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Archive for the ‘Financing’ Category

TSX Venture Exchange Extends Temporary Pricing Relief

Posted by Shane McLean on January 14, 2013

Check out my latest post at the LW Connect Blog relating to the TSX Venture Exchange’s extension of temporary pricing relief until April.

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Posted in Financing, TSX Venture Exchange | Leave a Comment »

LW Connect

Posted by Shane McLean on November 28, 2012

I have found that blogging is not unlike any other activity that you intend to do, know you should be doing and maybe even want to do (think of exercising). If you get into a routine it works great for a while but if you get out of that routine for some reason it’s easy for a great deal of time to go by before you even realize. It has been over 2 years since my last post to this blog. That’s hard to believe. Don’t get me wrong, I have been keeping busy — since my last blog post I have worked on over $130 Million in financings and about $640 Million in mergers and acquisitions. Having said that, I am going to try to get back into active blogging.

My firm, LaBarge Weinstein LLP, has set up a blog called LW Connect.   I am going to focus most of my energies there.  I will try to link to my LW Connect posts from this space (my most recent post is about temporary pricing relief measures from the TSXV) but I hope that you will visit LW Connect regularly and see not only my posts but posts from my colleagues as well.    As always, if there are any topics that you would like to see discussed here or at LW Connect please let me know.

Thanks.

Posted in Financing, LaBarge Weinstein, Misc., TSX Venture Exchange | Leave a Comment »

More Movement on Canadian Venture Capital Front

Posted by Shane McLean on February 9, 2010

Last week it was announced that the Canada Pension Plan Investment Board would invest  $400 Million in a “fund of funds” concept.  That is, it looks like they are proposing to deploy $400 Million to existing private equity and venture capital firms so that they may, in turn, deploy that money as part of their own investing activities.  The Montreal Gazette has a good write up about the announcement.

The fund of funds model is similar to the model employed by the Ontario Government and its co investors in the Ontario Venture Capital Fund which I blogged about last April (both the new CPP funds and the OVCF funds are both  managed by Northleaf Capital Partners).  The funding of the OVCF closed in June of 2008 and, as I understand it, it has yet to actually invest much money.   Unfortunately, very little of that money has been put to work so far.

Let’s hope that the CPP’s fund of funds is able to deploy funds a bit faster.  Without much needed capital, Canada’s knowledge based startups can’t get off the ground.  Mark McQueen recently lamented on the Wellington Financial Blog that the wicket is open for tech IPOs but there  isn’t enough “product”  — i.e. quality tech companies of the right size and trajectory.  Fund announcements like this may be too late to help launch companies that could take advantage of the IPO climate we face at the moment, but without a steady flow of funds to support generation after generation of knowledge based companies we will have a very hard time maintaining any kind of  robust public (or private) market for  tech companies in Canada.

Posted in Financing, Government Funding, Misc., Startup, Uncategorized, Venture Capital | Leave a Comment »

LaBarge Weinstein Fall 2009 Quarterly

Posted by Shane McLean on December 22, 2009

See below for LaBarge Weinstein’s quarterly newsletter published this week:

LaBarge Weinstein Fall 2009 Quarterly

Just in time for the holidays, as our long, gentle fall turns the December corner, even the grimmest winter-curmudgeons among us can’t but feel the public/private financing markets heating up their engines in the driveway for what we all think will truly be a breakout 2010.

Our evidence of the recession’s Chinook from the firm’s recent dealflow?  On the private side, Bridgescale’s permafrost-breaking investment in Bluecat Networks, Celtic House’s investment in Peraso Technologies, and Summerhill Ventures’ follow-on investment in Toronto’s Vantrix Technologies. On the public side, a quarter reminiscent of our pre-bubble roots, with each of IMRIS and Chemaphor completing fundraising transactions, and with Dynex Power launching a rights offering during the same period.

Coupled with energetic M&A interest fuelled both by the usual corporate development suspects as well as a new, brash breed of billion-dollar balance sheeters and pre-IPO roller-uppers, we expect a continued ruddy market glow despite the cold…so let it snow, let it snow, let it snow, and please feel free to contact anyone on the LaBarge team if you need some help shovelling that driveway.

Go Public My Son, Go Public…

Most definitely the last quarter’s biggest buzz has revolved around the pending mini-bubble for North American technology companies seeking to go public early in 2010.The Globe and Mail’s Andrew Willis commented on the TSX’s IPO rush this past November, and KPMG recently reported its Canadian and US annual public market pulse surveys confirming over 60% of industry participants expect IPO activity to substantially increase in the near term. South of the border, courtesy of the Valley’s Philip Smith, a summary of IDC’s predictions for 2010 that includes an industry-consensus view of the markets coming back to the tech neighbourhood in the coming year.

What does it mean to you and your board/management team? If your startup is just out of the blocks, you root for an increased liquidity environment to grease the wheels of the private equity funding cycle. If your company is just hitting its stride, you’re very possibly going to be rewarded for your resilience over the past few years, and you should do you best to get networked among the blue suited Bay Street crowd that is again hitting the airwaves and highways to check out the very best companies across the country. Our team can help, and you should feel free to contact any of our partners if you’d like our perspectives or some helpful introductions.

You’ve Changed, Man…

Our partner Shane McLean recently informed us of a troubling British Columbia court decision which awarded a consultant damages for lack of “reasonable notice” of termination much like an employee. In this case, notwithstanding the parties’ explicit treatment of the individual as a contractor, he was entitled to common law reasonable notice (for our clients, the bigger, badder amount depending on the team member’s length of service). For a more complete description of the case and how your startup can avoid the same result, please check out the enclosed link and please feel free to contact Shane at smclean@lwlaw.com if he can assist further.

Best in (Trade) Show…

With the fall trade show season coming to a close, and marketing folks falling asleep with dreams of sugarplum spring show fairies dancing in their heads, we unearthed a great blog post earlier this fall from Jason Calacanis giving startups advice on how to get most from a trade show experience. We asked a few Waterloo-based software business development and sales gurus for their thoughts on the article’s suggestions, and click this link to check out their responses.

Blogs & Other

Congratulations to a couple of LaBarge lawyers for some great achievements this past quarter, with founding partner Debbie Weinstein being elected to the board of directors of Waterloo’s OpenText Corporation (as well as taking a spin with the Olympic torch this past weekend in Ottawa) and more recent addition James Smith receiving recognition as one of Lexpert’s Rising Stars celebrating Canada’s leading lawyers under 40.

The firm is very pleased to announce new offices in Toronto and Waterloo since the end of the summer. In Toronto, we’ve been pleased to bunk with Robin Axon’s and Duncan Hill’s Basecamp Partners group, and its two (and soon to be more) terrific companies housed at 488 Wellington West, Suite 300. In Waterloo, we’ve lucked into a similarly rewarding arrangement with the team at social media analytics firm PostRank, and we’ll look forward to resting our heads (and computers) at its uptown Waterloo Allen Square location as of January 1st. We have a regular group of lawyers and staff passing through the offices, and we look forward to another year of getting closer to their tremendous entrepreneurial communities.

Speaking of networking, we’d appreciate all of you assisting Carleton’s tireless booster Luc Lalande in his efforts to recreate the 2002 poster featuring startups founded by the University’s faculty, students and alumni. In addition, we wanted to pass on a fascinating article courtesy of Luc describing the mathematical foundation of the social networks that form the fabric of tech business community. The article won’t necessarily make that stale croissant any tastier at your next morning biz dev outing, but it makes for great reading nonetheless, thanks Luc.

Finally, James Smith, Mike Morgan and Shane Mclean of the firm were pleased to assist an esteemed group populate a website sponsored by Toronto’s MaRS facility with articles on common startup legal topics. The site was developed principally to support the venture creation efforts among the facility’s tenants, but its content has general application and we encourage budding founders to check it out.

Dealflow Report

Here is a sample of the publicly announced transactions that our team worked in the past few months:

Events & Calander

Posted in Events, Financing, LaBarge Weinstein, MARS, Misc., Venture Capital | Leave a Comment »

Rights offerings — an old new way to raise money

Posted by Shane McLean on November 12, 2009

In the past 6 months or so I have had a number of clients ask about the possibility of raising funds by way of  a rights offering.  In late October we even filed a preliminary prospectus for one of our TSX Venture Exchange listed clients in connection with a proposed rights offering.  Public markets have seen a bit of a resurgence lately but we all know how abysmal things have been over the last while and so I think more companies are  looking at creative ways to raise funds and have been looking to the rights offering as one alternative.

In a “rights offering” a corporation issues “rights” to its existing shareholders. The rights entitle those existing shareholders to acquire additional shares (or some other form of security) from the corporation for a fixed exercise price over a fixed period of time (called the rights offering period).  When issued by a public company, the rights will typically trade  as separate securities on the same exchange as the company’s shares for the duration of the rights offering period.

Companies often look at rights offerings as a way to provide a presumably willing audience — i.e. those who have already bought the company’s shares — with an ability to buy additional shares directly from the company.  To sweeten the deal and encourage exercise of the rights, the rights are often issued with an exercise price at a discount to the market price of the common shares and may also entitle the exerciser to receive a warrant, preferred share or some other security in addition to the common share on exercise of the right. The “sweeter” the deal, the more likely  the rights will have some trading value, thereby enriching your shareholders just by issuing them, and the more likely they will ultimately be exercised prior to the end of the rights offering period.

Rights offerings of smaller sizes can often be done without prospectus under applicable Canadian securities laws but larger offerings will usually require a prospectus.

Rights offerings seem to have had a mixed reputation in the past with some viewing them as a fund raising method of last resort.  For example, I was told by someone at the TSX Venture Exchange that for many years they have only seen one or two a year on the exchange.  Recently, however, there seems to be a renewed interest in this fund raising vehicle and it’s worth a second look for any company looking to raise funds.

Posted in Financing, Law, Misc., TSX, TSX Venture Exchange | Leave a Comment »

From Wellington Financial — 5 pre-deal questions to ask your venture debt lender

Posted by Shane McLean on October 28, 2009

There is a  good article at the Wellington Financial Blog with a list of questions your should consider asking your “venture debt lender” in the early stages of discussion (see the article here).

For those of you who are not familiar with the term “venture debt lender”, the term is generally used to describe non-bank lenders that operate in the same or similar market as traditional venture capitalists.  Wellington Financial is an example.   Venture debt lenders typically offer a secured debt facility (that they expect to be paid back on set terms) and take some warrant or other equity incentive on the side.  Interest rates are generally higher than you would get from your traditional  bank but that is usually a factor of the level of risk these lenders take and the amounts loaned which are both generally higher than those a traditional bank would tolerate.

If looking at venture debt as a source of funding,  be prepared to discuss quasi-bank style financial covenants with your venture debt lender.  That typically rules out pre-revenue early stage borrowers.

Posted in Financing, Misc., Startup, Venture Capital | 2 Comments »

Congratulations to Chemaphor Inc. for raising funds in a tough market

Posted by Shane McLean on October 25, 2009

 Congratulations to Chemaphor Inc which announced Friday (see press release) that it successfully raised a round of just over $1.2 Million!  No small task in this still tentative financing market.  Great work was done on the agency front by Bloom Burton & Co.  and others.

 Chemaphor is a LaBarge Weinstein client and I have had the privilege of working with Chemaphor for about 6 years.

Posted in Capital Pool Company Program, Financing, LaBarge Weinstein, Misc., TSX Venture Exchange | Leave a Comment »

Update on the Ontario Emerging Technologies Fund

Posted by Shane McLean on October 13, 2009

This is a reprint of a note from the LaBarge Weinstein Emerging Issues Series: Update on the Ontario Emerging Technologies Fund

Over the past summer, our partner Debbie Weinstein has been closely involved in the industry outreach conducted by Ministry of Research and Innovation’s John Marshall relating to the launch of the Ontario Emerging Technologies Fund (OETF), which was originally announced by the McGuinty government in winter 2009. The Fund represents an exciting opportunity for our cash- or syndicate partner-starved clients (startups, venture investors and angels alike) to access government funding in a reasonable and timely way.

If you would like any additional information regarding the OETF, including how to become a “Qualified Investor” or submit an investment for consideration, we would be happy to assist. Please feel free to contact any of our partners via our website at http://www.lwlaw.com// and we’ll try and help you assess whether the program complements your future financing strategies.

What You´ve Likely Heard Already

OETF is a $250 million direct investment fund administered by the Ontario Capital Growth Corporation (OCGC), announced in February 2009. OETF has been designed as a matching fund for investments in Ontario-based companies, providing syndicate support for qualified investors that have sourced, diligenced and led financings. The Fund will invest $50 million per year during the term of the program, and $100 million will be available for funding over the next 18 months.

OETF will piggybacking on the diligence and pricing efforts of “qualified” investors that participate in an fund-sponsored approval process, and lead syndicated venture capital transactions.

OETF can invest in private companies, the majority of whose: (i) payroll is paid to Ontario employees and contractors, (ii) workforce is working in Ontario, and (iii) senior officers maintain their permanent residence in Ontario. Targets must carry on business in one of the OETF’s recognized industry categories, including clean tech, life sciences, digital media or communications.

The minimum initial investment requires target firms to be raising at least $1 million (including the matching money from the Fund), and will be made on the same deal structure terms as those made available to the qualified investor. The Fund will match the largest qualified investor up to $5 million per round. The OETF has adopted some stylized deal structure requirements for financing rounds where the syndicate relationships are more complex, or where the transaction contemplates a material follow-on investment by the qualified investor, and we would be happy to discuss those at your convenience.

OETF can do follow-on financings, which is terrific, provided that the maximum amount invested in any single target cannot exceed $25 million.

What You Need to Know and Do Now

Get Your Investors Qualified: Any investor, regardless of residence or location and whether an institutional venture capital firm or angel, can become a “Qualified Investor”. In order to seek approval, investors are required to submit an application to the Fund and submit to certain background and other diligence checks regarding the investor and its principals. OETF has engaged Toronto’s Northbridge Capital Management Inc. to administer and support granting these approvals. We have been advised that, once OGCG and Northbridge settle upon the set of administrative and diligence procedures to make these determinations, an application to become a qualified investor will take no longer than 15 days to process. Unfortunately, non-institutional investors (angels) are required to reapply for qualified status for each investment that they make.

Get Your Term Sheet Qualified: In order to submit a proposed transaction for approval, qualified investors are required to submit an application to the Fund. OETF has engaged Toronto’s Covington Capital Corporation in order to administer and support the approval and funding of qualified investments. We strongly suggest that interested parties submit applications for investor qualification at the same time as they pursue investment approval. Since accommodating applications this past July, we understand that the Fund has received more than 200 proposals for investment. We also understand that the Fund has every intent of distributing these Funds as soon as possible. It may very well be that the qualified investors who are first to the post will be the first to reap the rewards of their efforts.

Consolidate Your Angels: The most important limitation of the Fund is that it will only match the investment amount of the qualified investor. This is a real challenge for angel syndicates, but Mr. Marshall’s team has indicated a strong appetite and willingness to consider strategies to consolidate angel investments under a corporate, partnership or trust entity. This should streamline the investor approval process for the affected angels, and by consolidating the Funds to be invested will maximize the OETF’s matching investment in the target.

If You Have A Cross-Border Structure, You’re Still Eligible: Please keep in mind that targets do not themselves need to be Ontario or Canadian companies. If your corporate structure includes a Delaware parent or sister, as with many of our clients’ corporate structures, your qualified investors can still try and access the Fund.

If You are in the IAF Pipeline, Be Mindful of OETF Limitations: There are funding limitations where the target has received substantial concurrent Ontario government contributions, including OCE or IAF (Investment Accelerator Fund) funding. Targets should seek advice regarding these restrictions and how they might the affect the target’s status and eligibility for matching funding pursuant to the OETF.

The Fine Print: What You Should Consider Before Engaging the Fund

The intent is that OETF will act as a passive investor, but like any government-sponsored funding program, there are some traps and challenges to engaging the program.

There are some specific minimum deal terms to be reviewed and incorporated into your investment proposals before they are submitted for approval. More important, OETF investments will be subject to call rights in favour of the Fund should the target lose its Ontario footprint after the date of the investment. This should not affect conventional investment exits, which OETF will review and approve in the ordinary course in its capacity as a shareholder. However, if your firm anticipates near-term growth in its workforce and C-class management in the near term, you should get some advice on how those call rights work. It is similarly unclear as to how such rights will mesh with our venture and bridge loan contracting patterns over the last few years.

Overall, our team remains very bullish on the Fund’s potential for stimulating syndicate formation in Ontario, and we would be happy to assist you in engaging the Fund, and working through its eligibility and approval requirements. Again, please feel free to contact any of our partners via our website athttp://www.lwlaw.com// and we would be happy to assist.

Posted in Financing, Government Funding, LaBarge Weinstein, Law, Misc., Newsletter, Startup, Venture Capital | 1 Comment »

Win $5,000 for your Startup

Posted by Shane McLean on October 5, 2009

The Ottawa Network is running a Startup Boot Camp later in October.   $5,000 is up for grabs for the best developed idea at the end of the process.   Check out the details here and good luck!

Posted in Events, Financing, Misc., Startup, Venture Capital | Leave a Comment »

CPC Combinations Part 2

Posted by Shane McLean on September 16, 2009

In early August I posted about CPC Combinations (here).  In that post I discussed the concept of combining a public shell company listed under the TSX Venture Exchange’s Capital Pool Company (“CPC”) Program with another existing public company (instead of the typical acquisition of a private entity).

With most CPC shell companies raising only the minimum of $200,000 on their initial public offering (which, when taken with the $100,000 in seed money, would leave the company with $300,000 less expenses after the IPO), many are finding that they do not have much purchasing power, either in terms of cash in the bank or overall valuation, to go after the really interesting target companies.  In order to help alleviate this problem, there is another type of CPC “combination” available in which two or more CPC shell companies combine together in order to pool their resources.

When the shell companies combine, each can only be given a value equal to its cash in the bank and the funds available to the combined company cannot exceed $2,000,000.   Most CPC shells are likely to combine in this way only if they have a target company lined up already since the combined entity has only 12 months post-combination to complete its “qualifying transaction”.

At a time when the list of CPC shell companies that have not announced a qualifying transaction is approaching 150 names, combining a few of them may help the prospects for finding attractive targets and also help the whole program by reducing the glut of shell companies out there.

Posted in Capital Pool Company Program, Financing, Law, Mergers and Acquisitions, Misc., TSX Venture Exchange | 2 Comments »