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C A N A D I A N V E N T U R E E X C H A N G E
Canada’s Public Venture Capital Market
Kevan Cowan, Vice President, CDNX
Angel Investor SummitOctober 30, 2001
Overview
The Venture Financing ChallengeThe Venture Financing Challenge
Canadian Market ResponseCanadian Market Response
CDNX PerformanceCDNX Performance
CDNX OpportunityCDNX Opportunity
Additional CDNX ServicesAdditional CDNX Services
The Venture Financing ChallengeThe Venture Financing Challenge
Canadian Market ResponseCanadian Market Response
CDNX PerformanceCDNX Performance
CDNX OpportunityCDNX Opportunity
Additional CDNX ServicesAdditional CDNX Services
The Venture Financing ChallengeThe Venture Financing Challenge
The Venture Financing Challenge
The Canadian Challenge…The Canadian Challenge…To provide entrepreneurs with access To provide entrepreneurs with access to capital to fuel economic growth.to capital to fuel economic growth.
0
5
10
15
20
25
30
35
40
1999 2000 Jan - June 2001
US Canada
0
5
10
15
20
25
30
35
40
1999 2000 Jan - June 2001
US Canada
US vs. CDN Investment
35:135:1
25:125:1
Private Venture Capital Investment RatiosPrivate Venture Capital Investment Ratios
Target 10:1Target 10:1
13:113:1
Venture Capital Patterns
West73%
Intl.4%
East23%
West73%
Intl.4%
East23%
Public VCPublic VCPrivate VCPrivate VC
Intl.20%
West11%
East69%
Intl.20%
West11%
East69%
January 1 - December 31, 2000January 1 - December 31, 2000
Overview
The Venture Financing ChallengeThe Venture Financing Challenge
Canadian Market ResponseCanadian Market Response
CDNX PerformanceCDNX Performance
CDNX OpportunityCDNX Opportunity
Additional CDNX ServicesAdditional CDNX Services
The Venture Financing ChallengeThe Venture Financing Challenge
Canadian Market ResponseCanadian Market Response
CDNX PerformanceCDNX Performance
CDNX OpportunityCDNX Opportunity
Additional CDNX ServicesAdditional CDNX Services
Canadian Market ResponseCanadian Market Response
Canadian Markets
Senior EquitiesSenior EquitiesToronto Stock Exchange -TSEToronto Stock Exchange -TSE
Senior EquitiesSenior EquitiesToronto Stock Exchange -TSEToronto Stock Exchange -TSE
Venture EquitiesVenture EquitiesCanadian Venture Exchange - CDNX Canadian Venture Exchange - CDNX
Venture EquitiesVenture EquitiesCanadian Venture Exchange - CDNX Canadian Venture Exchange - CDNX
DerivativesDerivativesMontreal Exchange - MEMontreal Exchange - ME
DerivativesDerivativesMontreal Exchange - MEMontreal Exchange - ME
Venture EquitiesVenture EquitiesCanadian Venture Exchange - CDNX Canadian Venture Exchange - CDNX
Venture EquitiesVenture EquitiesCanadian Venture Exchange - CDNX Canadian Venture Exchange - CDNX
Acquisition Benefits
clear graduation path
stronger image and profile
operational efficiencies
cost efficiencies
global competitiveness
clear graduation path
stronger image and profile
operational efficiencies
cost efficiencies
global competitiveness
CDNX Market NicheExchange Comparison
CDNXTier 2
CDNXTier 1
TSE Nasdaq
NTA $500KCdn
$1M Cdn $7.5MCdn
$4M US
Earnings $50KCdn
$100KCdn
$200KCdn
$750KUS
CDNXTier 2
CDNXTier 1
TSE Nasdaq
NTA $500KCdn
$1M Cdn $7.5MCdn
$4M US
Earnings $50KCdn
$100KCdn
$200KCdn
$750KUS
Successfully Meeting Market Needs
VancouverVancouver
CalgaryCalgaryWinnipegWinnipeg
TorontoToronto
MontrealMontreal
Listed Company Geography
Ontario27%
Quebec6%
US1%
Sask/Man2%
Alberta28%
BC36%
Composition of new listed companies in 2001Composition of new listed companies in 2001
January 1 - September 30, 2001January 1 - September 30, 2001
Overview
The Venture Financing ChallengeThe Venture Financing Challenge
Canadian Market ResponseCanadian Market Response
CDNX PerformanceCDNX Performance
CDNX OpportunityCDNX Opportunity
Additional CDNX ServicesAdditional CDNX Services
The Venture Financing ChallengeThe Venture Financing Challenge
Canadian Market ResponseCanadian Market Response
CDNX PerformanceCDNX Performance
CDNX OpportunityCDNX Opportunity
Additional CDNX ServicesAdditional CDNX Services
CDNX PerformanceCDNX Performance
Financing Performance
Oil & Gas11%
Mining16%
Other23%
Tech50%
Oil & Gas11%
Mining16%
Other23%
Tech50%
Oil & Gas22%
Mining19%
Tech31%
Other25%
CPCs3%
Oil & Gas22%
Mining19%
Tech31%
Other25%
CPCs3%
Year 2000Year 2000January - September 2001January - September 2001
Total equity financing = $2.4 BTotal equity financing = $2.4 BTotal equity financing = $882 MTotal equity financing = $882 M
Total Grad Performance
Growth one year prior to graduationGrowth one year prior to graduation
115
302
33
195
0
50
100
150
200
250
300
2000 Jan - Sept 2001
per
cen
tag
e
Average Market Cap Average Return
115
302
33
195
0
50
100
150
200
250
300
2000 Jan - Sept 2001
per
cen
tag
e
Average Market Cap Average Return
Overview
The Venture Financing ChallengeThe Venture Financing Challenge
Canadian Market ResponseCanadian Market Response
CDNX PerformanceCDNX Performance
CDNX OpportunityCDNX Opportunity
Additional CDNX ServicesAdditional CDNX Services
The Venture Financing ChallengeThe Venture Financing Challenge
Canadian Market ResponseCanadian Market Response
CDNX PerformanceCDNX Performance
CDNX OpportunityCDNX Opportunity
Additional CDNX ServicesAdditional CDNX Services
CDNX OpportunityCDNX Opportunity
Why CDNX?
gaining liquidity for high growth companies
alternative financing strategies
vehicle for financing mergers and acquisitions
employee stock options
transparent market valuations
streamlined graduation path to the TSE
gaining liquidity for high growth companies
alternative financing strategies
vehicle for financing mergers and acquisitions
employee stock options
transparent market valuations
streamlined graduation path to the TSE
When CDNX
Project Project or ideaor idea
R&D orR&D orprototypeprototype
CommercialCommercial stagestage
Stable Stable productionproductionstagestage
OperatingOperatinghistoryhistory
CDNX candidatesCDNX candidates
Private equity candidatesPrivate equity candidates
TSE candidatesTSE candidates
Tech Candidate Profile
working capital to fund operations 18 - 24 months
management team
– key positions filled– experience in industry– public company
background
working capital to fund operations 18 - 24 months
management team
– key positions filled– experience in industry– public company
background$0
$500
$1,000
Revenue Assets
$0
$500
$1,000
Revenue Assets
(000’s)(000’s)
CDNX and Angels
CDNX may provide Angels with:CDNX may provide Angels with:
early stage exit early stage exit
early stage liquidityearly stage liquidity
additional investment options additional investment options – opportunities to invest in and mentor undervalued public companiesopportunities to invest in and mentor undervalued public companies– information and financials are disclosed and publicly available information and financials are disclosed and publicly available
opportunities to diversify riskopportunities to diversify risk– no minimum investments for secondary market tradingno minimum investments for secondary market trading– new private placement rules present further opportunitiesnew private placement rules present further opportunities
CDNX may provide Angels with:CDNX may provide Angels with:
early stage exit early stage exit
early stage liquidityearly stage liquidity
additional investment options additional investment options – opportunities to invest in and mentor undervalued public companiesopportunities to invest in and mentor undervalued public companies– information and financials are disclosed and publicly available information and financials are disclosed and publicly available
opportunities to diversify riskopportunities to diversify risk– no minimum investments for secondary market tradingno minimum investments for secondary market trading– new private placement rules present further opportunitiesnew private placement rules present further opportunities
Capital Pool Company Program
unique way to list, introduced in 1987unique way to list, introduced in 1987
1,327 listed since inception1,327 listed since inception
1,034 CPCs have completed 1,034 CPCs have completed qualifying transaction since 1987qualifying transaction since 1987
90 new CPCs listed in 2001 raising 90 new CPCs listed in 2001 raising nearly $445 million in seed capital nearly $445 million in seed capital IPOsIPOs
141 former CPCs now on senior 141 former CPCs now on senior exchangesexchanges
48% of CDNX grads to TSE YTD 48% of CDNX grads to TSE YTD 2001 were CPC issuers2001 were CPC issuers
unique way to list, introduced in 1987unique way to list, introduced in 1987
1,327 listed since inception1,327 listed since inception
1,034 CPCs have completed 1,034 CPCs have completed qualifying transaction since 1987qualifying transaction since 1987
90 new CPCs listed in 2001 raising 90 new CPCs listed in 2001 raising nearly $445 million in seed capital nearly $445 million in seed capital IPOsIPOs
141 former CPCs now on senior 141 former CPCs now on senior exchangesexchanges
48% of CDNX grads to TSE YTD 48% of CDNX grads to TSE YTD 2001 were CPC issuers2001 were CPC issuers
As of September 30, 2001As of September 30, 2001
CPCs in Ontario
Introduction of program published for comment Introduction of program published for comment by the OSC by the OSC
Implementation details being finalizedImplementation details being finalized– review proceduresreview procedures– role of securities commissionrole of securities commission
Program launch in early 2002Program launch in early 2002
Introduction of program published for comment Introduction of program published for comment by the OSC by the OSC
Implementation details being finalizedImplementation details being finalized– review proceduresreview procedures– role of securities commissionrole of securities commission
Program launch in early 2002Program launch in early 2002
CPC Process
Traditional IPO processTraditional IPO process
Qualifying transactionQualifying transactionListingListing CPC processCPC process
Overview of CPC Process
Seed Financin
g
Public Offering
Trade as CPC
Prospectus R
eceipt
Prospectus R
eceipt
Announce Qualifying
Transaction
File Draft Info Circular
Obtain Shareholder
Approval
CDNX Listed
Company
IncorporateCPC 18 Months Maximum
IPO vs. CPC
IPO preferred when:
– transaction is certain– strong retail appetite– larger financings
required– wider structuring
parameters
IPO preferred when:
– transaction is certain– strong retail appetite– larger financings
required– wider structuring
parameters
CPC preferred when:
– going public for reasons other than raising equity
– market not conducive to an IPO
– issuer prefers to go public prior to market window opening
– issuer has financing sources that require a public vehicle
CPC preferred when:
– going public for reasons other than raising equity
– market not conducive to an IPO
– issuer prefers to go public prior to market window opening
– issuer has financing sources that require a public vehicle
Graduate Case Studies
Jul. 99 - qualifying transaction
Mar. 00 - $9.5 million special warrant deal
Feb. 01 - grad to TSE
First Capital Management and Caledonia Investments
Jul. 99 - qualifying transaction
Mar. 00 - $9.5 million special warrant deal
Feb. 01 - grad to TSE
First Capital Management and Caledonia Investments
Jan. 97 - qualifying transaction
Dec. 97 - Jun. 00 - six rounds of financing
Oct. 00 - grad to TSE
Triax and Working Ventures
Jan. 97 - qualifying transaction
Dec. 97 - Jun. 00 - six rounds of financing
Oct. 00 - grad to TSE
Triax and Working Ventures
Overview
The Venture Financing ChallengeThe Venture Financing Challenge
Canadian Market ResponseCanadian Market Response
CDNX PerformanceCDNX Performance
CDNX OpportunityCDNX Opportunity
Additional CDNX ServicesAdditional CDNX Services
The Venture Financing ChallengeThe Venture Financing Challenge
Canadian Market ResponseCanadian Market Response
CDNX PerformanceCDNX Performance
CDNX OpportunityCDNX Opportunity
Additional CDNX ServicesAdditional CDNX ServicesAdditional CDNX ServicesAdditional CDNX Services
Focus on management and governance
Comprehensive listings policy
On-going listed company regulation
Focus on management and governance
Comprehensive listings policy
On-going listed company regulation
Regulatory Program
InfoCDNX
Contact Information
Main Office Number– (416) 365-2200
Kevan Cowan– (416) 365-2207– [email protected]
Business Development:
Delilah Panio– (416) 365-2213– [email protected]
Main Office Number– (416) 365-2200
Kevan Cowan– (416) 365-2207– [email protected]
Business Development:
Delilah Panio– (416) 365-2213– [email protected]
Corporate Finance:
Tom Graham– (416) 365-2209
Ungad Chadda
– (416) 365-2206
Corporate Finance:
Tom Graham– (416) 365-2209
Ungad Chadda
– (416) 365-2206
C A N A D I A N V E N T U R E E X C H A N G E
www.cdnx.com