BUSINESS DEVELOPMENT BANK OF CANADA
PROSPERITY THROUGH INNOVATION
MR. JÉRÔME NYCZ
SVP, CORPORATE STRATEGY & SUBORDINATE FINANCING
APRIL 26, 2012
Canada’s Business Development Bank
In this presentation:
> About the Business Development
Bank of Canada (BDC)
> The importance of innovation,
growth and productivity for
Canada
> How BDC is supporting
innovation:
– Venture capital
– Subordinate Financing
– Information and Communication
Technologies (ICTs) strategy
2
BDC supports Canadian entrepreneurs
MISSION – Help create and develop Canadian business
through financing, venture capital and consulting services,
with a focus on small and medium-size enterprises.
1,900
29,000
EMPLOYEES
SME CLIENTS
$3B+
ANNUAL FINANCING
ACTIVITY
$18B
ASSETS
100
BUSINESS
CENTRES ACROSS
CANADA
$230M
IN DIVIDENDS PAID
TO SHAREHOLDER
SINCE 1997
3
BDC offers services for various needs
FINANCING
SUBORDINATE
FINANCING
VENTURE
CAPITAL
CONSULTING
SECURITIZATION
Term loans
with flexible
repayment
schedules
Hybrid
instrument
combining debt
and equity
without
ownership
dilution
Direct and
indirect equity
investments in
multiple
technology
sectors
Business
consulting,
planning and
management
solutions
Debt financing
that relies on the
pooling of illiquid
assets
$17B
committed1
2.9%
of Canadian term
financing market2
$500M
committed1
$737M
$711M
committed1
ABS outstanding
under CSCF4
5%
of reported VC
transactions ($) in
Canada3
1,927
mandates in F20121
$440M
authorized under
MSPSO4
1 As
at March 31, 2012
Based on 2008 data from Statistics Canada’s survey of SME financing suppliers, 2009
3 Based on BDC authorizations (direct investments only) versus total industry authorizations taken from Thomson Reuters
4 CSCF = Canadian Secured Credit Facility, outstanding as at February 29, 2012; MSPSO = Multi-Seller Platform for Small
Originators, authorizations as at March 31, 2012
2
4
BDC is a Crown
corporation
> Single Shareholder – the
Government of Canada
> Mandated to be financially
sustainable
> Mandated to play a complementary
role in the marketplace
> BDC supports entrepreneurs, and
responds to specific Government
requests
> The Government looks to BDC for
“real-life” insights into the world of
entrepreneurs
5
Innovation is a Government priority
The Canadian Government wants to create value-added jobs by
supporting innovation, with a focus on the ability of high-growth and
knowledge-based firms to access capital.
Innovation
Growth & Productivity
Prosperity
6
Capital is always needed for growth
> Revenue growth requires capital
> Growth firms often lack tangible
security
> Some also lack management
skills in marketing, HR
> High growth = high risk to many
commercial financial institutions
When high-growth
Canadian firms fail to seek
or secure the financing
needed to achieve a certain
scale:
> They are often acquired by
larger U.S. or international
companies.
> Future domestic and
international growth is cut
short, as are many benefits
to the Canadian economy.
7
VC - More, but smaller, funds
Number of GPs per
$1 trillion of GDP
Average GP fund size
CA $ Millions
1
2
U.S.
Canada
1
Assumes exchange rate of 1.21 CAD/USD
Average is inflated by larger funds, such as BDC, Growthworks, Vengrowth, and Fonaction
Source: McKinsey analysis based on data from Thomson Reuters, Thomson Financial, Funding Venture
Capital Deals for High-Growth Companies in Canada
2
8
VC - The jam is spread too thin
Average amount invested/company
CA $ millions
U.S.
Source: VC Reporter, Investment Analytics
Canada
9
VC - Less attractive exits
Canadian VC-backed companies exiting in the U.S.
perform worse than U.S. companies
Average exit price 2000-2009, CA $ millions
Many examples
of exhausted
funds pushing for
early exit
Canadian companies
exiting in Canada
Canadian companies
exiting in U.S.
Source: McKinsey analysis based on data from Thomson Reuters, Datastream
Analysis excludes impact of any Canadian companies not backed by VC
U.S. companies
exiting in U.S.
10
BDC’s venture capital model
supports innovation and growth
DIRECT
INVESTMENT
Build leading
Canadian
technology
businesses
Manage and
grow
diversified
portfolio
INDIRECT
INVESTMENT
Build and
support
world-class
Canadian venture
capitalists
STRATEGIC
INITIATIVES
AND INVESTMENTS
Help stimulate VC
and innovation
ecosystems
Attract, develop and retain high-potential investment professionals
Support objectives with a flexible and responsive organization
and an entrepreneurial VC culture
11
Strategic investment strategies
to fill the innovation financing gap
Accelerator
Investments
Seed/early stage
and small fund
> Catalyze emergence
> Provide an institutional
of new tech firms
> Mentor entrepreneurs
and improve their
chances of
commercialization
success
> Bridge the seed/early
stage gap
> Catalyze emerging
start-up/innovation
clusters
LP presence in the
seed/early stage
space
> Support high-quality
teams capable of
bridging the
financing/mentoring
gaps
> Identify, groom and
grow new GPs in
small funds
Strategic
Funds
> Support funds and
projects that have
compelling national,
regional or strategic
relevance
This framework includes well-defined investment criteria within the context of a national framework with a
regional approach. It is designed to ensure meaningful BDC impact, as well as a sustainable investment
model over the long term.
12
BDC Subordinate Financing
also supports innovation and growth
BDC Subordinate Financing:
> An approach based on trust, full
business partnership
> A pioneer in the field for over
10 years
> BDC offers experience:
–
–
–
–
Without dilution or conversion
Preset output
Less expensive
Non-interventionist
> Fast & effective process
> Flexible repayments schedule
> Variable return structure
13
Flexible financing for growth firms
What we finance
What we offer
What we look for
> Company Transition
> Subordinate Debt
> Quasi-Equity
> Passionate
entrepreneurs
executing their plan
> Synthetic Equity
> Solid management
> Mezzanine
> Equity
> Clear and defined
market position
> For an amount of
250k$ to 12M$
> Established line of
credit
– Inter-generations
– Existing direction
(MBO)
– New team (MBI)
> Growth
–
–
–
–
–
Cash flow funding
New markets
New product launch
Improving efficiency
Foreign development
> Over 3 to 7 years
> Acquisitions
14
Too few entrepreneurs use ICT
17%
use the Internet to sell their
products and services online
25%
use software for enterprise
resource planning or customer
relationship management
Source: NetPME 2011 - Use of ICT by Canadian SMEs (Cefrio) October 2011 – 2,000 SMEs surveyed
15
Scale matters: the larger the SME,
the more likely they are to adopt ICT
> Adoption rate of enterprise resource planning software packages in
Canadian SMEs
5-19 EMPLOYEES
20-99 EMPLOYEES
19.4%
33.3%
100-499 EMPLOYEES
Source: NetPME 2011 - Use of ICT by Canadian SMEs (Cefrio) October 2011 – 2,000 SMEs surveyed
51.9%
16
Entrepreneurs are constrained
by limited money, expertise and time
> Barriers to ICT Adoption
INADEQUATE ACCESS TO FUNDING
LACK OF COMPETENT OR
SPECIALIZED PERSONNEL
LACK OF TIME
23.2%
18.7%
10.4%
Source: NetPME 2011 - Use of ICT by Canadian SMEs (Cefrio) October 2011 – 2,000 SMEs surveyed
17
Entrepreneurs must adopt ICTs
to improve productivity
25%-30%
> In support of the Government’s Digital
Labour productivity gap
between Canada – U.S.,
increasing since 1984
Economy Strategy, BDC is helping
SMEs to understand and implement
ICT solutions.
15th
60%
“A key ... fact that emerged from the
diagnosis of Canada’s labour
productivity gap with the U.S. is the
much lower level of ICT investment
and capital stock per worker in
Canada relative to the U.S.”
Canadian ICT investment per
worker compared to U.S.
– Centre for the Study of Living
Standards, February 2010
Canada’s rank among OECD
countries, output per hour
18
BDC’s ICT strategy has three phases,
supported by various tools
Awareness
> Smart Tech site
−
−
−
−
e-Book
Ask a PRO
One pagers
Success stories/
testimonials
− Website Assessment
− ICT Assessment
Consideration
Adoption
> Website diagnostic
> Internet strategy
> Online sale
> System selection
> ICT essentials
> Social media
> ICT diagnostic
− Presence
− Coaching
− Monitoring
> e-Marketing
> Marketing campaign
> ICT financing
> External webinar
> Other solutions being
considered
> Speaking engagements
19
The ICT strategy is seeing results
BDC’s ICT Financing:
> Up to $50,000 at preferential
interest rates
> Reimbursed over 4 years
> Simplified and accelerated
process
> Term financing to cover
investments in ICT:
– Hardware
Since the launch in October 2011:
381
$40M
ICT loans
approved
approximate
value
33,700
14,865
visitors to
Smart Tech
Web
assessments
485
551
ICT
assessments
e-Books
downloaded
– Software
– Consulting Services
– Internet
20
Thank
Youinformation:
For
further
Jérôme Nycz
SVP Corporate Strategy & Subordinate Financing
Theodore Homa
Senior Partner, International Consulting Service
1 (514) 283-8742
Theodore.homa@bdc.ca
1 888 INFO BDC
www.bdc.ca
21
Back-up Slides
22
Testimonial: Educator Supplies Limited
> A national retailer of educational toys and teaching materials for
schools, daycares, teachers and parents with 25 retail stores across
Canada and multiple catalogues and web sites
This client
> Subordinate financing of $1M and term loan of $350K
increased sales
> Financing needed to upgrade technology/web presence, including
ICT hardware/software, to:
and improved
–
–
–
–
re-engineer its web sites and email generation capabilities
enhance ability to use social media in marketing
enable better marketing, customer communication and feedback
install computer kiosks in its stores for searching entire product catalogue
anticipates
ability to
communicate
with customers
23
Testimonial: tappeques.com
“BDC provided me a web diagnostic that will really make a
difference in improving my online bookstore and reaching more
customers in the unique market I am targeting … the diagnostic
provided a clear sense of direction as to where I should take my
business and make it successful. The final report was also very
well-structured. Overall, the online experience was amazing. It
truly was a great solution for my website.”
– Celina Gutierrez, www.tappeques.com
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