Miners, Marijuana and Mahjong Done, CSE Turns to TechnologyBy
Canadian Securities Exchange wants to attract tech firms
Won’t be easy, venture capitalists say: private means patient
"I would love to see more technology companies," Richard Carleton, 57, chief executive officer of the Canadian Securities Exchange, said in an interview at Bloomberg’s Toronto office. "But one of the challenges that we’ve got is those kids all watch Silicon Valley, they read all those books, and they think the VC world is the model, that’s how tech companies grow."
Carleton’s ideal CSE would be like the NASDAQ in the 1970s, rich with patent owners the world hasn’t yet heard of. That won’t be easy: only two Canadian technology firms have raised more than C$100 million ($74 million) through initial public offerings in the past three years, Shopify Inc. in 2015 and Kinaxis Inc. in 2014.
Technology startup companies won’t easily give up the relative safety of private capital -- "contacts, mentorship, knowhow and experience" -- for the rough-and-tumble world of public markets, said Mike Woollatt, chief executive of the Canadian Venture Capital and Private Equity Association.
Private is Patient
"They call private capital ‘patient capital’ for a reason; there are ups and downs that you can ride with private capital," Woollatt said by phone from Vancouver. "That said, it’s only patient for so long. Venture has a timeline: these funds are raised for 10 years and they need to invest in your company, scale up, and either exit or see big success within that timeframe."
The TSX Venture Exchange, owned by TMX Group Ltd. and the main competitor to the CSE, is also working to win more tech listings.
These aren’t the listings the CSE is targeting. It’s a tiny exchange, handling only about 2 percent of the value of shares traded in Canada during the past four quarters, according to regulatory data. It uses lower costs and more lenient rules to attract companies and it focuses mainly on juniors, particularly in the mining and marijuana sectors, which together make up about half of its total listings.
Carleton said listing on the public markets is rare for early-stage tech companies in the U.S. but that doesn’t have to be the case in Canada.
Friendly Dating Service
"In Canada, we are a really, really friendly jurisdiction for public capital and it is a genuine option for these companies to look at raising growth capital from the public markets," he said. "This is a story we’ve all got to sell."
To do this, Carleton and his colleagues at the CSE visit angel investor groups, universities and tech conferences across the country. They’ve even hired some "reformed venture capitalists" south of the border to help them make their pitch to U.S.-based startups.
"We’re running a dating service for them, to introduce them to advisers and accountants and lawyers," he said.