Geoff Catherwood

www.bdc.ca/venturecapital

Venture CapitalMay 4, 2009

Business Development Bank of Canada

Overview

•BDC Venture Capital StructureBDC Venture Capital Structure

•Venture Capital Investment Venture Capital Investment ParametersParameters

•Venture Capital Investment CriteriaVenture Capital Investment Criteria

•Approaching a VC – the ProcessApproaching a VC – the Process

•VC Rules of ThumbVC Rules of Thumb

BDC Venture Capital - Structure

•Main Fund - (~$600M)Main Fund - (~$600M) •160 Companies in portfolio across 160 Companies in portfolio across CanadaCanada

•Annually: ~$100M in ~90 companies.Annually: ~$100M in ~90 companies.

•Fund Investments – ($150M)Fund Investments – ($150M)

•18 VC Funds18 VC Funds

•Annually: ~$50M in 10 funds.Annually: ~$50M in 10 funds.

•People - People - 30 investment professionals with 30 investment professionals with business and technology expertise.business and technology expertise.

•Vancouver (5), Calgary, Ottawa, Toronto & Vancouver (5), Calgary, Ottawa, Toronto & MontrealMontreal

BDC Venture Capital Investment Parameters

•Tech. Focused – Life Science, Telecom, IT & Tech. Focused – Life Science, Telecom, IT & EEEMEEEM

•EEEM = Energy, Environment, Electronics & EEEM = Energy, Environment, Electronics & Materials (“Cleantech”)Materials (“Cleantech”)

•Previous EEEM Investments include: Ballard, Previous EEEM Investments include: Ballard, Creo & XantrexCreo & Xantrex

•Investment Range, $500k to $3M with follow on Investment Range, $500k to $3M with follow on investments (Up to $1M for “Seed Investments”)investments (Up to $1M for “Seed Investments”)

•Long Term Perspective – 3-7 year horizonLong Term Perspective – 3-7 year horizon

•Active on Board and Board CommitteesActive on Board and Board Committees

•Syndicated Deals (part of $5-10M round)Syndicated Deals (part of $5-10M round)

•Lead Investor or Syndicate PartnerLead Investor or Syndicate Partner

VC Investment Criteria•Ideal CandidateIdeal Candidate

•Private Private Technology-basedTechnology-based CompanyCompany

•Strong ManagementStrong Management

•Strong Competitive AdvantageStrong Competitive Advantage

•Protected Protected Intellectual PropertyIntellectual Property

•Large Market with High-Growth PotentialLarge Market with High-Growth Potential

•Sound Business ModelSound Business Model

•Comprehensive Business PlanComprehensive Business Plan

•Reasonable ValuationReasonable Valuation

•Credible Route to Liquidity EventCredible Route to Liquidity Event

The Process – Timing Considerations

•11 Contact VC – submit Exec Summary, BP, Contact VC – submit Exec Summary, BP, pitchpitch

•22 Preliminary Due Diligence; site visitsPreliminary Due Diligence; site visits

•33 Detailed DD (expert reviews if required)Detailed DD (expert reviews if required)

•44 Negotiate & sign term sheetNegotiate & sign term sheet

•55 VC’s obtain internal authorizationVC’s obtain internal authorization

•66 Legal documentationLegal documentation

•77 Closing and cheque disbursementClosing and cheque disbursement

Note:Note: This process typically takes 4 to 12 This process typically takes 4 to 12 months!months!

VC Industry Rules of Thumb•Out of 80-100 approaches per year…Out of 80-100 approaches per year…

•20 will get a meeting to “pitch”20 will get a meeting to “pitch”

•4 will get to detailed due diligence4 will get to detailed due diligence

•2 will get to a term sheet2 will get to a term sheet

•1 will receive funding1 will receive funding

•Out of 10 VC Investments made…Out of 10 VC Investments made…

•2 will fail in the short term2 will fail in the short term

•6 will become “living dead” or “lifestyle” 6 will become “living dead” or “lifestyle” companiescompanies

•2 will become “winners” (returning >5X-10X 2 will become “winners” (returning >5X-10X $)$)

Thank You

EEEM Tony Van Bommel (Van) tony.vanbommel@bdc.ca

Geoff Catherwood (Van) geoff.catherwood@bdc.ca

IT Andrew Lugsdin (Van) andrew.lugsdin@bdc.ca

LifeScience Brenda Irwin (Van) brenda.irwin@bdc.ca

Website: www.bdc.ca/venturecapitalWebsite: www.bdc.ca/venturecapital