

$

# TOTAL DEALS

SEED

OTHER

242

30

39

$56 M

# DEALS

MOST ACTIVE FOREIGN INVESTORS IN CANADIAN DEALS

M&A

25 15 11 9 8 7 7 5 4 4

IN VENTURE CAPITAL (VC) WAS INVESTED IN CANADIAN COMPANIES

INDIVIDUALS / FAMILY OFFICES

STAGE

BRIDGE

484

79

25

RELAY VENTURES, SEQUOIA CAPITAL, NORTHLEAF CAPITAL, GRANDBANKS CAPITAL

M&A

63 187 149 32 12 144 40 29 66 101 43

46

SKYWAVE MOBILE COMMUNICATIONS INC.

COMPANY

69

VC FUNDRAISING

$371M

65

78

TYPE

98

LATER STAGE

EARLY STAGE

$ MIL

# TOTAL DEALS

CLEANTECH

EXTREME VENTURE PARTNERS, INOVIA CAPITAL, RHO CANADA VENTURES, METAMORPHIC VENTURES , MANTELLA VENTURE PARTNERS, METAMORPHIC VENTURES

Ontario

SEED

3

IPO

$458M

STAGE

39

OMERS VENTURES, INSIGHT VENTURE PARTNERS, BESSEMER VENTURE PARTNERS, FIRSTMARK CAPITAL, GEORGIAN PARTNERS, FELICIS VENTURES

$4M

CANADIAN VC STAGE TYPES

$14 M

LIFE SCIENCES

M&A

Manitoba

126 118

11

$56 M

$303 M

2

MCLEAN WATSON CAPITAL, DESJARDINS VENTURE CAPITAL, GTI CAPITAL

36 31 30 25 25 22 21 21 21 TOTAL ($ MIL)*

$74 ON ON ON ON ON BC ON ON QC DEALS

TOTAL ($ MIL)*

PROV.

QC

$939M

VC INVESTMENTS BY QUARTER

AGRI BUSINESS

25

39

ICT VC BACKERS

2

4

CLEANTECH

LIFE SCIENCES

1 1

SECTOR

TOP 4 VC COMPLETED CANADIAN EXITS

244 DEALS

$547 M

TOP VC SECTORS

(PRIVATE INDEPENDENT)

Alberta

161

Nova Scotia

TOP 10 MOST ACTIVE VC FIRMS

INOVIA CAPITAL INC. RELAY VENTURES CYCLE CAPITAL MANAGEMENT (CCM) INC. AVRIO VENTURES MANAGEMENT CORP. LUMIRA CAPITAL INVESTMENT MANAGEMENT INC. PANGAEA VENTURES LTD. YALETOWN VENTURE PARTNERS CHRYSALIX ENERGY VENTURE CAPITAL GEORGIAN PARTNERS INC. ENERTECH CAPITAL

$21M

ICT

TOTAL $

$6M

VC INVESTMENTS BY QUARTER

New Brunswick

$35M

COMPANY

REAL VENTURES

BC

9

1

14

1

$170M

# DEALS

Ontario

$568M

$458M

Quebec

126 118 $244M

9

$.63M Newfoundland & Labrador

INFLUITIVE CORPORATION HIGHLAND THERAPEUTICS INC. REAL MATTERS INC. TRILLIUM THERAPEUTICS INC. GAN SYSTEMS INC. GENERAL FUSION INC. BUILDSCALE, INC. CYNAPSUS THERAPEUTICS INC. MILESTONE PHARMACEUTIQUES INC.

42

SECTOR

$4M Manitoba

98

69

1

* VC components of the deal

COMPANY

CLEMENTIA PHARMACEUTICALS INC.

TOTAL

TOP VC SECTORS

244 DEALS

TOTAL #

VC FUNDRAISING

$21M

2

$371M

BC

9

$939M TOP 10 DISCLOSED CANADIAN VC DEALS

1

TOTAL #

$170M

42

TOTAL

IN VENTURE CAPITAL (VC) WAS INVESTED IN CANADIAN COMPANIES

# COMPLETED VC DEALS AND $ BY PROVINCE IN 2015 H1

FIRST HALF 2015

CANADIAN VENTURE CAPITAL INVESTMENT ACTIVITY

# COMPLETED VC DEALS AND $ BY PROVINCE IN 2015 H1

$.63M

$35M

Nova Scotia

2

1

1 TOP 10 DISCLOSED CANADIAN VC DEALS

** Includes BDC Capital internal allocation to a newly capped IT fund.

* VC components of the deal

1 TOP 10 MOST ACTIVE VC FIRMS (PRIVATE INDEPENDENT)

TOTAL ($ MIL)*

$74

INFLUITIVE CORPORATION HIGHLAND THERAPEUTICS INC. REAL MATTERS INC. TRILLIUM THERAPEUTICS INC. GAN SYSTEMS INC. GENERAL FUSION INC. BUILDSCALE, INC. CYNAPSUS THERAPEUTICS INC. MILESTONE PHARMACEUTIQUES INC.

ON ON ON ON ON BC ON ON QC

36 31 30 25 25 22 21 21 21 TOTAL ($ MIL)*

COMPANY

DEALS

REAL VENTURES

46

63

INOVIA CAPITAL INC. RELAY VENTURES CYCLE CAPITAL MANAGEMENT (CCM) INC. AVRIO VENTURES MANAGEMENT CORP. LUMIRA CAPITAL INVESTMENT MANAGEMENT INC. PANGAEA VENTURES LTD. YALETOWN VENTURE PARTNERS CHRYSALIX ENERGY VENTURE CAPITAL GEORGIAN PARTNERS INC. ENERTECH CAPITAL

25 15 11 9 8 7 7 5 4 4

187 149 32 12 144 40 29 66 101 43

TYPE

VC BACKERS

$162

1

MCLEAN WATSON CAPITAL, DESJARDINS VENTURE CAPITAL, GTI CAPITAL

* INCLUDES ALL PARTICIPATING INVESTORS

2

COMPANY

DEAL SIZE

SKYWAVE MOBILE COMMUNICATIONS INC.

204

IPO

SHOPIFY INC.

188

EXTREME VENTURE PARTNERS, INOVIA CAPITAL, RHO CANADA VENTURES, METAMORPHIC VENTURES , MANTELLA VENTURE PARTNERS, METAMORPHIC VENTURES

M&A

CHANGO INC.

155

RELAY VENTURES, SEQUOIA CAPITAL, NORTHLEAF CAPITAL, GRANDBANKS CAPITAL

M&A

ACHIEVERS

137

M&A

OMERS VENTURES, INSIGHT VENTURE PARTNERS, BESSEMER VENTURE PARTNERS, FIRSTMARK CAPITAL, GEORGIAN PARTNERS, FELICIS VENTURES

DAVIDS TEA INC.

2

MOST ACTIVE FOREIGN INVESTORS IN CANADIAN DEALS VC FIRMS SR ONE BESSEMER VENTURE PARTNERS ATLAS VENTURE ORBIMED ADVISORS, LLC COMMONANGELS VENTURES DOMAIN ASSOCIATES, L.L.C. PAPPAS VENTURES ADVANCED TECHNOLOGY VENTURES (ATV) GE VENTURES LLC FF ASSET MANAGEMENT LLC CHARLES RIVER VENTURES (CRV) SALESFORCE VENTURES FELICIS VENTURES INTEL CAPITAL

GOVERNMENT FUNDS**

2

PROV.

QC

TOP 4 VC COMPLETED CANADIAN EXITS

L

4

COMPANY

CLEMENTIA PHARMACEUTICALS INC.

65M

8

PENSION

$

9

14 9 2

$ MIL* 66 64 51 95 43 42 39 36 28 28 24 21 15 8

1201 - 372 BAY STREET, TORONTO, ONTARIO M5H 2W9 WWW.CVCA.CA

* SUM OF ALL DEALS INVOLVED

MEDIAN

$ RAISED

OSINGS

25

# TOTAL DEALS 6 3 3 2 2 2 2 2 2 2 2 2 2 2

910M

$

INITIAL CLOSE (8 FUNDS, 8 CLOSINGS)

$531 $217 $162

EXCLUDES RETAIL FUNDS

SUBSEQUENT CLOSE (6 FUNDS, 8 CLOSINGS)

ALL FUNDS** ** Includes BDC Capital internal allocation to a newly capped IT fund.

FUND SIZE ($M)

51 $75 $68 $

CLOSING ($M)

51 $20 $27 $

THE

Fine-tuning of economic policies trumping honesty in Europe

By Aki Georgacacos, Avrio Capital Inc.

MILAN GONDA, DUCU59US, DANIELO/SHUTTERSTOCK.COM

T

16

he Grexit story has dominated headlines the world over, with many observers heaping scorn upon Greece and what many consider to be a doomed single currency project for Europe. As a native Greek, and having recently returned from holiday to a southern part of the Peloponnesus peninsula, I found myself wondering if any of this was avoidable.

What is clear to me is that the current crisis – the maneuvering, the politicking and Greek bailout version three – are the result of a nation which culturally doesn’t have the necessary checks and balances in place to succeed as part of the European Union. In many respects, Greece was set on this inevitable course long before the concept of a united Europe was even breached.

Private Capital § Quarter 3 § 2015

One must consider that Greece has been, for all intents and purposes, an occupied state for much of the modern age. Ottoman rule, the Turks – which Greece did not fully regain its independence as a nation from until 1821 – and now a centralized Eurozone command. Resisting the occupying force became a matter of national pride, and dodging taxes surfaced as the preferred weapon.

This is the harbinger of Greece’s enormous revenue problem. The Greek civil service and government was well known to be immoral and corrupt – a culture where everyone placed greater emphasis on personal needs ahead of the common good.

Soon, bureaucracy followed suit and supporting institutions and red tape were created, providing an infrastructure that allowed cronyism amongst the Greek elite to flourish.

Greek Crisis

The situation represents the ultimate tragedy of the commons where neither the Europeans nor the Greeks see beyond petty arguments and political pressures to build a prosperous Greece within a united Europe.

Monastiraki Square and Plaka in Athens, Greece

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Greek Crisis After the Greek government fudged their overall deficit GDP and inflation figures to meet the requirements of entry into the European Union in 2001, massive sums of capital flowed into the country from the EU for infrastructure and development. It was a veritable cornucopia stuffed full of cash for certain privileged Greeks to spend at their discretion – anytime, anywhere. And they did.

What was practiced so liberally at the government level spilled over

and a “if you can’t beat’em, join’em” mentality became pervasive.

These fundamental flaws of the Greek economy and social fabric are endemic – they are part of Greek DNA. Although difficult for Canadians to grasp, or sympathize with, that DNA cannot change via the type of shock therapy that has been imposed; a fact that the European Union is unwilling to acknowledge and correct.

As 2015 approached, it became clear that Greece would require a third

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bailout to continue the structural reformations required to transform its economy and build a foundation for growth. The German-led European Union continues to push austerity as the tonic for a nation mired in a deep depression. A strategy akin to “extracting milk from a sick cow by whipping it” in the words of the now disgraced former Greek finance minister, Yannis Varoufakis.

The situation represents the ultimate tragedy of the commons where neither the Europeans nor the Greeks see beyond petty arguments and political pressures to build a prosperous Greece within a united Europe.

The European Union is unwilling to alter its formula of austerity, and the Greeks haven’t the humility to acknowledge that they’ve been fully complicit in eroding Eurozone trust.

These are the first important steps toward creating a stimulus package that can help Greece regain economic independence. It is frustratingly out of reach.

As I return home from vacation, I am saddened with what I have witnessed in Greece. Although I have been hopeful in the past that the transformation from this centuries old culture of entitlement to something that resembles a meritocracy is ongoing, I am not certain the conditions are present for this evolution. It seems there’s more focus on a tuning of economic policies when drastic course correction is needed.

Apart from the economics, it is heart wrenching to watch a nation lose its identity as corollary damage to the economic crisis. The best and brightest are leaving as there is no future; lawyers simply do not exist anymore, doctors are serving crepes at tavernas to make ends meet and the youth are apathetic, disenfranchised and defeated. The banks have been de-capitalized and permanent capital is not available to emerging businesses.

For a proud culture, steeped in traditions, losing economic wherewithal not only means foregoing vacations, but increasingly also means postponing marriages and starting a family. These aren’t viable options in

Greek Crisis

today’s economic environment. The most troubling elements of the crisis in Greece relate to the rapid loss of identity, the very evisceration of the culture, the traditions, rituals and the pride that have defined Greeks for generations.

Greeks are resilient people and emerging from the current crisis will undoubtedly bring new

strength to the people, the nation and the culture. There will be a Greek Renaissance, but I fear that the road will be long and will require pan global support. But what’s really needed is a change in attitude. At a time when Greeks are genuinely suffering, the current punitive approach will not create a bridge to prosperity. In its place,

both sides must search for an honest approach even though, as Plato put it, “honesty is for the most part less profitable than dishonesty.” n

Aki Georgacacos is senior managing director at Avrio Capital Inc.

Private Capital § Quarter 3 § 2015

GOPIXA/SHUTTERSTOCK.COM

The Greek civil service and government was well known to be immoral and corrupt – a culture where everyone placed greater emphasis on personal needs ahead of the common good.

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A Family Affair Notes from the Opal Financial Group’s Family Office & Private Wealth Management Forum

By Mike Woollatt, CVCA

I

was recently invited to speak at the Opal Financial Group’s Family Office & Private Wealth Management forum in Newport, R.I. I was really keen to go because they were obviously interested in the Canadian market, and I know that both single-family offices (SFOs) and multi-family offices (MFOs) represent a huge amount of untapped potential as LPs for CVCA members. And judging by the fact that I gave out every business card I brought, these two things definitely appear to be the case.

The bottom line was that interest in Canada is extremely high, and it’s clear that there’s a ton of powder in family offices. If any of our members are interested in establishing some connections there, feel free to drop me a line, or better yet – go to one of these conferences. There were plenty of GPs in the rooms looking for LPs. It’s hard to get an estimate on the number of family offices in the United States given how private they are.

There are roughly 10,000 families with over $100 million

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Private Capital § Quarter 3 § 2015

in assets, but of course not all of them have family offices. According to the Family Wealth Alliance, there are now roughly 5,000 family offices in the United States.

Meanwhile, MFOs are proliferating with the Family Offices Group saying that MFOs increased by 33 per cent between 2008 and 2013, and that there are now more than 4,000 in the U.S. Looks like I’ll need more business cards!

While at the Opal forum, I also participated in a panel discussion on the “Opportunities in Venture” with a GP and an MFO that focused on health and life sciences. Here are the top three things I said about the Canadian market: ›› The Canadian private capital market is now thriving on all sides – VC and PE – and there are plenty of opportunities for further growth. ›› The Canadian financial system is secure. ›› For those seeking better valuations, look toward Canadian GPs operating in a slightly less competitive deal-making environment. There are a number

Family Offices

of examples to support this. For instance, U.S. to Canadian GDP is about 10:1, but the total capital under management is about 30:1. Or, more specifically to a sector, for every $1 million in VC dollars invested, the Toronto-Montreal region generates 125 biomedical research publications – in Boston that number is 28.

On the VC side, I explained that we have a globally competitive ecosystem that is one of the top markets for U.S. investment. I also emphasized how rapidly the technology and life sciences sectors are growing. In particular, I made sure to mention all the many Canadian born startups making headlines south of the border – Shopify, Hootsuite, Wattpad, D2L and others. In short, don’t miss out, folks.

As for PE, most were familiar with our pension funds so I noted how experienced our private GPs are, that they consistently perform in the top quartile globally and that

overall, 2014 was a record year for PE deals with $41 billion invested.

I also learned quite a lot from them about family offices. Family offices have unique issues – whether it is intergenerational values, or estate planning concerns.

They have also begun to specialize through MFO offerings much like the VC community has. These groupings are allowing them to focus on specific sectors such as Spindletop Capital, which acts as an MFO targeting expansion capital for healthcare.

The Opal conference is a great example of how the CVCA can extend our industry’s reach and profile in the U.S. I plan on attending many more of these as we’re getting more and more invites. I look forward to reporting back to you. n

Mike Woollatt is CEO of the CVCA.

Private Capital § Quarter 3 § 2015

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Deal of the Year Awards

Avrio and Clairvest Honoured for Top Private Capital Deals of 2015 CVCA announces venture capital and private equity “Deal of the Year” Award recipients

T

SERGIGN/SHUTTERSTOCK.COM

he Canadian Venture Capital & Private Equity Association (CVCA) announced winners of its annual Deal of the Year Awards during its annual conference in Vancouver this past May. Calgary-based Avrio Capital won in the venture capital category for its sale of Wolf Trax Inc., while Torontobased Clairvest Group Inc. won in the private equity category for its sale of KUBRA Data Transfer Ltd. Both deals were selected for outstanding cash realization value, and multiple of invested capital returned.

The CVCA’s Deal of the Year Awards promote, highlight and celebrate the achievements of CVCA members who have had outstanding investment successes. The selection process focused on CVCA members with the most significant investment return realized during calendar 2014.

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Private Equity Deal of the Year Venture Capital Deal of the Year Avrio Capital, which invests in innovative food and agricultural companies, invested $2.5 million in Wolf Trax Inc., an agriculture technology company focused on developing, manufacturing and selling high efficiency fertilizer and seed treatments. Wolf Trax Inc. was acquired

by Compass Minerals in 2014 for $38.55 million. ›› Multiple of invested capital returned: 15.4x ›› Internal Rate of Return (cash and total): 138% “Wolf Trax is a great example of one of many emerging Canadian companies becoming global leaders in agricultural technology,” said Mike Woollatt, CEO of CVCA. “Generating and implementing differentiated technology to address global food supply for a rapidly expanding population clearly represents a tremendous global opportunity.”

This is the second time Avrio Capital has won a CVCA Deal of the Year Award. Avrio was recognized in 2013 for its investment in Brookside Foods.

Clairvest Group Inc., which invests in entrepreneurial corporations, invested $13 million in KUBRA Data Transfer Ltd., a leading North American provider of outsourced billing solutions for companies with a large customer base. KUBRA Data Transfer Ltd. was acquired by Hearst Corporation for almost $175 million in 2014. ›› Multiple of invested capital returned: 13.4x ›› Internal Rate of Return (cash and total): 40% “Kubra’s commitment and courage to de-emphasize its core print business with the view to transforming itself into a global leader in electronic billing illustrates the type of difficult strategic decisions that can precede outsized returns to investors,” said Aki Georgacacos, CVCA Awards Committee chair and senior managing director at Avrio Capital.

“It’s this combination of vision and gumption that makes this deal such a standout.” n

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