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Archive for the ‘Government Funding’ Category

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 »

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 »

Ontario Green Energy Act

Posted by Shane McLean on September 3, 2009

Earlier this year the government of Ontario enacted the Green Energy Act.  The Act amends 21 different Ontario statutes and several elements are not yet in force as the government continues to work toward implementation.   The intention of the Act is, in part, to help promote the growth of clean, renewable sources of energy such as wind, solar, hydro, biomass and biogas.  Assuming that all elements of the Green Energy Act are eventually put into force, two of the most exciting aspects are the “right to connect” and the “feed in tariff program”.

Subject to certain conditions, the “right to connect” creates an obligation for utilities to grant grid access to green energy projects.  The utilities are, in turn, entitled to recoup the costs of permitting such access by spreading those costs equally across their entire rate base.   I understand that there are some wrinkles to be ironed out in this concept, particularly where it relates to portions of the current Ontario electricity grid that are “reserved” to carry nuclear power from the province’s nuclear generators.

The “feed in tariff program” works hand in hand with the right to connect and sets a fixed rate at which  utilities are required to purchase power generated by renewable energy projects over the life of a 20 year contract.  Different rates are set for energy derived from different renewable sources, with energy from solar generally commanding the highest rates.  All  rates are intentionally set at above market rates in an attempt to help producers of renewable energy offset  the high costs associated with starting up a project which might otherwise be prohibitive. The feed in tariff program  is based on models already in place in parts of Europe.

Many other changes implemented by the Green Energy Act will assist and encourage the production of renewable energy in the province including changes to zoning and local approval requirements.  For renewable energy businesses, the Act helps to level the playing field (or, some might say, tilt it slightly in favour of the small upstart producers) and will hopefully  act as a catalyst for more renewable energy development in the province of Ontario.

Posted in Cleantech, Government Funding, Law, Misc., Startup | 1 Comment »

More Details Out on the Ontario Emerging Technologies Fund

Posted by Shane McLean on August 16, 2009

In prior posts I have mentioned the Emerging Technologies Fund announced by the Ontario Government earlier this year with a pool of up to C$250M in funding (up to C$50M per year for 5 years).  Until recently information on the ETF has been spotty but in the last week of July the Fund Guidelines were released.  Some of the guidelines are old news but I believe that some have only been made clear for the first time with the release of the Fund Guidelines.  Here are some highlights:

  • The ETF is focused on private  companies with an “Ontario Footprint” and involved in (i) clean technologies; (ii) life sciences and advanced health technologies and (iii) digital media and information and communication technology.
  • An “Ontario Footprint” requires that (i) the company pays at least 50% of wages, salaries and fees to employees and contractors working in Ontario, (ii) the majority of the full-time employees must be working in Ontario and (iii) the majority of senior officers must maintain their permanent residence in Ontario.  If the company ceases to have its “Ontario Footprint” the ETF has a right to sell the shares back to the company at a predetermined price.
  • The initial investment in any company will not exceed C$5M, total investment will not exceed C$25M and the ETF will not be the largest single investor in any company
  • The investment round must be at least C$1M and not more than C$15M.
  • ETF will always co-invest with a “Qualified Investor” and will not invest more than the Qualified Investor
  • A Qualified Investor must present the co-investment opportunity to the ETF.  Companies may not seek investment directly from the ETF.
  • Venture Capital and Private Equity funds, angel investors, angel groups, pledge funds and other investment entities can apply to become a “Qualified Investor” provided they meet specific criteria.

The Fund Guidelines contain more detail so check them out.  At some point the ETF web site promises to start listing Qualified Investors.  Once that happens, companies can presumably approach those Qualified Investors to invest and apply to the ETF for co-funding.  Interestingly, the materials say that an investor can apply to become a “Qualified Investor” and submit a co-investment opportunity at the same time.  So, if you’re a company that has secured some investment, you should get one of your investors to apply to become a “Qualified Investor” to see if you can leverage their investment to get access to some of the ETF funds.

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

StartupNorth Series on Startup Funding Sources

Posted by Shane McLean on August 2, 2009

Craig Hayashi at StartupNorth has a great series going on Startup Funding Sources.   The latest (see it here) is on the National Angel Capital  Organization.

Each post so far has focused on a different source of funding for startup ventures, including a review of the areas of focus for each funding source and how to get on their radar screen.   There’s some valuable information in these postings and I recommend them to you.

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

Industry Canada’s Small Business Internship Program

Posted by Shane McLean on July 9, 2009

Industry Canada has a program that might be of interest to small and medium sized businesses in Canada who do or might hire post secondary student interns.   The IC web site describes it like this: “The Small Business Internship Program provides small and medium-sized businesses financial support to hire a post secondary student intern to assist them in their adoption of information and communications technologies to increase their productivity and competitiveness”.

To be eligible your business must:

  • be a small or medium-sized enterprise with less than 500 employees;
  • be incorporated; and
  • wish to enhance your e-business capability.

Essentially, qualifying businesses can hire an intern for an  internship of up to 12 weeks and IC will pick up 75% of the wages and employment related expenses to a maximum of $10,000.  Definitely worth a look if your business is one that could benefit from interns.     Check  here for details, filing requirements, forms etc.

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

BDC gets a new pool of money

Posted by Shane McLean on June 24, 2009

Last week the Canadian Federal Government announced that it is providing an additional $450 million in funds to the Business Development Bank of Canada “in support of small and medium-sized enterprises and innovative firms”.  This is part of the government’s “stimulus package” and hopefully it will trickle down to capital starved startups as quickly as possible.  The BDC has been one of the more active seed and early stage investors in recent years, filling some of the void left by the general retreat of private venture capital we have seen.    According to the  announcement, $350 million of this money is earmarked for venture capital style investment with $90 million of that in the form of direct investment in VC funds (who will, presumably, put that money to work by investing it in companies).  $125 million is supposed to be rolled out in the next year with the balance to trickle out later.

Check out the government’s announcement.

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

Government Funding Presentation Materials

Posted by Shane McLean on May 7, 2009

I mentioned in a recent post that I would be attending an OCRI event entitled: A Treasure Map to the Myriad of Federal and Ontario Government Funding and Financing Programs on Tuesday May 5.  It was a pretty good event with a lot of good information packed into an hour long presentation.   I thought I would provide a link to the presentation materials.  They have a lot of great detail in them and are good as a primer if you are just getting started looking at government funding.

Posted in Events, Financing, Government Funding, OCRI, Startup | Leave a Comment »

New Quebec Goverment VC Fund Started with $700M

Posted by Shane McLean on May 4, 2009

Teralys Capital Fund is a joint effort of the Caisse de Depot et Placement du Quebec, the Solidarity Fund QFL and the Quebec Provincial Government who are putting in a combined $700M.  According to the announcement Teralys will fund private venture capital funds that invest in technology companies in sectors that include life sciences, information technology and clean technology.  Once again, I’m glad to see that government is leaving the management to professionals.

It’s not clear to me at this point how soon the dollars will start flowing or how you get on their radar screen, but for readers in tech companies with  a Quebec connection this should be your call to start figuring that out.  Let me know what you find.

Credit to Jonas Brandon at the StartupNorth Blog for putting up a link to the press release over the weekend.  We at LaBarge Weinstein had heard talk about this fund for a while but I didn’t catch the formal announcement last week until I read about it at StartupNorth.  Glad someone is paying attention!

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

More on Government Money

Posted by Shane McLean on April 28, 2009

Further to yesterday’s post about tapping into the world of government funding, it has been brought to my attention that  OCRI, The Ottawa Network and several of the local clusters are hosting an event on April 29 entitled: The Real Secrets Behind Getting Government Financing For Your Tech Company.  Looks like a good lineup.  See details here.

Posted in Events, Financing, Government Funding, OCRI, Startup | Leave a Comment »