Toronto, Jan 27, CNW - VenGrowth was the most active Canadian private equity investor managing both retail and institutional assets in 2003*. VenGrowth deployed a total of CDN$160 million into 35 of Canada’s leading small and medium-sized enterprises (“SMEs”) over the calendar year on behalf of shareholders, topping the national list of venture capitalists by money invested for the second year running. It is also the third consecutive year that VenGrowth has invested $160 million or more in venture opportunities, an achievement made possible by consistent capital inflows from individual and institutional investors. Strong fundraising has enabled VenGrowth to deploy CDN$0.5 billion throughout the last three years to capitalize on the most favourable private equity investment environment of the last decade – a move it expects to generate attractive long-term returns for shareholders.
VenGrowth, Canada’s largest private equity and venture capital firm managing both retail and institutional assets, has employed a conservative, predominantly late-stage investment approach over the last two decades – targeting more established companies and preferential share structures to mitigate risk for investors. VenGrowth continued to diversify its funds’ portfolios in 2003, spreading investments carefully over a range of companies in different locations and lines of business:
VenGrowth 2003 Investment by Sector
Communications 29%
Semiconductor 13%
Biotechnology 19%
Software 7%
Diagnostic 15%
Internet 3%
Special Growth Opportunities 14%
Total 100%
Over the last three years, a scarcity of new capital has forced venture capitalists to use 75% of every venture dollar to support existing portfolio companies*. VenGrowth bucked that trend in 2003, taking advantage of a 10-year low in private company valuations by investing 75% of its venture dollars into new investment opportunities. Shareholders stand to benefit from VenGrowth’s ability to capitalize on new opportunities as investee companies progress and mature in an improved economic climate.
“To be the most active participant in the Canadian venture capital market is especially significant because of the unparalleled investment opportunities in 2003,” explained David Ferguson, Managing General Partner for VenGrowth Capital Partners Inc. “The valuation of private companies dropped by up to 65% from the peak in 2000, providing well-funded venture capitalists like VenGrowth with the opportunity to invest in the most promising and innovative late-stage companies in Canada at low prices. Now that we are witnessing a sustained economic turnaround, the underlying companies in our funds are well positioned to benefit as larger companies gain confidence and turn to venture capital portfolios to acquire next generation technology and broaden their product lines.”
The primary way for venture capitalists to make money for investors in their funds is to “exit” portfolio holdings by taking a company public through an initial public offering (“IPO”) or selling the company to a large strategic buyer. Over the last three years, volatile stock markets and depressed economic conditions have closed the door to these exit avenues. However, venture capitalists have witnessed a gradual improvement in the exit environment for venture-backed companies in the last two quarters, with a number of Canadian technology companies filing to go public and large companies beginning to make acquisitions.
“VenGrowth has not strayed from its leadership role with respect to funding and supporting small and medium-sized Canadian companies throughout the downturn over the last three years,” said David Ferguson. “By staying the course and adhering to our predominantly later-stage, conservative investment strategy, we are best positioned to capitalize as the private equity market improves in 2004 and beyond.”
As a national venture capitalist, VenGrowth offers its shareholders access to the best opportunities from centres of innovation across the country. In 2003, VenGrowth was once again the leading venture capital investor in the Ottawa region – one of Canada’s key technology clusters. VenGrowth invested $55 million in Ottawa-based companies in 2003, single-handedly accounting for nearly 20% of the total $287 million venture capital invested in the area**.
VenGrowth invested in companies with activities in numerous provinces across Canada in 2003. VenGrowth I and VenGrowth II Funds invested in Travelers Leasing Corporation, an independently owned specialty auto finance company that finances automobile leases to non-prime customers through pre-qualified dealers across Canada. VenGrowth’s investment will help Travelers Leasing take advantage of the growing Canadian non-prime market.
VenGrowth nourishing Canadian life sciences companies
The $131 million VenGrowth Advanced Life Sciences Fund invested a total of $45.3 million in eight companies in 2003 – its first full year of operations. Among recent additions to the portfolio is a $5 million investment in Adherex Technologies Inc. (TSX:AHX), an Ottawa-based biotechnology company developing therapeutic products for treating cancer – a leading cause of death worldwide. Adherex has a substantial intellectual property portfolio, with four products already in clinical development. One anti-cancer product is in the first phase of clinical testing while a more clinically advanced product is being developed to protect against side effects caused by current chemotherapy treatments.
"Adherex is a prime example of companies in the Fund that are putting Canada on the map for innovative life sciences products, and in turn, providing attractive investment opportunities and return potential for our shareholders,” says Dr. Luc Marengčre, General Partner, VenGrowth and Lead Manager of the VenGrowth Advanced Life Sciences Fund. "Another investee company, GB Therapeutics, recently received approval by both the U.S. Food and Drug Administration (FDA) and the Canadian Therapeutic Product Directorate (TPD) to start Phase I human testing of its revolutionary drug candidate for the treatment of Alzheimer’s Disease. This kind of meaningful milestone best illustrates the Fund’s progress in 2003.”
*Source: Canadian venture capital industry specialists, MacDonald & Associates
**Based on figures from the Ottawa Centre for Research and Innovation (OCRI)
About VenGrowth’s Labour Sponsored Investment Funds (“LSIFs”)
VenGrowth II – VenGrowth’s diversified core venture capital fund investing in innovative growth companies for high long-term return potential. The portfolio is diversified across a broad range of predominantly later-stage companies and industry sectors spanning Internet infrastructure, enterprise software, communications, semiconductors, traditional industries, life sciences and other special growth opportunities. The Fund invested $97 million in 2003 and had net assets of $487.4 million as of December 31, 2003.
VenGrowth Advanced Life Sciences Fund – A well-diversified fund investing in a broad range of high-growth life sciences sectors for maximum long-term return potential. Sectors targeted include biotechnology, diagnostics, medical devices and imaging and other special life sciences opportunities. The Fund invested $45.3 million in 2003 and had net assets of $131 million as of December 31, 2003.
VenGrowth Traditional Industries Fund – VenGrowth’s newest and most conservative LSIF. Invests in predominantly small and medium-sized Canadian companies in traditional manufacturing and services industries that are expected to generate sustainable cash flows, with the objective of generating interest and dividend income to the Fund as well as long-term capital appreciation for shareholders.
VenGrowth I (closed) – VenGrowth’s diversified core venture capital fund launched in 1995 and capped in 1999. It has consistently ranked among the top-performing and most conservative retail venture capital funds. It was capped to enable shareholders to fully benefit from a maturing venture capital portfolio. The Fund invested $17.8 million in 2003 and had net assets of $373.4 million as of December 31, 2003.
About VenGrowth Capital Partners Inc.
With over $1 billion in assets under management, VenGrowth is Canada’s largest private equity and venture capital firm managing both retail and institutional assets. Since 1982, VenGrowth’s accomplished team of seasoned private equity managers has invested over $1 billion in 169 companies, building a strong track record of successful portfolio transactions. These investments have been made on behalf of over 160,000 individual investors as well as leading pension funds, insurance companies and family foundations. Portfolio companies benefit from VenGrowth’s substantial experience, resources, and hands-on investment style. VenGrowth is 100% independently owned by employees that are dedicated to generating superior returns for shareholders in its funds. VenGrowth’s offices are located in Toronto (Corporate Headquarters) and Ottawa. For more information, please visit www.vengrowth.com.
About Labour Sponsored Investment Funds (“LSIFs”)
For Canadian investors, LSIFs provide important portfolio diversification and a tax-efficient method of accessing the long-term return potential of the private equity asset class. The VenGrowth II Investment Fund Inc., The VenGrowth Advanced Life Sciences Fund Inc. and The VenGrowth Traditional Industries Fund Inc. are accompanied by a federal tax credit of 15% on the first $5,000 invested per investor, per taxation year. Ontario investors are eligible for additional provincial tax credits of up to 15% for investing in VenGrowth II Investment Fund Inc. and VenGrowth Traditional Industries Fund Inc. and up to 20% for investing in VenGrowth Advanced Life Sciences Fund Inc., per taxation year. Investments in these VenGrowth funds are 100% RRSP eligible. The VenGrowth Investment Fund Inc. is closed.
For further information:
Ed Dermit,
Vice President, Marketing
VenGrowth Capital Partners Inc.,
(416) 967-2392
ed@vengrowth.com
