 |
 If you've ever wondered whether or not your company would be eligible for venture capital, Jacques Simoneau would suggest you first ask yourself this question: "Is my business going to change the world?"
"That may seem like a lofty goal but venture capital is reserved for a small percentage of entrepreneurs who are trailblazers in their fields. They often have very ambitious objectives," says BDC's Executive Vice President, Investments. Typical examples would be companies that are making their mark in areas such as biopharmaceutical technology, which is transforming the face of medicine, or telecommunications firms that are fundamentally changing the way we live. "These companies often take the world by storm," he emphasizes.
What is venture capital exactly?
"Venture capital is a source of financing that gives investors equity in your business. The investment is aimed at your company's development and growth, as well as the commercialisation of your products or services," he explains. "Injecting venture capital in a company involves a lot of risk for organizations such as BDC. Naturally, investors want to see a higher return for that risk. Ultimately, they're looking for an exit through an initial public offering or a strategic sale. Down the road, these companies are expected to perform and deliver the goods," he adds.
What's in it for you?
"Companies that are financed by venture capital often develop and grow faster," says Jacques Simoneau. "Getting venture capital opens the door to a network of like-minded business people. Money is just a commodity here. You also get access to people who may have years of experience in your field. Ultimately, you're building credibility with your industry peers," he emphasizes. Organizations that provide venture capital are often directly involved as advisors to entrepreneurs and usually sit on their board of directors. "BDC, for instance, provides management coaching to seed technology companies. This kind of coaching is invaluable to people who may have the right ideas but lack business experience," he says.
What counts in your proposal?
"Venture capital is not easy to raise, and the reality is that you have to really stand out in the crowd to get the attention of backers," says Jacques Simoneau. He contends that the winning ingredients of a venture capital proposal at BDC are the right technology, market potential and management team.
Technology reigns
"Your company has to have a technological platform that goes beyond a simple product. If you're developing a revolutionary electronic chip for cellular phones, for example, you might need to have the technology-driven R&D necessary to constantly bring new products to consumers," he explains. Generally, the bulk of BDC's venture capital is directed at companies in these sectors: information technology, life sciences, telecommunications and advanced technologies. "These companies are able to show that they can sustain growth in a very competitive business environment," he says.
A hungry market
"When you first approach an organization for venture capital, you have to think of it as a sales pitch. It's not just about due diligence, which will come later of course. It's about convincing your potential investors that you have a very clear plan to reach a specific market. You also have to have a strong business model. At the end of the journey, you need to know who you'll be selling to. Who's going to snap up your product or service," he says.
Businesses that are on top of the list for venture capital investors often have highly coveted intellectual property and knowledge that their competitors don't offer. An example would be patents, specific know-how or unique technology.
The right management team
Another important area to consider is ensuring that you have the right management team in place to turn your company into a success story. "You need the right mix of entrepreneurial drive and brainpower. Venture capital-funded businesses are often involved in long-term research where academics and business people strike alliances," says Jacques Simoneau.
Do you have the right type of financing?
On an annual basis, BDC receives hundreds of venture capital submissions. "When appropriate, these companies are redirected to other types of financing more suitable to their needs," he says. "When we get proposals from entrepreneurs, we can quickly judge if they're candidates for venture capital or better suited to another type of financing such as term loans," says Jacques Simoneau.
Another popular option today is subordinate financing which brings together some features of both debt financing and equity financing. Even though you need cash flow to repay the loan, the terms of repayment are generally more flexible than conventional debt financing. Subordinate financing is often associated to equity financing because BDC may participate in your company's growth by receiving stock options and/or royalties, depending on the terms of your agreement.
In the end, raising venture capital is another challenge for technology-driven entrepreneurs, says Jacques Simoneau. "It's not an avenue for everyone but it is possible with work and determination," he concludes.
|
  
|
|
