TH E G LOB E AN D MAI L T H U R S D AY , J U N E 2 2 , 2 0 0 6
A special information series
SMALL BUSINESS INNOVATION
Financing
A strategic approach to raising capital can generate returns beyond dollars
BY RANDALL ANTHONY MANG
ouxbe Video Technologies’ quest for funding to support its development and growth has netted the company more than dollars. Along the way, CEO Joe Girard and founding partner Dawn Thomas have learned invaluable lessons and attracted top-tier management, including former executives from IBM, Nike, PricewaterhouseCoopers and the film industry, now helping this innovative start-up realize its potential. Vancouver-based Rouxbe (pronounced ROO BEE) produces stepby-step instructional cooking videos for in-store promotions and broadcast over the Internet, offering shoppers and home cooks a novel way to see products in action, learn recipes and improve their cooking skills. Instead of charging viewers for these learning experiences, Rouxbe’s media is funded by consumer-brand companies, which use Rouxbe’s instructional videos and other web tools to engage customers. Mr. Girard says he and Ms. Thomas, who are both former chefs, conceived Rouxbe while operating a successful catering company that served B.C.’s film industry. In 2004, they sold that business and used some of the proceeds to launch Rouxbe. Further funding from family members and investors helped finance Rouxbe’s discovery phase and the development of its proprietary media capture process. “At these early stages, it’s really about people buying into you,” says Mr. Girard. “They were investing in me and Dawn.” By 2005, however, the company was ready to make another significant step forward, one that would require funding from angel investors and/or venture capitalists. John McDonald of Vancouverbased Rampworth Capital says this critical stage of development all too often catches companies off guard. “What’s your company worth? How do you make it worth more to an investor?” poses Mr. McDonald, a veteran entrepreneur who now helps businesses prepare for sale or financing. “This isn’t about day-today business. You have to look at your company as a product, from an investor-centric viewpoint.” He says entrepreneurs should begin by investigating how the financial marketplace values similar companies, and then consider whether their company’s strategy is taking the business towards a comparatively higher or lower valuation. Among the prerequisites are a clear exit strategy and a corporate structure that will enable investors an easy exit. “An institutional or angel investor won’t talk to you if they can’t see a way to get their money out,” says Mr. McDonald. He encourages owners to educate themselves rather than learn lessons the hard way. “There are workshops and seminars available. It’s a set of skills you have to have. It’ll put money in your jeans,” he says. Mr. Girard says, “Raising money outside your sphere of influence is a whole new world. You’re now speaking with people who don’t know you, who don’t necessarily trust you.” Fortunately, Mr. Girard sought expert advice early on. Among those who offered guidance was Glenn Ballman, a Vancouver entrepreneur best known for creating Internet blockbuster Onvia.com and
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HIGH-ENERGY PERFORMER
Kelowna-based Pacific Asia China Energy Inc. (PACE) may still be small, but its prospects are large. PACE holds contracts to help China explore for and develop its coal bed methane (CBM) resources – a fuel China needs to help it satisfy its energy demands. According to a technical report by Calgary-based Sproule International, one of the properties over which PACE has secured rights has a potential for up to 11.2 TCF (trillion cubic feet) of gas. “The general rule of thumb is that if you have one TCF of recoverable CBM, you should theoretically have a market cap of $1 billion,” says PACE CEO Devinder Randawa, who started PACE with about $15 million raised from private investors. Since going public earlier this year, PACE has attracted interest of institutional investors. While the company’s rise appears to have moved at a fast clip, Mr. Randawa says it follows years of due diligence that included securing contracts with the Chinese government and assembling technical expertise from Alberta, China and Australia to execute the company’s plans.
PHOTO: SUPPLIED
Entrepreneurs Dawn Thomas and Joe Girard show off the versatility of Rouxbe Technologies’ media, which provides up-close, step-by-step culinary instruction and product demonstration, and a new way for consumer brands to reach customers. Investors in Canada and the U.S. have backed Rouxbe’s concept and capabilities, bringing money and expertise to further Rouxbe’s goals. later executing its $230-million IPO on the NASDAQ. In 2004, Mr. Ballman launched the Genesis Exchange, a private securities exchange that brings pre-qualified companies together with potential investors. Mr. Girard says Mr. Ballman and others showed him the importance of incorporating value drivers and mechanisms into Rouxbe’s practices to help build a “platform of trust” essential to attracting outside investment. For example, early on, Rouxbe began practicing corporate transparency through regular shareholder communications, and its disclosure of financials to current and potential investors. Mr. Ballman also demonstrated the value of building relationships. Last summer, he selected Rouxbe and four of other firms to meet with accredited investors, lawyers and commercial bankers in B.C., Alberta and the U.S. The experience generated returns beyond dollars. “For us, it was about listening to good advice and then executing on that advice. Not all of it was easy,” says Mr. Girard, who notes, “We had run a company that did a million in sales. But Rouxbe is a company projecting $30 million to $40 million in sales. People told us we needed to improve our execution team. They started to open doors to people who they felt might be able to help.” The process snowballed with influential individuals in Seattle, Portland and Vancouver taking personal and vested interests in the company. Ultimately the path led Rouxbe to sign former IBM and Amazon executive Wes Arens as president and COO, and former Nike vice president brand communications Rick Anguilla as Rouxbe’s brand advisor. Mr. Girard says it wasn’t just economic opportunity that drew this talent. “We didn’t have six-figure paycheques to hand out. They see in Rouxbe a potential to help them achieve their personal goals. That’s a connection they share with everyone on this team.” The bottom line? “We now have the people in place who are accelerating the execution of our business plan. They also bring to the team a level of trust and credibility that investors are looking for.”
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AN ANGEL ON YOUR SIDE
Thinking of raising capital for your business? Consider approaching an angel. That’s the advice of Glenn Ballman, an entrepreneur who created e-commerce giant Onvia.com. He now heads Genesis Exchange, a private securities exchange that pre-qualifies companies and provides a forum for them to interact with potential investors. The exchange also enables companies and angel investors to explore opportunities beyond their local networks. “More than 49,500 companies last year raised angel financing in the U.S.,” says Mr. Ballman, who notes that average angel seed financing ranged from $22,000 to $500,000. Last year, Genesis helped companies raise $9 million. For more information, visit www.genesisexchange.com.
This supplement produced by Randall Anthony Mang (www.randallanthony.com) for The Globe and Mail. Project Manager Richard Deacon. rdeacon@globeandmail.com
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