December 12, 2005 – The Chronicle Herald – Business Section

Wanted:  venture capital

MedMira CFO says companies will need to look outside region

By Tom Peters

Nova Scotia companies should think outside the box when accessing venture capital for investment in their businesses, says a senior official with MedMira Inc.

Research by NovaKnowledge, a member-based, not-for-profit organization dedicated to the development of a flourishing and sustainable provincial economy, has shown that many companies moving from the seed stage to startup and early development have experienced a financing gap in the range of $100,000 to $1 million.

NovaKnowledge has set a target to expand the province’s venture capital industry to $50 million per year by 2010, and although there has been progress, Bill Gullage, MedMira’s chief financial officer, says it may not be enough to meet that target.

“To have $50 million invested in each and every year, you need to have a pool of capital of $400 million or $500 million available to have that reinvested annually, “ he said in an interview.

“I think we will have to expand what we are doing in terms of reaching out and partnering with other venture capital funds or other funds outside the region, be it in Central Canada or be it in the United States, to bolster what funds we can pull together here.”

Mr. Gullage, who took part in a debate Friday at Saint Mary’s University addressing the equity financing gap, said local companies have to look at a bigger picture when seeking investment financing.

He said all the ideas expressed during the session should be explored, “and pick two or three that we can (put into) action and move forward on.”

Mr. Gullage, whose company focuses on developing, manufacturing and marketing easy-to-use rapid diagnostic tests, also said those with capital, should be more open to various types of investments at least on the knowledge side.

“Knowledge-based businesses are different than the traditional resource-based business in terms of how it looks and feels to the investor,” he said.  There is some reluctance on part of the private investor because knowledge-based business “is a longer cycle and a different return.”

“On the company side, we need to be a little more innovative in what we go looking for and to think outside the box in approaching people.”

Much of the discussion focused on private investment, but there was a reference to going public for investment capital.  Two approaches suggested were privatizing public pension funds and investing some of those funds in business, and raising money on the stock market.

Mr. Gullage said that the process of raising funds depends on the individual business.

“I think for startup companies the private market is best and at some point, depending on how your company progresses, the public market is a real opportunity, “ he said.

“It gives you a different access to capital, and you can be a little more innovative in terms of the types of capital you can raise.  But on the public market today that comes with a price tag, and not just in terms of the cost of going public and so on, but just in the rigour that has to go behind it, in terms of governance, reporting and all the infrastructure you have to put in place when you are a public company.  So picking the right time to go is critical.”

Although various government funding programs are available for business, there was a suggestion that all the programs to pooled into one “fund of funds” in order to be most effective.

Mr. Gullage said there may be merit to such an approach, which could facilitate leverage of private funds against public funds.

But some publicly funded programs help companies at various stages, he said, “and my initial reaction would be (that) it would be a crime to lose some of those programs.” 

“There are a number of companies that benefit and might not be here today without them.  Under a fund-of-funds approach, putting everything in that process, would those companies get funding?  I think you need to balance the two.”

Copyright © 2005 The Halifax Herald Limited