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					Venture Capital Financing

                  Update 2005
       Emerging Trends for Decision Makers
              November 30th, 2005

                     Annie Thabet,
            Former President of Réseau Capital
                  Partner, Celtis Capital

                       Élie Farah,
     Vice-President, Investment, Montréal International

                 Andrée-Lise Méthot,
President and CEO, Fonds d’Investissement en Développement
                     Durable (F.I.D.D.)

             Me Jean-François Pelland,
            Partner, McMillan Binch Mendelsohn

                                                             1
Venture Capital Financing

                  Update 2005
       Emerging Trends for Decision Makers
              November 30th, 2005


                2005 OVERVIEW

                  2006 TRENDS

            QUESTIONS & ANSWERS



                                             2
For A Better Performing
Industry In Québec
2005 REVIEW

              Annie Thabet
           Partner, Celtis Capital
      Former President, Réseau Capital

            November 30th, 2005
Agenda

• Evolution of the Québec industry over the
  last two years

 2005 Review
Evolution of the Québec Industry
Over The Last Two Years
Québec’s Share of Canadian Investments
In Venture Capital Has Decreased In 2005

           Billions of $ invested in Québec and
                    in Canada, 2003-05
                                                                    The investment rate seems to have
      2
                                                                     leveled off in Québec at $600
                                                                     million per year since 2003
     1,5



                                                                    For the first three quarters of 2005,
      1

     0,5
                                                                     Quebec’s share of investments
      0
                2003            2004              2005 (3 trim.)
                                                                     accounts for 27% of total
                       Québec   Reste du Canada
                                                                     investments in Canada compared to
                                                                     37% in 2003
     Source: Thomson Macdonald

                                                                                                         6
ITC* Sectors Regain Their Strength, Life
Sciences Are Losing Ground
  Investments in Life Sciences have                    Investments in Québec,
   decreased from 40% in 2003 to 13%                      per industry, 2003-05
   during the first three quarters of 2005
                                                 100%

  ITC sectors have regained their strength      80%

   during 2005, representing 50% of all          60%                                      Traditionnels

   investments                                   40%
                                                                                          TIC
                                                                                          Sciences vie
                                                 20%
  The traditional sectors currently              0%
   represent 37% of investments in                      2003      2004   2005 (3 trim.)


   comparison with 25% in 2003
                                              Source: Thomson Macdonald

                                              * Information Technologies and Communications

                                                                                                          7
Investments In Start-Up Companies Have
Significantly Decreased

        Investments in Québec according to                          For the first three quarters of
           development phase, 2003-05                                2005, expansion stage
                                                                     companies have secured 61%
     100%                                                            of the capital invested, as
      80%
                                             Autre
                                                                     compared to 40% in 2003
      60%                                    Redressement
                                             Achat/Rachat
      40%                                    Expansion              Investments in start-up
                                                                     companies have decreased to
      20%                                    Début de croissance

       0%
            2003     2004   2005 (3 trim.)                           32% in 2005 from 51% in
                                                                     2003
   Source: Thomson Macdonald

                                                                                                       8
Fiscalized Funds Have Doubled Their
Investments
 The Government’s share of investments
  has decreased to 7% for the first three
  quarters of 2005 from 33% in 2002                        Investments in Québec,
                                                          by investor type, 2002-05
 Fiscalized funds have more than doubled
  their investments, reaching 53% of the        100%
  investments in 2005                            80%                                  Autre
                                                                                      Institutionnel
 The independent private funds’ investment      60%                                  Corporatif

  share has remained low, at the 7-8% level      40%                                  Étranger
                                                                                      Privé indépendant
                                                 20%
 Foreign investors have increased their                                              Détail
                                                                                      Gouvernement
                                                  0%
  investments in Quebec to 16% from 7%                 2002   2003   2004   2005 (3
                                                                             trim.)




                                              Source: Thomson Macdonald


                                                                                                       9
2005 Review
 For a Better Performing Industry In The
 2010 Horizon
Following the work accomplished by the Secor firm and the
Brunet Committee as well as the consultations led by Réseau
Capital in 2003-04, the main industry players have agreed upon
the objectives to be reached in the 2010 Horizon:
    1. Financial returns comparable to the performance of the best
       world-class venture capital funds
    2. Investments by specialized private funds representing 50% of
       the total amount invested (vs. 8%)
    3. New funds providers to the industry (pension funds and
       others) in lieu of the Government
                                                                  11
At The Heart of the 2010 Strategy, The Acceleration of
The Implementation of Private Funds in Québec

  Implementation of a Strategic Investment Plan for the Capitalization of
   Specialized Private Funds:
     • A dozen of specialized private funds
     • For all development stages
     • In complement to current investors

  At first, mainly capitalized by:
     • Fiscalized funds
     • The Government

  By 2010, traditional funds providers will take over from the
   Government
                                                                             12
Actions Taken In 2004-05
 Privatization of Innovatech Montréal and Régions Ressources;
  withdrawal of SGF from venture capital
 Implementation of FIER program by the Quebec Government and of
  fiscalized funds
 Implementation of an indirect investment incentive aiming fiscalized
  funds: each $1 invested in a Quebec private fund will be recognized as
  $1.50 by the 60% rule
 Repositioning of the CDP combined with a proactive investment
  strategy in funds
 Allocation of indirect investment budgets in several institutions,
  among which BDC, Solidarity Fund QFL, Fondaction CSN, and
  Desjardins
 Discussions at the Federal level by CVCA to implement the Venture
  Capital Incentive Program
                                                                           13
A Review Must Be Done In Six Months

 The majority of these actions to encourage the
  capitalization of specialized private funds were
  implemented during the last few months
 Several private funds teams would currently be in
  fund raising mode, with closing expected during the
  next few months
 A progress review must be done in six months

                                                        14
www.reseaucapital.com

www.celtiscapital.com
Panel On Venture Capital Financing


              Elie Farah, Eng.
         Vice-President, Investment
            Greater Montreal, MI

            November 30th, 2005
Montréal International (MI)

  Created in 1996, Montréal International is a private,
  non-profit organization whose mission is to
  contribute   to    Metro      Montreal     economic
  development and to increase its international status.




                                                          17
Communauté Métropolitaine de
Montréal




                               18
Our Mandates

1. Increase foreign direct investment;

2. Attract more international organizations;

3. Facilitate the relocation of foreign strategic workers;

4. Accelerate the development of strategic clusters.


                                                        19
Our Vision

Montréal International seeks to position the
Communauté Métropolitaine de Montréal among
North American leaders with respect to wealth per
inhabitant.




                                                    20
 MI FUNDING

Our Financial Sponsors

 More than 120 members: private sector and institutions

 Government of Canada

 Government of Québec

 Communauté Métropolitaine de Montréal (CMM)

 City of Montréal

                                                           21
    Board of Directors

Board of Directors

27 members – 16 representing the private sector – 10 the public sector
and MI’s CEO
M. Pierre Brunet, Chairman of the Board – Montréal International
Chairman of the Board, Caisse de dépôt et placement du Québec
M. Jean-Jacques Bourgeault, Vice Chairman – Montréal
International
President, CDC Coaching
Me C. Stephen Cheasley, Treasurer – Montréal International
Partner, Fasken Martineau DuMoulin s.r.l.

                                                                         22
                                                                      Potential
                                     One on one                       investor           Follow-up
Promotion           Targeting        meetings           Follow-up
                                                                      welcome




                                              Follow-up mode

            MI in direct role   ratio “10”        “3”               “1”
              MI more in                     Agreement in                         Project
              follow-up
                                Structured                      Final project     implementation
                                             principle/MOU
                 role           project



                                                                                                     23
     Summary of Proactive Targeting For 2006
                         Priority Territories for Business Development:                       Other
                         Europe                                                               Countries /
                                                                 United States                Regions
                         •France       •England   •Germany       •CA   •MA   •PA   • IL •OH   •Japan
                         •Holland      •Spain     •Switzerland   •WA   •CT   •MD   •WI •MO    •China
                         •Belgium      •Sweden    •Austria       •AZ   •NY   •VA   •TX        •India
                         •Luxembourg   •Denmark                  •CO   •NJ   •FL   •MN        •Taiwan

Priority sectors for
Business
Development:

• Aerospace                       Proactive Business Development
• Agri-food
• Environment
• New Materials /
  Nanotechnologies
• Life Sciences
•Transport / Logistics
• ITC
     Other
                           Strategic intelligence gathering on Asia /
    sectorial
                           Reactive Business Development / Opportunistic
    clusters

                                                                                                            24
        Organizational Chart
                                      Daniel Grabowski                            Elie Farah
                                    Vice President Assistant                  Vice President IGM
                                  (+Partner and Subsidiaries)
                                                                                                Maria Froias
                                                                                                Executive Assistant




                                      Europe Team                                                                                 United States Team



                                                  Véronique Bourgault                                                                             Suzanne Bisson
                                                  Assistant                                                                                       Assistant


           Ronan Caillo                  Marianne Wurm                    Steve Adam                    Louise Thiboutot                  David McFarlane                John Rooke
              Director                         Director                      Director                         Director                         Director                     Director
       Business Development             Business Development          Business Development             Business Development             Business Development         Business Development

                    France                           Germany                       England
                    Belgium                          Austia                        Spain                              United States                 United States                 United States
                    Netherlands                      Switzerland                   Sweden
                                                                                                                          West                         Center                         East
                    Luxemburg                                                      Denmark


       Alexandre Lagarde                 Catherine Émond                    Ginette Audet                   Johan Eile                    Michèle Parent                 Bernard Dufour
         Project Manager                  Project Manager                  Project Manager                Project Manager                 Project Manager                Project Manager

  New Materials / Nanotechnologies,    Environmental technologies,    Life sciences, Farm-produce     ITC, Gaming, Multimedia,         Aerospace, Wood and papers,   Transport / Logistics,
  Construction, Tourism & Leisure      Energy, Chemistry,             industry                        Cinema                           Consumer goods, Metal         Call Centers, Finance
  activities                                                                                                                           industry
                                       Plastics processing industry
                                                                                                                                       Textile industry (fashion)

November 10, 2005

                                                                                                                                                                                                  25
Foreign Investment And Venture
Capital
 Montréal City of Knowledge

 High technological projects are tributary of venture capital

 Fundamental role in biotechnology: Conjuchem, Methylgene,
  Intellivax

 Difficulty in obtaining financing from other sources without
  having crossed the venture cap step beforehand


                                                                 26
At Stake: How To Manage The Current Low
Level of Venture Capital?
 Align business development efforts with investment priorities
  and criteria of fund managers

 Contribute to attract foreign venture capital firms to Montréal

 Pursue current representations to governments

 Focus the business development /Targeting efforts towards
  projects where human capital is key

                                                                    27
Business Cases: Example




                          28
                     Thank You!


                   Élie Farah
                   Vice President
                   Investment Greater Montreal

                   Tel : (514) 987- 8191
                   Fax: (514) 499-9547
                   E-mail: elie.farah@montrealinternational.com


                             Suite 8000                      H2Y 3X7
380 Saint-Antoine St. West                Montréal, Québec             www.montrealinternational.com



                                                                                                       29
Venture Capital In Sustainable
Development Era


 Andrée-Lise Méthot, ing. M.Sc., President and CEO
 Fonds d’investissement en développement durable
                   (FIDD), s.e.c.


                       November 30th, 2005


 Green and socially responsible
                                                     30
Revealing Signs
 "Venture Capital Funds aiming at corporations showing a            superior
 environmental performance show a trend of generating returns exceeding S&P
 500."
 Extract from « 2000 Annual Review of Eco-Efficiency Funds » John Buffington ans John Ganzi.

 “Issues dealing with environment protection, social questions and corporate
 governance impact long term shareholders value and in some cases, in a very
 significant way."
 Extract from « Materiality of social, environmental and corporate governance issues to equity pricing » published in June
 2004 by PNUE.

 " Endorsing institutions are convinced that a better consideration of
 environmental, social and governance factors will ultimately contribute to
 stronger and more resilient investment markets, as well as contribute to the
 sustainable development of societies."
 Extract from« Who cares wins » published in 2005 by Global Compact, an initiative from the general secretary of
 the United Nations Organisation, M. Kofi Annan
Revealing Signs


  Socially sustainable investment aggregated to 65,5 billions
  of dollars in Canada in 2004.

  Cleantech Venture Networks represents more than 3,6
  billions of US dollars in the clean technologies sector, which
  is currently ranked 6th in venture capital fields of investment
  in the US.
Revealing Signs

  CalPERS, Merrill Lynch, Citigroup, Ontario Teacher’s Pension
  Plan, ABN and UBS, from the Carbon Disclosure project,
  now impose to corporations resolutions aiming at considering
  the risks resulting from the changes to climatic systems.

  GE Energy, through its "Ecomagination Initiative", aims at
  doubling its revenue, from current 10 billion dollars, mainly
  through clean technologies and renewable energy.
           FIDD Approach: Life Cycle Management
    Gaz                       Eco-conception of goods
    emission
    reduction

Improved working                                                         Steps
conditions
                                                            Diagnostic
                     Final objective:
                    Enhanced financial
                      performance                           Investment Conditions
                                                            Subscription and shareholders agreements
 Eco-efficient disposal
                                                            Sustainable Development
                                                            Committee
                                                            Follow-up on item actions
                                         Optimal use of
                                         resources,         Re-Evaluation
                                         including energy
Multi-players implication
FIDD’s Investments

         CO2 Solution inc. is a high-tech company active in the recycling of carbon
         dioxide gas (CO2), the principal greenhouse gas.

         Corporation EARTH (Canada) is a global leader in the development of
         technologies geared at the recovery of hydrocarbons. By means of its exclusive
         RPA® and TORRTM technologies, EARTH specializes in the extraction of
         hydrocarbons from commercial wastewater.
         Recy-Clone inc. is a company that turns wood residue into environmentally-
         safe fire logs for the residential market.
         Bioetik inc. is a company that transforms certified organic food, producing
         organic energy bars known under the brand name Equibar.
         Bush Marine inc., is manufacturing deluxe electric boats under the brand
         name: Compagnie Canadienne de Bateaux Electriques. It is the only manufacturer in
         Canada.
Legal Update


        Me Jean-François Pelland
        McMillan Binch Mendelsohn

            November 30th, 2005




                                    36
Legal Update

 Regulation 45-106 (September 14, 2005)
  • Harmonisation of prospectus exemption rules
     ― Official introduction of Accredited Investors exemption
     ― Post-closing notice in lieu of pre-approval
     ― New Closed Issuer rules regarding new issuances




                                                                 37
Legal Update

 Fonds d’Intervention Économique Régional (FIER)
      • $378 M (Québec Government, FSTQ, Desjardins,
        Fondaction)
      • FIER-REGIONS ($1 private = $2 program)
          – 7 FR in operation on 22 accredited
          – $90 M committed on $156 M authorised
          – Max: $1 M per enterprise, $ 35 maximum assets value
            (private or public)


                                                                  38
Legal Update

 Capital Pool Corporations (TSX-V)
      • $2 M max before qualifying transaction
      • 18 months to complete qualifying transaction
      • Possibility to combine private placement, FIER or SMB
        Growth Stock Plan
      • 2002-2004 growth:
         – QC: 42 CPC. 26 completed QT, 8 ongoing QT



                                                                39
Legal Update

 AMB Growth Stock Plan (April 2005)
  • New “QSSP” regime
  • 100% Provincial deduction on admissible issuance
  • 3-year coverage ownership including by secondary market
    acquisition of admissible shares
  • Less than $100M in assets, more than 5 employees, general
    direction and more than 50% of salaries in Québec
  • End in 2009

                                                                40
Q&A



      41
Amongst our next event is
 a joint presentation with
    the TSX-Venture in
      February 2006.




                             42
          www.mcmbm.com




Toronto                   Montréal
                                     43

				
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