Summit 05 Cd Session 09b Presentation

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  • Summit 05 Cd Session 09b Presentation

    1. 1. National Angel Organization Annual Summit Terry Matthews October 24th, 2005
    2. 2. Who is Wesley Clover? <ul><li>Significant investments in: </li></ul><ul><ul><li>Next Generation Networks </li></ul></ul><ul><ul><li>Real Estate </li></ul></ul><ul><ul><li>Leisure and Golf resorts </li></ul></ul><ul><li>Founded or funded over 60 hi-tech startups </li></ul><ul><ul><li>Not as a ‘pump and dump’ investor </li></ul></ul><ul><li>Most major investments are here in Canada </li></ul><ul><li>Pretty good run-rate from initial investment to IPO </li></ul>
    3. 3. Investment Philosophy <ul><li>Investment decisions based upon ideas and people </li></ul><ul><li>Innovation is important, but innovation without commercialization is a challenge </li></ul><ul><li>Use the success to fuel new investments </li></ul><ul><li>Use stock options as a reward for success and encourage employee share ownership </li></ul><ul><li>Leverage Government funds where possible </li></ul><ul><ul><li>Generate an attractive return to all parties </li></ul></ul>
    4. 4. When Is a Good Time to Invest? <ul><li>Now is a good time to start a new venture, the talent is available </li></ul><ul><li>Technology cycles come in waves </li></ul><ul><li>Ottawa is a good example of a technology cluster, critical mass has been established here </li></ul><ul><li>Need to stimulate more early stage investor activity </li></ul><ul><ul><li>Federal Government must encourage tax breaks for early investors – historically there is evidence of a 6:1 $ benefit to the federal government for every additional dollar invested in R&D intensive companies </li></ul></ul><ul><ul><ul><li>Investors will reap benefits </li></ul></ul></ul><ul><ul><ul><li>Our portfolio companies will reap benefits </li></ul></ul></ul><ul><ul><ul><li>Canadian economy will reap benefits </li></ul></ul></ul>
    5. 5. A Proof Point 604%+ Direct Return Government Investment in Newbridge
    6. 6. Venture Capital (Canada) Source: OCRI $CAN Millions
    7. 7. Concerns <ul><li>Lack of incentives for startups </li></ul><ul><li>Ottawa has great technical skills - leadership and commercial pool needs to be improved </li></ul><ul><li>Cost of Canadian innovation versus China and India </li></ul><ul><ul><li>In Canada, R&D as a percentage of GDP has declined since 2001 - In Asia (China, Taiwan and India) it is surging </li></ul></ul><ul><ul><li>From 1995 to 2001, gross R&D spending in China, South Korea and Taiwan increased by about 140%. In Canada and the US it increased by only 65% and 34% respectively </li></ul></ul><ul><ul><li>Chinese patents filed through the World Intellectual Property Organization 38% last year. Canada dropped 7%. </li></ul></ul><ul><li>Many new innovations acquired by US Companies - need to maintain a strong base here </li></ul>
    8. 8. Summary <ul><li>Innovation is our life blood and we must strive for continued improvement </li></ul><ul><li>It requires support from Government, Industry and Academia </li></ul><ul><li>This is not a time to be complacent! </li></ul><ul><li>It is a time for this country to be involved and not just a participant </li></ul><ul><li>I continue to be involved and will be for a long time to come </li></ul>
    9. 9. Thank you...
    10. 10. The Telecom Nuclear Winter <ul><li>Telecom industry is a $150B industry – but came down from a peak of $250B+ </li></ul><ul><li>It is a global market and Ottawa/Canada is one of the centres of excellence </li></ul><ul><li>The market will evolve and new technologies will be adopted – it is a matter of time </li></ul><ul><li>Bold investments will return handsomely </li></ul><ul><li>Technology change causes churn in Telco and enterprise capital expenditures (typical industry cycles and technology waves) </li></ul>
    11. 11. A Dollar Here versus a Dollar There <ul><li>Value of a dollar in our economy versus in their economy </li></ul><ul><ul><li>Capital gain (tax) </li></ul></ul><ul><ul><li>Capital spend </li></ul></ul><ul><ul><li>Operational expenditure (rent, professional fees) </li></ul></ul><ul><ul><li>Salary base </li></ul></ul><ul><ul><li>Consumption taxes </li></ul></ul><ul><li>Intellectual capital and our centre of excellence </li></ul><ul><li>Knock on effect - $1 invested generates $10 of economic activity </li></ul>
    12. 12. Net Benefits Flowing to Government from Newbridge <ul><li>$ Billions in exports over the life of the company </li></ul><ul><li>$ Hundred Millions invested in R&D </li></ul><ul><li>Thousands new high tech jobs in Ottawa alone </li></ul><ul><li>New tax revenues of over $Hundreds Millions </li></ul><ul><li>Anchor company for high tech cluster (affiliate program) </li></ul><ul><li>Development of several hundred local supplier jobs </li></ul><ul><li>Strong relationships with local universities </li></ul><ul><li>2,000 hrs/employee of training - increasing local skill base </li></ul>
    13. 13. Stimulate R&D Investment through Private Sector (VC/Angel/private equity) Funding Sources
    14. 14. Let’s Encourage Early Stage Investment <ul><li>Angel community needs encouragement now!! </li></ul><ul><ul><li>VC’s are in the process of returning funds to investors (ie. They are NOT investing the money they have today!) </li></ul></ul><ul><li>Capital Gain tax holiday for early stage investor cost only 1.5% ($88) of the net-net proceeds of the $5,783 additional taxes reaped from the program </li></ul><ul><li>Not in the analysis </li></ul><ul><ul><ul><ul><ul><li>A profitable operating company (value to the economy of $30k - $50k per job - based on incentives paid to attract investment) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Economic benefit from wealth creation through employee option plan (beyond salary driven accelerator effect) – Value to economy of a higher ratio of Disposable Income per Job Created? </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Wealth creation in the hands of the Angels </li></ul></ul></ul></ul></ul>Reinvestors in economic Activity!!
    15. 15. Venture Capital (Ottawa) Source: OCRI
    16. 16. Summary <ul><li>Early stage investment is a significant driver for the economy </li></ul><ul><li>We should be investing when the price is low so we can reap when the price is high </li></ul><ul><li>Two significant actions: </li></ul><ul><ul><li>TCG exemption for early stage investors to get things rolling </li></ul></ul><ul><ul><li>ESOP tax exemption to retain our best and brightest </li></ul></ul>
    17. 17. <ul><li>Enterprise gateways and IP Telephony and Applications </li></ul><ul><li>Advanced desktop applications </li></ul><ul><li>Hosted key systems </li></ul><ul><li>Session Border Controllers </li></ul><ul><li>XML Routing </li></ul><ul><li>Rapid new service creation and deployment </li></ul><ul><li>Peer to peer policy management </li></ul><ul><li>Carrier class media processing platforms </li></ul><ul><li>Digital Video Recording Solutions </li></ul><ul><li>Policy Management Solutions </li></ul>
    18. 18. Present Value Impacts on Tax System $1,000 Early Stage + $5,000 Follow-on Investment <ul><li>Capital gains $528 </li></ul><ul><ul><li>Early stage $88 ($113 five years out) </li></ul></ul><ul><ul><li>Later Stage $440 ($565 three years out) </li></ul></ul><ul><li>Salary taxes $1,282 </li></ul><ul><li>Downstream activities $6,123 </li></ul><ul><ul><li>Corporate income taxes $389 </li></ul></ul><ul><ul><li>Transactional taxes $1,947 </li></ul></ul><ul><ul><li>Salary taxes $3,787 </li></ul></ul><ul><li>Costs (ITC’s and PV of future loss carry forward) $2,150 </li></ul>Net-Net – Each $1,000 Early stage investment yields $5,783 in Taxes

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