We 2012 workshop finance

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We 2012 workshop finance

  1. 1. Strategies for Raising Capital and Securing Financing
  2. 2. Agenda:1. Introduction of the Topic2. Discussion to determine the type of businesses and outlook for the future (size of business, adding employees, growth of 10%, 20%, 30%, selling globally)3. “Where We Fit In”4. Introduction of the panel5. Mark Usher, Partner, Wellington Financial LP Covering Debt6. John Marshall, President / CEO Ontario Capital Growth Corporation Government Programs7. Andrew Wilkes, Managing Director, Management Initiatives Inc Review of Equity8. Q&A
  3. 3. The Panel:• Mark Usher, Partner, Wellington Financial LP• John Marshall, President/ CEO at Ontario Capital Growth Corporation• Andrew Wilkes, Managing Director, Management Initiatives Inc., and Co-chair, National Angel Capital Organization (NACO)
  4. 4. Where Angels Fit In Stage of Research & Prototype Development Seed Start-up Growth Mature Developme nt Funding Intensity Government and Universities (10K-500K) Friends and Family (2K – 300K)Sources of Individual Angels Capital (10K – 250K) Single Angel Groups (250K – 1M) Angel Group Syndicate & Angel Funds (1M – 5M) Venture Capital (2M – 12M) M&A/IPO (91.5M/ 79.7 for venture deals) Commercial Banks
  5. 5. Wisdom Exchange 2012:Strategies for Raising Capital and Securing Financing Government Programs March 29, 2012
  6. 6. Ontario Emerging Technologies Fund (OETF)• $250M direct co-investment fund, investing into high-potential Ontario- based companies chosen by private sector qualified investors in: ► Clean technology; ► Life sciences and advanced health technologies; and ► Digital media and information communication technology companies.• Ease the lack of risk capital available to Ontario’s most promising companies• Qualified Investors source, assess, and negotiate investments based on market principles• OETF receives the same equity return as other market based investor ► Not a loan or grant• Currently 27 Qualified Investors and 4 Angel Syndicates• As of March 26, 2012 OETF has committed $55M in 35 co-investments (both initial and follow-on)• For more information please visit: www.ontario.ca/ocgc Strategies for Raising Capital and Securing Financing – Government Programs 6
  7. 7. OETF in Action – Qualified Investors Strategies for Raising Capital and Securing Financing – Government Programs 7
  8. 8. OETF in Action - Portfolio Companies Strategies for Raising Capital and Securing Financing – Government Programs 8
  9. 9. Investment Accelerator Fund (IAF) • Helps accelerate the growth of new technology companies being established in Ontario and positions them for further investment by angels and venture capitalists • Invests up to $500,000 in companies that have the potential to be global leaders in their field and provide sustainable economic benefits to Ontario • The IAF program is managed by MaRS and delivered through the Ontario Network of Excellence • For more information please visit: www.marsdd.com/aboutmars/partners/iaf Ontario Network of Excellence (ONE)• ONE is a province-wide team of member organizations with commercialization experts which include: ►experienced entrepreneurs ►sector-specific organizations ►tech-savvy advisors ►colleges and universities• Services and programs: ►Advisory services ►Industry-academic programs ►Financing and investors - ONE can steer ►Customer development businesses toward financing programs and ►Educational programs opportunities with potential investors• For more information please visit: www.oneinnovation.ca Strategies for Raising Capital and Securing Financing – Government Programs 9
  10. 10. FedDev• Established in August 2009 to help the southern Ontario economy mitigate and overcome regional and global economic challenges• FedDev Ontario supports the competitiveness, innovation, and diversification of southern Ontarios economy by: ► delivering strategic investments to businesses, not-for-profit organizations and communities; ► establishing and strengthening collaborative partnerships with key economic stakeholders; and ► representing the regions interests at the national level.• Offers a number of programs. One of note is the Investing in Business Innovation - boosts private sector investment in start-up businesses to accelerate the development of new products, processes and practices and bring them to market• For more information please visit: www.feddevontario.gc.ca Strategies for Raising Capital and Securing Financing – Government Programs 10
  11. 11. Executive SummaryHighlights• Wellington Financial manages a $450 million investment program. ► Canada’s 17th Fastest-Growing company according to PROFIT Magazine’s 2009 “PROFIT 100” rankings. ► 6 of the 2011 Deloitte Fast 50 – Canada’s• Highlights: fastest growing companiesbank; Senior debt or 2nd charge behind a – were Wellington portfolio companies; 10 of 2009/10 Deloitte Venture debt; Fast 50 to 4 year term, inc. renewals;companies. 6 months were also Wellington 30 days to close a transaction.• Cost of Capital:• Product Offerings: Up front fee (2%-3%) ► Term loans from $2 - $30 million; Coupon (12%-13%) ► No principal amortization. Warrant Coverage All in cost – high teens 11 11
  12. 12. Executive Summary: Target Customer Target Customer $450 • Must have meaningful revenue, $400 management, external board members, $350 etc. $300 ► Generally greater than $5 million in trailing revenue. $250Millions $200 • High growth private companies that want $150 to delay the dilution of an equity offering. $100 $50 • Existing users of amortizing venture debt $0 looking to re-fi. • Public companies needing capital not available at a suitable price or on an appropriate timeline. 12 12 • Companies feeling “the pinch” from their
  13. 13. Co-investment example www.PondBioFuels.com Angel investors $1,260 Commercialization customer 1,300 Commercialization grant 1,930 Commercialization loan 930 Total $5,420 13
  14. 14. Types Of Capital Available to Canadian High Growth Companies 14-Apr-09 Cost Capital Type of Capital Key Features Use of Capital Capital ProvidersSR&ED Tax Credits Zero! Up to 41.5% Credit Eligible R&D Govt of Canada Refundable Province of Ontario Claim < 18 MonthsSenior Debt P to P+3% First Security Working Capital Chartered Banks "On Demand" Fixed Asset Finance Asset Based Lenders Asset Based; Covenants Some Acquisitions P&I MonthlyMezz Debt/High Yield 10-15% Junior Secured Acquisitions Hedge Funds Monthly Interest/some PIK LBO / MBO Specialty Finance Principal Varies Working Capital Some Chartered Banks Balloon Pymts 5 year termSubordinated Debt 10%-17% Junior Secured Working Capital Merchant Banks Warrants/Success Fee Acquisitions Some Chartered Banks Cash flow Coverage Fixed Asset Finance Specialty Finance P & I Monthly LBO/MBO 2-5 year termVenture Debt 15-20% Junior Secured Typically Event Focused Venture Lenders Warrants/Success Fee M&A Specialty Capital Firms Enterprise value Focus Bridge to Higher Valuation Interest Only Growth Capital Board ObserverConvertible Debt 25%+ Unsecured Growth Capital Merchant Banks Convert @ a future date Fund R&D Venture Capitalists Limited Term/expiry Build out sales force Hedge Funds Board Seat Working Capital Growth Interest Capitalized AcquisitionsPreferred Shares 35%+ Liquidation Preferences Business Expansion Venture Capital Outrank Common Fund R&D Merchant Banks Typically 5 year term Build out sales force Angels Redemption/Retraction Working Capital Growth Board Seat Acquisitions Interest Capitalized Forced Sale process Senior Exec Approval Annual budget approvalCommon Shares 40%+ Board Seat Start Up Costs Angels Annual budget approval Fund R&D Merchant Banks Some Venture Capitalists 14
  15. 15. The Depth of Angel Capital
  16. 16. Where Angels Fit In Stage of Development Research & Prototype Seed Start-up Growth Mature Development Funding Intensity Government and Universities (10K-500K) Friends and Family (2K – 300K) Sources of Individual Angels Capital (10K – 250K) Single Angel Groups (250K – 1M) Angel Group Syndicate & Angel Funds (1M – 5M) Venture Capital (2M – 12M) M&A/IPO (91.5M/ 79.7 for venture deals) Commercial Banks© National Angel Capital Organization
  17. 17. NACO –The Canadian Angel Association • Non-profit association (small staff, volunteer Board) • Formal Angel groups and individual members (2000+) • 12th year - best practices in Angel investing • Networking events, annual Summit • Angel education and standards (Term Sheets, Diligence, Valuation +++) • Research studies and statistics (info generates $ for NACO) • Advocacy and communications (member value) • Finance (sustainability of NACO and groups) • www.angelinvestor.ca© National Angel Capital Organization
  18. 18. Significance of Angel Capital ANGELS Invest own $ Invest more Invest widely© National Angel Capital Organization
  19. 19. Worldwide Trends in Angel Investing! • Individual Angels banding together • formal group, informal groups • Matching funds (angels as a catalyst) • customers, tax credits, sidecar funds, government programs, network development • Capital milestone - focused - prototype validation → commercialization → global market penetration. • “Asset allocation in Angel portfolios ”© National Angel Capital Organization
  20. 20. Maximizing Return, Minimizing Risk • Items to consider: • Quality deal flow (executable high growth potential) • Depth of management • Smart money • Defined roles of participating Angels • Due diligence (value proposition, defensible, strong IP) • Deal structure vs. valuation • Scale fast – global business models (Opentext 5/95)© National Angel Capital Organization
  21. 21. Co-investment example www.PondBioFuels.com Angel investors $1,260 Commercialization customer 1,300 Commercialization grant 1,930 Commercialization loan 930 Total $5,420© National Angel Capital Organization
  22. 22. Join us in Halifax, Canada!•Date: October 24 – 26, 2012•Location: Marriott Harbourfront, Halifax, Nova Scotia, Canada•Registration: http://2012angelsummit.eventbrite.com/
  23. 23. Q&A

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