My initial thought regarding the presentation I attended yesterday is that this was more of a presentation and less of a roundtable. The third presentation by Tim McCunn was prepared in advance and presented to the audience with none of the comments from the round table session at the event included. If you have the solution before soliciting comments and feedback then the event should be called a retail fund presentation and not a CEO roundtable. At the end of the session a form was handed out and attendees were asked to sign to help further the cause of the retail fund.

Here are my general observations:

- Early stage funding means different things to different people
- Funding continuity is really important, Mashaad Koohgoli raised this point and I tend to agree
  – Secure line of funding from seed to series X or IPO
  – Perhaps a pipe dream, however, a noble goal
- This is event is a small step in the right direction, however, not clear on the motivation

The proposed solution:

- Any Qualified VC manager should be able to raise a retail fund
- Managed based on the same principles as OVCF
- Target Sectors: IT, BioTech, CleanTech

OK, let’s start with the obvious; what qualifies a VC to manage a fund? I guess if the manager can recruit retail investors for the fund that would be fine with me; however, there should be no matching government contributions from the taxpayer. The tax credit and such mentioned in the proposal ($200k maximum investment with 30% tax credit) should suffice.

OVCF is a series A and above fund rather than what I would call early stage, however, this goes back to my previous point; what is early stage funding? I would prefer to see any new retail fund start at the earliest stage of investment, say less than $1M. However, this fund seems to start closer to series A because they were talking about $4M and $5M payloads. This is a significant flaw, IMHO.

I understand that this is preliminary but, the target sectors of; IT, BioTech and CleanTech, IMHO really need to be sorted out. IT for instance is far too broad a sector, BioTech probably has some potential in certain regions of the province and finally cleantech is a case of (again IMHO) irrational exuberance.

The key issues I see with this proposal are:

- Needs to be smaller and regionally focused fund(s)
   – Another Ontario wide fund is NOT the solution
  – This was actually one of the strengths of the old LSIF model
- There needs to be a <$1M seed fund set up and this isn’t it
   – Typical pay load mentioned was $4M to $5M
   – How is this different that OVCF
- No mention of CAP on management fees
   – Raised by Doug Cummings as a key issue with former LSIF
   – Not addressed in this proposal
   – Like to see a results based management fee myself

I am not sure who is sponsoring the travelling Retail Fund Road Show; however, it did seem to be very VC centric. I am not a fan of the VC funding model. While I support the concept of a new retail investment fund for seed and early stage funding what was proposed needs some serious retooling. In my opinion early stage funding starts with a payload of < $1M and should harness the wisdom of crowds for merit based award to start-ups. Ideally the new retail fund would also have contingency for continuity of funding to subsequent rounds. This fund payload is not significantly differentiated from OVCF, has an outdated administrative model and needs a serious rethink before I would support such an initiative.

Ian Graham

Filed under: Commercialization, Start-up by Ian
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