LaBarge Weinstein Quarterly: Spring 2013

Despite a winter of freezing cold temperatures and mounds of snow, it finally feels like spring is on the way! It’s nearly time to stop hibernating and instead, get out and enjoy the patios, golf courses, and cottages.

Over the past three months, there have been a lot of late nights and early mornings at the LaBarge Weinstein offices. The team has been exceptionally hard at work assisting companies raise nearly $30M in financing transactions. We’ve also closed two M&A deals and ­one public offering.

As usual, our clients have also been busy. Here are a few client highlights from the past few months.

• Ottawa-based mobile gaming company, Magmic, was recently featured in an Apple commercial. With hundreds of thousands of apps available on the iPhone 5, this is a pretty amazing honour! Congratulation to John Criswick and the entire team.

• Fast Company Magazine named MediaCore to its list of the world’s top 10 most innovative companies in digital video.

• Out of more than 500 tech companies who applied to present at the SXSW Interactive Accelerator, InfoActive was one of the few lucky finalists.

• In February, after 18,000 votes were cast, Frank & Oak was named the Best New Startup of 2012 in the 2^nd annual Canadian Startup Awards presented by TechVibes.

Growing a successful tech startup is difficult enough with hundreds of thousands of dollars. Imagine just how hard it would be without any funding!

Impossible you say…Not according to Randy Frisch, COO of Uberflip, a Toronto-based interactive marketing and digital publishing software company. Founded in 2008 under the name Mygazines, Uberflip has grown to 19 employees and over 650 paying clients through bootstrapping.

Wondering how? Randy recently offered up five key strategies in an article on the Uberflip blog. Here is a brief summary:

1) Recurring Revenue – “It allows you to create predictable revenue month over month, as long as you manage to keep your churn (customers who leave you) down. Without predictable revenue, the decision of making that next hire, whether dev or sales, is overwhelming. You may think you can pay them this month, but what about three months from now if we hit a dry spell?”

2) SRED – “The SR&ED Program gives claimants cash refunds and/or tax credits for their expenditures on eligible R&D work done in Canada. The best part of SRED is you can reinvest a lot of your R&D dev spend back into the business to fund next year’s projects year after year. This means all you have to do is find a way to carry the business in between annual claims.”

3) Government Grants – “A couple of the programs I’ve participated in include IRAP and Career Focus, which have covered up to 80% of a new hire’s out of pocket costs in the first year…Be sure to consult with your accountant or just do some research on your own to see what dollars are awaiting.”

4) Sacrifice – “I’m pretty confident I could be making a lot more money had I chosen a cushy downtown job or taken a slightly different path earlier in my career. But I chose to be part of building something that could grow beyond what I could control on my own.

5) Scale – “No matter how much money you can get from family, personal savings or the government, it better be going into a scalable business model. Without something that scales and earns back your money in a reasonable time span, forget about ever going at it without VCs, let alone finding a VC who will listen to your story in the first place.”

The decision to try and obtain VC funding or to go it alone depends on a number of factors. There are pros and cons to either approach that must be carefully considered.

Read the full blog post

In late January, Citizenship, Immigration and Multiculturalism Minister, Jason Kenney, announced that Canada’s new start-up visa program will officially launch on April 1^st.

Unlike similar programs running in the U.K. and Australia, immigrants under this new, historic visa class will receive immediate, non-conditional, permanent resident status.

“Our new Start-Up Visa will help make Canada the destination of choice for the world’s best and brightest to launch their companies,” said Minister Kenney. “Recruiting dynamic entrepreneurs from around the world will help Canada remain competitive in the global economy.”

The Program has received widespread support from many in Canada’s startup and venture capital communities. In fact, venture capital investors will be involved in selecting and issuing visas to qualified candidates. This Program will also link entrepreneurs with private sector organizations in Canada that have experience working with startups and who can provide essential resources.

Although the full criteria have yet to be published, basic requirements include proficiency in English or French and at least one year of post-secondary education.

Click here to learn more.

A recent article in the Financial Post, which comes from the Ontario Securities Commission (OSC), sets out some of the more common mistakes the OSC has seen from newly listed public companies. The mistakes listed essentially boil down to: (i) not putting enough effort into compliance with rules and laws applicable to public companies; (ii) not understanding securities laws; and (iii) issues with disclosure, either by providing inappropriate disclosure or not providing disclosure on a timely basis.

We have seen a lot of issuers make a lot of mistakes and would put the disclosure issues at the top of the list in terms of importance. The other issues around the rules, securities laws etc. can often be dealt with by ensuring the company has good external advisors. In our view, the disclosure obligations are something that management must really internalize and understand because, at the very least, they need to have a good sense of when to call on their external advisors for advice on whether and when disclosure is required.

You may have heard the term “B Corp” floating around lately and wondered just what it stands for. Well, a B Corp or a benefit corporation is a type of company required by law to create general benefit for society as well as for shareholders. Benefit corporations must create a material positive impact on society, and consider how their decisions affect their employees, community, and the environment.[1]

B Corps are certified by B Lab, a non-profit organization, and are required to meet rigorous standards of social and environmental performance and transparency. Currently, there are more than 600 Certified B Corps from 15 countries and 60 industries working together toward one goal: to redefine success in business.

The concept was introduced five years ago by a group of entrepreneurs. B Corp certification is “like the Fair Trade label but for a whole company, not just a bag of coffee,” said Jay Coen Gilbert, a co-founder of B Lab.[2]

By voluntarily meeting higher standards of accountability, Certified B Corps are distinguishing themselves in a cluttered marketplace by offering a positive vision of a better way to do business. They create higher quality jobs and improve the quality of life in our communities.

According to B Labs, the government and the nonprofit sector are insufficient at addressing some of society’s greatest challenges. Businesses on the other hand, are the most powerful man-made force on the planet. If they strive to create value for society as a whole, and not just for shareholders, we will see vast improvements in our communities. The B Corp movement offers a concrete, market-based, and scalable solution.

“Increasingly there are businesses that want to create value for all their stakeholders, not just their shareholders,” said Andrew Kassoy, another of B Lab’s founders. “These companies are competing not just to be best in the world, but best for the world.”

With hundreds of businesses having already joined the B Corp initiative, let’s hope the movement continues and we begin to see more positive changes in our communities because of it.

To learn more, visit the B Labs website.

LW Connect

Back in September, we reintroduced our monthly networking sessions, LW Connect. The events run once a month on Thursdays from 5pm until 7pm, with a focus on seed level investing options for technology and knowledge-based startups.

If you’re an Ottawa-based business that could benefit from this information, come network with other entrepreneurs, have a beer on us, and hear from Canada’s Venture Capital & Private Equity Association – April 25^th at 5pm in our boardroom.

For more information, please contact Casey O’Brien at cobrien@lwlaw.com.

Deal Flow Report

Here is a sample of recent publicly-announced transactions that we’ve worked on over the past few months:

• BLiNQ Networks’ Financing
• ePact Financing
• Espial’s Acquisition of ANT Software
• Fusebill’s Financing
• KarmaHire’s Financing
• IMRIS’s Public Offering
• Vidyard’s Financing

Firm and Staff News

In February, co-founding partner, Debbie Weinstein, successfully summited 19,300 feet to the top of Kilimanjaro – Africa’s highest mountain. According to Debbie, it was one of the toughest mental and physical endeavours she has ever undertaken, but the payoff was definitely worth it.

The firm was recently selected as the People’s Choice Professional Services Company, which was presented at the Kanata Chamber of Commerce awards gala on February 21^st.

Information Worth Sharing

Back in January, Prime Minister Harper announced a plan to strengthen the venture capital investment in Canada. The Venture Capital Action Plan will seek to deploy $400M over the next seven to 10 years to strengthen Canada’s competiveness in the knowledge-based economy. Click here to learn more.

On April 1^st, PEI implemented a harmonized sales tax (HST) of 14%. Harmonizing at a 9% provincial rate resulted in a decrease of 1.5 percentage points of tax on goods and services subject to the PST. While PEI prepared for the adoption of HST, British Columbia was getting ready to abolish it. During the summer of 2011, British Columbians voted in favour of eliminating the HST in a province-wide referendum. Following the vote, the BC government committed to transition back to a PST/GST system as quickly as responsibly possible. Effective April 1^st, PST on the majority of good and services is 7%, and GST is 5%.

We are pleased to announce that LaBarge Weinstein is acting for the underwriters in the initial public offering of Halogen Software. The team consists of Debbie Weinstein, Randy Taylor, Brigitte LeBlanc-Lapointe, Chase Irwin, and Suzanne Pellerin. If you’re interested in learning more, click here.