business development bank of canada prosperity through innovation
DESCRIPTION
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) - PowerPoint PPT PresentationTRANSCRIPT
APRIL 26, 2012
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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
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BDC supports Canadian entrepreneurs
1,900EMPLOYEES
29,000SME CLIENTS
$3B+ANNUAL FINANCING
ACTIVITY
100BUSINESS
CENTRES ACROSS CANADA
$18BASSETS
$230MIN DIVIDENDS PAID TO SHAREHOLDER
SINCE 1997
MISSION – Help create and develop Canadian business through financing, venture capital and consulting services, with a focus on small and medium-size enterprises.
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BDC offers services for various needs
FINANCING SUBORDINATE FINANCING
VENTURECAPITAL CONSULTING SECURITIZATION
Term loans with flexible repaymentschedules
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 financingthat relies on the pooling of illiquid
assets
$17Bcommitted1
2.9%of Canadian term financing market2
$500Mcommitted1
$737Mcommitted1
5% of reported VC
transactions ($) in Canada3
1,927mandates in F20121
$711MABS outstanding
under CSCF4
$440Mauthorized under
MSPSO4
1 As at March 31, 20122 Based on 2008 data from Statistics Canada’s survey of SME financing suppliers, 20093 Based on BDC authorizations (direct investments only) versus total industry authorizations taken from Thomson Reuters4 CSCF = Canadian Secured Credit Facility, outstanding as at February 29, 2012; MSPSO = Multi-Seller Platform for Small Originators, authorizations as at March 31, 2012
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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
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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.
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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.
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VC - More, but smaller, funds
Number of GPs per$1 trillion of GDP
Average GP fund sizeCA $ Millions
U.S. Canada
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1 Assumes exchange rate of 1.21 CAD/USD2 Average is inflated by larger funds, such as BDC, Growthworks, Vengrowth, and FonactionSource: McKinsey analysis based on data from Thomson Reuters, Thomson Financial, Funding Venture Capital Deals for High-Growth Companies in Canada
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VC - The jam is spread too thin
Average amount invested/companyCA $ millions
Source: VC Reporter, Investment Analytics
U.S. Canada
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VC - Less attractive exits
Canadian VC-backed companies exiting in the U.S. perform worse than U.S. companiesAverage exit price 2000-2009, CA $ millions
Canadian companies exiting in Canada
Canadian companies exiting in U.S.
U.S. companies exiting in U.S.
Many examples of exhausted
funds pushing for early exit
Source: McKinsey analysis based on data from Thomson Reuters, DatastreamAnalysis excludes impact of any Canadian companies not backed by VC
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BDC’s venture capital model supports innovation and growth
DIRECT INVESTMENT INDIRECT
INVESTMENT
Build and support
world-class Canadian venture
capitalists
STRATEGIC INITIATIVES
AND INVESTMENTS
Help stimulate VC and innovation
ecosystems
Build leading Canadian
technology businesses
Manage and grow
diversified portfolio
Attract, develop and retain high-potential investment professionals
Support objectives with a flexible and responsive organization and an entrepreneurial VC culture
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> Catalyze emergence 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
Strategic investment strategies to fill the innovation financing gap
> Support funds and projects that have compelling national, regional or strategic relevance
> Provide an institutional 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
Accelerator Investments
Seed/early stage and small fund
StrategicFunds
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.
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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
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Flexible financing for growth firms
What we finance
> Company Transition– Inter-generations– Existing direction
(MBO)– New team (MBI)
> Growth– Cash flow funding– New markets– New product launch– Improving efficiency– Foreign development
> Acquisitions
What we offer
> Subordinate Debt
> Quasi-Equity
> Synthetic Equity
> Mezzanine
> Equity
> For an amount of 250k$ to 12M$
> Over 3 to 7 years
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What we look for
>Passionate entrepreneurs executing their plan
>Solid management
>Clear and defined market position
>Established line of credit
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Too few entrepreneurs use ICT
use software for enterprise resource planning or customer relationship management
use the Internet to sell their products and services online
Source: NetPME 2011 - Use of ICT by Canadian SMEs (Cefrio) October 2011 – 2,000 SMEs surveyed
17%
25%
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>Adoption rate of enterprise resource planning software packages in Canadian SMEs
Scale matters: the larger the SME, the more likely they are to adopt ICT
Source: NetPME 2011 - Use of ICT by Canadian SMEs (Cefrio) October 2011 – 2,000 SMEs surveyed
20-99 EMPLOYEES
100-499 EMPLOYEES
33.3%
51.9%
5-19 EMPLOYEES 19.4%
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Entrepreneurs are constrained by limited money, expertise and time
LACK OF COMPETENT OR SPECIALIZED PERSONNEL
LACK OF TIME
18.7%
10.4%
INADEQUATE ACCESS TO FUNDING 23.2%
Source: NetPME 2011 - Use of ICT by Canadian SMEs (Cefrio) October 2011 – 2,000 SMEs surveyed
> Barriers to ICT Adoption
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Entrepreneurs must adopt ICTs to improve productivity
> In support of the Government’s Digital Economy Strategy, BDC is helping SMEs to understand and implement ICT solutions.
25%-30%Labour productivity gap between Canada – U.S.,
increasing since 1984
15th
Canada’s rank among OECD countries, output per hour
60%Canadian ICT investment per
worker compared to U.S.
“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.”– Centre for the Study of Living Standards, February 2010
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BDC’s ICT strategy has three phases, supported by various tools
> Internet strategy
> System selection
> Social media− Presence− Coaching − Monitoring
> e-Marketing
> ICT financing
> Other solutions being considered
Consideration AdoptionAwareness
> Smart Tech site− e-Book− Ask a PRO− One pagers− Success stories/
testimonials− Website Assessment − ICT Assessment
> Marketing campaign
> External webinar
> Speaking engagements
> Website diagnostic
> Online sale
> ICT essentials
> ICT diagnostic
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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
– Software
– Consulting Services
– Internet
Since the launch in October 2011:
381ICT loans approved
$40Mapproximate
value
33,700visitors to
Smart Tech
14,865Web
assessments
485ICT
assessments
551e-Books
downloaded
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1 888 INFO BDC www.bdc.ca
Theodore HomaSenior Partner, International Consulting Service 1 (514) [email protected]
Thank YouFor further information:
Jérôme NyczSVP Corporate Strategy & Subordinate Financing
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Back-up Slides
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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
> Subordinate financing of $1M and term loan of $350K
> Financing needed to upgrade technology/web presence, including ICT hardware/software, to:– 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
This client
anticipates
increased sales
and improved
ability to
communicate with
customers
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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