Archive for the ‘venture capital’ Category

NorthSpring Capital Partners Co-founder named GTAN’s Angel of the Year

Our warmest congratulations to Brian Hunter, co-founder of our sister company Northspring Capital Partners, for receiving the distinguished Golden Triangle Angel Network’s Angel of the Year award!

We extend our congratulations to Top Hat for receiving the prestigious Company of the Year award and to David Benton Leong, recipient of the Borges Community Builder of the Year award!

The Golden Triangle Angel Network held its 6th annual Pauli Awards on Tuesday June 20th night at Bingemans Conference Centre in Kitchener, celebrating seven years of unprecedented success for it’s members and the community. The Pauli Awards recognize leading contributors of local tech investments and celebrate GTAN’s success including over $35M in capital committed by Angel investors, thereby infusing over $62M of capital into local, early-stage companies.

Brian has over 35 years of experience in providing debt and equity financing to private and publicly held businesses in Southern Ontario. Having began his career with Canada’s leading private merchant bank, Roynat Capital, Brian later became Director and District Manager of the Kitchener office and has assisted hundreds of entrepreneurs with long term capital needs.

In 2009 Brian and Sol Algranti co-founded NorthSpring Capital Partners, a private equity fund that is focused on contributing to the growth of the next generation of great Canadian companies by providing risk capital to both traditional industry companies, such as manufacturers and distributors, and early stage technology company startups. NorthSpring Capital Partners recently announced investments in five high growth companies located in the Toronto-Waterloo technology corridor.

NorthSpring Capital Partners Invests over $1.5 million in Five Companies in the Toronto-Waterloo Technology Corridor

NorthSpring Capital Partners announced recent investments in five high growth companies located in the Toronto-Waterloo technology corridor:

  • SSIMWave Inc.
  • Intellijoint Surgical Inc.
  • Sprout Wellness Solutions
  • HTBase Inc.
  • Envoy Energy Inc. and ComTech CNG

IRAP Announces Support for Early Stage Firms

Accelerators and incubators based in Canada that support the development and growth of start-up companies can receive funding from the Industrial Research Assistance Program (IRAP).  The Canadian Accelerator and Incubator Program (CAIP) will provide non-repayable funding over a five year period to a limited number of qualified applicants.  To ensure that the funding is allocated to the appropriate sector needs, the program will be assisted by a Venture Capital Expert Panel, which will be  assembled by the Minister of Finance.  The National Research Council of Canada (NRC-IRAP) is accepting proposals until October 30, 2013.

The National Research Council of Canada Industrial Research Assistance Program (NRC-IRAP) is Canada’s first-class innovation program that supports small to medium sized enterprises (SMEs). IRAP is integral to the NRC and has been recognized world-wide for its contributions to innovation in Canada.

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Why Venture Capital is so Important

Greg Smith, president of Canada’s Venture Capital and Private Equity Association (CVCA), described the current landscape of Canadian entrepreneurship:

“Canada has an historic opportunity to become an innovation leader by making major investments that enable our best technology businesses to realize optimal growth and compete on a global stage,” he said in a statement. “However, in order to act decisively on this opportunity, we must first overcome challenges to supplying VC funds that, in turn, supply entrepreneurs.”

Without VC initiatives, small companies with big ideas are being caged by cash crunch – running low enough on cash so that it has a significant impact on operations. Exponential growth can also cause a company to be short on working capital. Business growth requires a steady cash flow, enabling the acquisition of equipment and personnel. Lacking VC, companies may be forced to unload assets or sell a part of the business to raise crucial funds.

The cheapest forms of financing are the sources taken for granted:

-Cash in bank account
-Revenue from sales
-Financing from tangible assets (accounts receivable factoring, purchase order factoring).

Aside from borrowing from friends and family, the next funding options come from cost-heavy debt or equity financing. Debt financing directs small businesses to traditional institutions, banks and credit unions, and many small businesses run into trouble meeting financing prerequisites. Equity financing or “share capital” – funding through selling common or preferred stock to individual or institutional investors – is dilutive in nature and requires loss of ownership and possibly control of the business.

In order to get to an operable stage, small businesses can also consider bridge financing and financing from intangible assets. Bridge financing is used to gain immediate cash flow while waiting for an expected inflow of cash. Basically bridge financing provides a forwarded payment for future sales or anticipated inflow of cash. Financing on intangible assets, such as SR&ED (Canada’s Scientific Research and Experimental Development credit program), is not often offered by the traditional institutions but is a non-dilutive form of bridge financing. North Innovation Fund (NIF) is one such source of funding, providing accrual SR&ED financing to support small business and entrepreneurs. NIF released their first Fund this month in response to the increasing demand of funding alternatives for start-up companies in Canada. SR&ED financing will bridge the funding gap for companies with R&D initiatives and new ideas to help make the leap to commercialization.

NIF offers a unique opportunity which includes support in identifying SR&ED activities and a friendly approach to funding. Initiatives like NIF will help push Canada to forefront of growth and innovation.

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Options for Early Stage Technology Companies to Finance Growth

The dilutive nature of early stage equity financing (i.e., giving up ownership) makes it the most expensive way to finance growth.  When a start-up does not have enough cash in the bank or cash flow to support their growth (hire more employees, fund working capital, etc.), the company is faced with a significant funding barrier that quite often results in tepid acceleration or worse, either bankruptcy or a fire sale.

When seeking various financing options, it always makes sense to start off with the cheapest form of capital until the threshold is met at which point, you would go to the next tranche of financing – for example (in the order of least to most expensive):

–          Cash on hand and internally generated cash flows;
–          Traditional bank debt;
–          Loans from friends and family;
–          Alternative debt financing (subordinated/mezzanine debt or factoring); and
–          Equity financing.

At the end of the day, all types of financing are based on one of two things: cash flow or hard (tangible) assets.  However, by leveraging its vast knowledge and experience in the SR&ED program, North Innovation Fund (NIF) focuses on an intangible asset – SR&ED accruals.  NIF is a provider of SR&ED accrual debt financing, which is timely, flexible and more importantly non-dilutive. What differentiates NIF’s SR&ED financing from other SR&ED financiers is the fact that NIF advances funds before the SR&ED claim is filed (i.e., beginning of the fiscal year). This type of funding plays a critical role in an early stage company’s capital structure by providing the runway to a future round of equity investment or a bridge to the next level of growth.

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