Private Equity Investors are Ready to Spend

David Simpson recognized the important role that family controlled businesses play in the Canadian economy, and became founding Director of Ivey’s Business Families Centre. As an operator in a family business himself, he supports learning in this vital sector of the Canadian economy and maintains a passion to promote this lifestyle choice.

Join David as he leads the discussion. Please note that space is limited to maximize the value to attending CEOs by ensuring a highly interactive environment.
Thursday, November 20th, 2008

10:30 am – 3:00 pm

The National Club

303 Bay Street,

Toronto

Bay Street & Adelaide, Downtown Toronto

Map Location & Parking
Cost
$148.00 + GST
To Register (Please note, business owners and CEOs only):
Please email: akobeleva@loewenpartners.com or call 416 961 0740 and ask for Anastassia

Agenda
10.30 am – 12:00 pm
David Simpson, The Richard Ivey School of Business, Business Families Centre - Welcome
Charles Loewen, C.P. Loewen Enterprises Ltd.
12:00 pm - 1:30 pm Networking and hot lunch
1:30 pm – 2:30 pm
Mark MacDonald, C.A. Bancorp
2:30 pm – 3:00 pm Networking

Gold Sponsor: Loewen & Partners works with private companies to raise growth capital. Our goal is to match owners of companies with suitable investors who understand the business and can add significant value. Over the past decade there has been a significant shift in the sources of financing available to small and medium-sized companies. This is primarily a result of the rise of private equity as the best place to access capital.

The Canadian Dollar is Ridiculously Undervalued

The storm is passing over according to a financial expert who called the Wall Street melt down in July, 2008.

"I think we're ending the financial crisis now," said Krishnamurthy Narayanan who studied under Paul Krugman at MIT and runs CI Global Opportunities Fund has returned 57 per cent in the past year, 19 per cent (compounded) over the past five. "
There will be countries, like the U.S., that will go into recession. But this need not be a global recession. And there are some encouraging signs on that front."
Narayanan was in Toronto and said he's buying Canada - the dollar, the oil, the companies. An excellent story in the Globe and Mail by Derek DeCloet ddecloet@globeandmail.com, October 25, 2008.

"The Canadian currency is ridiculously undervalued. I can't think of any country in
the world that has no fiscal deficit, no trade deficit and no inflation - except Canada. I think the Canadian dollar should go through parity. I like the whole Canadian market. I don't particularly dig the banks because I just don't know what's in there [on the balance sheet]. But I'd say virtually everything else is fine.

Canadian SMEs Need to Partner Up

"If Canadian companies want to survive the global economy, most current SMEs will need to find a partner to grow," said Jean Rene Halde, President and CEO of Business Development Bank of Canada. "Most SMEs - small and medium sized enterprises - are just going to need to get together with a competitor and partner."

Halde spoke to the Canadian Club of Toronto, October 20th, and explained that the new economy is no longer a small aquarium with room for many small fish. Imagine taking that aquarium to the ocean and now the fish can choose to stay in the glass box, even though the top is open? If they do leave their artificially safe old home, they will need to be a bigger size to avoid getting eaten.

With the Internet and global business borders, the world of commerce has jumped in size. SMEs will need to find suitable partners to buy. This next five years, companies will need to double or else close their doors. Find private equity to support your growth and help guide you out of your comfortable spot in the aquarium and out to the big sea.

Even Kevin Would Agree

I have been asked to blog for CBC's Dragons' Den, the Venture Capital reality TV show. It is a change from my usual writing style as the audience is different, so please take it with a big pinch of salt!

Every now and then, investors will take a punt. In other words, they put cash on a deal with the off-chance it may do well and spin off rich returns. This week, the Dragons played the lottery but also shared their appreciation for the finer elements of life – the Arts – by supporting two sensitive souls asking for $10,000 to complete their film project. Did these producers get lost on their way to the Canada Council for the Arts who gave a grant to the movie Young People F***ing. Then why not give a grant to a movie about a Canadian’s journey to the Playboy Mansion?
Of course, Dragon Arlene Dickinson grasped the marketing genius of these two artists who knew that by appearing on TV, they would build advance hype for their movie titled My Date with Hugh and expose it to a wider audience of highly intellectual and attractive Dragons’ Den viewers.
Dave, the producer, handed a card to the Dragons which had the list of movie stars appearing in the movie (I’m assuming in cameo roles). Suddenly, Dragons Kevin O’Leary and Robert Herjovec went into a feeding frenzy. But who’s names were on that list? Madonna’s soon to be released husband, Guy Ritchie? Perhaps Brad Pitt taking a break from Angelina and the kids? “Hi honey, I’m just stopping in to see some friends. Don’t wait up, love ya.”
That list also got W. Brett “Clint Eastwood” Wilson to briefly clench his jaw.
Brett approaches his deals like entering a bar room. He swaggers in, expressionless, and just when you think things are going swell, he whips out his six-shooter and blows holes in the deals. There went Herjovac’s offer of $25,000 for 25% of the business.
This left O’Leary spluttering, confused and annoyed,
“Why Brett, why? Why be a Bozo?”
Oh dear, using clown names on a big boy from Saskatchewan* – not good for building long lasting relationships. It just begs the question, did Kevin’s mother ever teach him about manners?
If you are pitching for capital and you find yourself in Dave’s delicious position of having investors start a bidding war, follow Arlene’s advise and ask what each investor group can do for you besides the money. Kevin claimed he had invested in a movie distribution company which made Dave rub his hands together and begin to drool, but Arlene warned that there was a strong whiff of bull manure in the air. Perhaps Kevin was invested in Disney - who knows - but Dave sure did not care and went with Kevin and Robert, leaving Arlene and Brett to twist in the wind. I suppose Kevin is more the target audience and Dave probably imagined himself having A Date with Kevin, drinking beers in his kitchen with the Explosion Bottlecaps and doing other manly pursuits. Yet, Arlene’s marketing ability may have created a more nuanced marketing campaign. Also, Kevin did confess to having an abysmal track record with movies.
There were two more artistic deals – fashion for plus-sized women and jewellery which Hollywood Stars are buying. What’s it with Hollywood? Why can’t we hear that Melinda Gates loved the necklaces?
When Cindy and Rina of Maximum Women described how they stay up into the middle of the night to make calls and do research, Jim Treliving appreciated that entrepreneurial craziness saying he did the same thing as he built his own business. Yet, Jim got the sense that Cindy and Rina knew what they were doing and cash would be used wisely. Arlene asked for 50% ownership, along with Brett and Big Jim. Despite the promise of long, dark, snowy Saskatchewan nights heating up with Brett stopping by for a hot chocolate beside the roaring fire, Cindy and Rina turned down the Dragons’ deal. Robert teased Arlene; finally, someone had stopped her from stealing their business.
The jewellery game is fickle and Kevin did a great job of questioning Rachel of Hillberg and Berk Jewellery but she convinced Brett to invest. The lesson here as that Rachel really knew her numbers which gave confidence that she was CEO material and not a one-product-person.
The best pitch came from Tom with dataSentinel who broke a laptop and then held out the USB key to access the up-to-date files stored safely on the Internet. Masterpiece Theatre could not have done it better and even someone with the abilities of a gherkin could understand Tom’s product. Too bad Robert broke the drama by saying the technology was already in the marketplace.
Bummer.
Robert asked if Tom had received government grant funding and when he confirmed this, Kevin asked for his tax money back.
The CBC and Dragons’ Den is also funded by tax dollars. As Brett pointed out, “This country is built by entrepreneurs” and with small and medium enterprises (SMEs) generating 60% of Canada's economic output and providing 80% of Canadian jobs. There is no doubt that the Dragons and the entrepreneurs who enter their Den teach a great deal about how investors reward innovation. If we want to strengthen our Canadian economy, the Dragons’ Den is a truly fantastic investment of tax dollars. I think even Kevin would agree.

*Mea Culpae: Brett is actually from Saskatchewan, not Alberta, as I have stated in past blogs.

J. B. Loewen raises capital for companies wanting to grow and is the author of Money Magnet: Attract Investors to Your Business.

You Made Money From That?

I've been asked to blog for Dragons' Den. Here is episode 4:

This week’s Dragons’s Den had me gripped – and it wasn’t just by the pitches but the interplay between the Dragons snapping at each other. As Robert Herjovic and Brett Wilson manoeuvred Marissa, owner of Moxie Trades, towards a deal, each of the Dragons took turns chipping at the opportunity. Kevin O’Leary had on his MBA professor hat, explaining how more products means way too much complexity for an early stage business. Unless Marissa sticks with shipping only boots, the SKUs (stock keeping units) will mushroom horribly and as Kevin said, “Marissa will find herself in the world of hurt”. Showing again why she gets paid the big bucks for marketing, Dragon Arlene Dickinson labelled Moxie Trades’ products for females in traditional male jobs as “badges of honour”. Brilliant - but before I could absorb this feel good moment, Kevin had kicked out with his hobnail boots of reality and inquired about the money. Ah yes, it always comes back to the money.
Brett Wilson picked up the theme and asked, “What is the margin on your boots?” When Marissa said around 30%, there were quite a few Dragons trying hard not to look too impressed. Kevin does know his industry metrics and let out that those margins were significant.
It was Big Jim Treliving who tipped over the Dragons’ negotiating table, telling Marissa not to make the deal, leaving Robert to blurt out with a blinding smile, “Damn you.” Gosh, Herjovac makes even his bad moments seem wonderful. He has enormous emotional intelligence in his dealings with people, particularly during awkward moments. Indeed, Robert gently asked Arlene to clarify after she said she did not want to do the deal with him. Actually, she meant the deal structure did not appeal. I also admire the way Robert sets out his boundaries telling other Dragons to make a deal or get out, but in the most charming way that only James Bond (or perhaps Robin Williams) could possibly top. No bridges were burnt with Marissa and we learn that this deal will return in a later show.
The Nails ‘n Martini presentation demonstrated how far you can get with investors when you realize that pitching is more about debate. Actually, the entrepreneur, Martin, approached pitching as a social encounter at The Devil’s Martini Club on Adelaide Street.
As you know, investors put money into people. With Martin, the Dragons recognized a positive, upbeat, outgoing personality and spent the time unpacking his concept even though he had neglected to do much of the work himself. You can see how the partnership between innovator and venture capitalist works. The Dragons bring financial competence, price out the dream and keep everyone grounded in realty. Big Jim is familiar with building a service business one city at a time and then moving down to the USA. Jim shared that the American market place is tough and that he got his “tail shot off.” This is exactly the kind of partner Martin should have in his business to guide him past the rocks and the hard place. Jim’s been there already.
Arlene told Martin she could drive a bus through his plan, particularly the costs. Martin dismissed her feedback saying he already gets money from his wealthy relatives. Hope they weren’t watching because my guess is that they will be putting a stop order on any more cheques. Martin reminds me of a teenager who racks up the calls on his parent’s cell phone and when the monthly bill arrives says, “Whaaaat? I didn’t know.”
Each week, the Dragons astonish me with their openness to listen to zany characters like Martin and to put their money into ventures. Innovation sure happens in strange, unbelievable places. Wouldn’t we all love to invest in a growing business and make money but how many of us could even spot a diamond in the rough? Last week, I was reminded of the crazy quirkiness of innovation at an entrepreneurs’ award ceremony. Lo and behold, the competition winner was a man who started on the streets of Montreal, walking on stilts while eating fire - Guy Laliberté, the founder of Cirque du Soleil.
Zut alors! Turns out, I worried needlessly about Brett Wilson’s sanity when he invested in Alison and her street circus business, Arial Angels. He may have actually done a pretty wicked deal by putting cash into what seemed a flimsy business concept. If a fire eater from Montreal can trade in his stilts for a business suit and finance partners – well, we can see that the world truly can become his stage.
Memo to Alison of Arial Angels: get hold of the book Blue Ocean Strategy which lays out how Cirque du Soleil reinvented the circus business model and beat the industry giant, Wringley Brothers. Then buy a navy blue suit and wear it. Robert Herjovic gave you the best advice for free – become a business person, do not remain an artist. Laliberté accepted his award wearing a suit and spoke about his financial partners, not a word about fire eating.
I’m becoming quite fond of Dragon Brett’s style and how his investment strategy involves so many elements around people, innovation, risk and reward. Maybe Big Jim should follow the Albertan instead of O’Leary. One thing I know: where there’s a Dragon’s Deal, it’s genius.

Jacoline Loewen is the author of Money Magnet.