Canada like many countries is populated with large numbers of underserved and underfinanced companies due to the structural inefficiencies of equity based VC/PE and the limitations of debt, resulting in companies not raising needed monies to achieve their growth potential. The supply of capital is further restricted to an even narrower set of SMEs since Canada’s capital market is less efficient vs. the USA; requiring firms to be bigger with higher levels of revenues/profits to IPO on Canadian exchanges vs. American stock markets.
Investors mistakenly use venture loan and royalty based schemes to ‘sweeten’ returns to attack these market failures vs. implement as a 2nd generation solution to penetrate new investment niches, earn equity-like ROI and improve liquidity. It was this latter solution Innovative Ventures delivered to the Federal Business Development Bank of Canada (FBDB), C$3B AUM, for financing Canadian firms underserved by commercial banks and local venture funds.
IVI’s capacity building contributions included:
- Designed/created the investment program with the FBDB, committing C$100MM to establish venture loans as an asset class equal in status to the debt, guarantees and venture capital product lines within the FBDB
- Created the investment process to transact deals. Educated FBDB staff on the unique attributes of customer needs so the product would not cannibalize business from other Bank products
- SME targets included food/beverage, FMCGs, distribution, light mfging, technology, retail and wholesaling as examples. Deal amounts $C250k-$C1 million
- Increased efficiency of staff to profile clients, sell features and benefits as sales messages that overcome customer preferences for competitive investment products.
- Hired/trained staff to structure venture loan investments as a combination of debt/royalty. Negotiate terms, conditions and covenants that protect long-term returns when a firm grows slower-than-expected vs. be a victim of risk that erodes ROI. See here, IVI training program delivered to investment team
- Educated staff on the common mistakes that skilled investors inadvertently make in deal analysis and structuring, and solutions when transacting venture loan investments. Executed investments thru regional offices in Montreal, Toronto and Vancouver.
- Specified the qualitative monitoring criteria in marketing, product development, human resources and operations that snapshot tomorrow’s health of an investee company today, and provide a 12-18 month lead time for portfolio managers to affect a proactive response
“Consider IVI as your investment advisor and partner in planning and executing international private equity schemes. We can help you avoid the learning curve costs that skilled investors inadvertently incur when executing new investment programs.”