Q-News

December 2010

Best wishes to all for a healthy and prosperous 2011

Posted in Mike's Commentary

Congratulations go out this month to Co-Chairs Robert Montgomery (Achilles Media) and Rick Nathan (Kensington Capital Partners) for their great work in driving the success of this year’s Canadian Innovation Exchange (“CIX”).  In its third year, CIX is now firmly entrenched as Canada’s leading annual showcase where innovative companies in the ICT, Digital Media and CleanTech space compete for recognition as industry leaders.

Following a day of superb presentations by 25 top-notch innovation companies (who made it through an initial screening of over 200 companies), three winners were selected; gShift Labs (Digital Media), BlueCat Networks (ICT) and GreenMantra Recycling Technologies (CleanTech).  In addition to company presentations, the day was filled with very informative panels, sessions and opportunities for entrepreneurs to meet one-on-one with many of Canada’s top investors. 

On a personal note I would like to thank cigar smoking, duck shooting Charlie Lax from Grandbanks Capital for his amusing annual rant on how Canadians don’t know how to sell or market and are never able to ask for the deal.  His “ugly American” routine is a throwback to the 60’s and while both irritating and fun to watch, makes me want to send him a copy of Thomas Friedman’s “The World is Flat”.  In Charlie’s mind, Canadian entrepreneurs lack the sales savvy necessary to build substantial businesses, meaning that he has to move the top management of his Canadian investee companies to Boston or New York where he can keep a close eye on them and find the appropriate U.S. sales team to drive business.  Charlie also likes the fact that while valuations in Boston are about 70% of those in The Valley, valuations in Canada are at an additional substantial discount to those of Boston.  As long as other US VCs don’t see the opportunities in Canada, Charlie will be here and when smart money begins to move to Canada, Charlie insists that he will be moving on. 

While I personally like Charlie and find his shtick amusing, I do find his views telling and to some degree I’m still not sure when Charlie is expressing his real opinion or just acting out to get attention and cause a stir.  I sincerely hope it’s the latter.    In our current funding environment companies are often forced to take money on valuations and terms and conditions that obviously would not be acceptable if there were multiple sources of growth capital competing for deals.  My read on Charlie’s comments is that while our tech companies are desperate, Charlie’s here to take advantage of the limited competition and once he has to compete for deals he’s out the door.  I hope I’m wrong because having GrandBanks investing in Canada is a good thing but when the competition heats up I would have hoped that they would have been able to convince us that they bring more to the table than money and I just didn’t hear that in Charlie’s rant. 

By the way, Charlie’s views were more that offset by Michael Greeley, a General Partner at Flybridge Capital Partners, Jeff Grammer from Rho Canada and Chris Albinson, Co-founder and Managing Partner of Panorama Capital.  Each of these individuals and their firms have been very active in Canada, bring insight and investment value and are welcome additions to the Canadian investment scene.

On another note, Mentor Monday has fast become an important monthly showcase of Canadian technology companies and an excellent networking event.  Last’s month’s presentations were put on by Michael Ho, CEO of Bering Media, Chris Sukornyk, CEO of Chango and Wendy Robertson, CEO of Kneebone.  Hats off to Howard Gwinn and the boys from Bridgescale Partners for taking an active role in the tech community and driving the success of this increasingly important event.

Finally, this week Christmas came early for both entrepreneurs and investors in two Canadian companies: Protus IP Solutions and CognoVision Solutions.   Protus IP Solutions was acquired by j2 Global Communications, Inc. in a $213 million transaction that provided significant returns for long-time VC investors BEST Funds, BMO Capital Corporation, Celtic House Venture Partners, Covington Capital Corporation, Edgestone Venture Fund and Mosaic Venture Partners.  For a number of these investors, the sale of Protus represented over a 9X return on their initial investment.  Established in 1997, Protus received its first round of institutional investment in 1999 and, by growing to become a leading North American SaaS provider, provides an excellent example of the importance of venture-backed financing.

CognoVision’s acquisition by Intel is a great example of the ability of young Canadian entrepreneurs to develop world class technology while working through the challenges of our current capital market challenges.  With support from MaRS, CognoVision developed market-leading real-time audience measurement and retail intelligence solutions for retailers and the out-of-home advertising industry.  Acquired for a number reportedly between US$17 million and US$25 million I have to think that Haroon, Shahzad and Faizal will find this holiday season to be particularly festive and rewarding.

As we approach our 10th anniversary of working with Canadian entrepreneurs to meet their monetization, liquidity and financing needs we can look back on many successful transactions and the challenges and fulfillment of building our business.  We have made many new friends this year and look forward to what we see as an increasingly positive outlook for 2011.  As we move toward the close of 2010, we at Q1 Capital would like to wish all of our readers and friends good health and prosperity in the coming year and all the best for 2011. 

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