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Posts Tagged ‘Maple Leaf Angels’

By David Crow

Local angel investor Paul Maasland was murdered, his body was found north of Toronto at a public boat launch. We extend our deepest condolences to Mr. Maasland’s family. And our sincerest concerns go out to his friends and colleagues at Maple Leaf Angels and his investments (according to Mr. Maasland’s LinkedIn profile) including:

The conversations with his investees shed some light on Mr. Maasland as an investor. From one of the portfolio companies CEOs:

“I’d just say he was very generous with his time and resources and provided great input into how we ran [company removed]. He always was positive and excited about the initiatives we were doing.”

These comments were repeated throughout Mr. Maasland’s portfolio. He was a knowledgeable, generous investor that provided useful guidance and support for his companies.

This is an unexpected situation for anyone including many startups. It opens questions for startups about succession planning for Board Directors, questions around the Shareholders Agreement and the shares of a deceased investor. Hopefully most Boards are experienced in succession planning. As the shareholders change over time with new investment, replacing board members is a fairly straightforward and common practice (albeit usually under very different circumstances). Regarding what happens to a deceased investors shares this is decided between the deceased’s estate and the shareholders agreement. If an estate needs or chooses to liquidate the investment, many shareholders agreements have a clause that allows the company or other shareholders to purchase the investment at Fair Market Value. There are tax and legal considerations, so this should not be considered tax or legal advice, please consult a professional.

It’s unfortunate for our small close-knit community to suffer such a sudden, tragic loss. We are deeply saddened to hear about the loss of a member of our community.

Paul Maasland photo source: CBC & OPP

Reposted from StartUp North

David Crow is an emerging technology and start-up advocate/evangelist. At Microsoft Canada, he is responsible for helping Canadian start-ups gain access to software, support and visibility in the Microsoft ecosystem through programs like BizSpark (details at microsoft.com/bizspark). David blogs at http://davidcrow.ca/ and http://startupnorth.ca/ or follow him on Twitter @davidcrow.


The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers pro vide a wealth of information based on their personal experiences. Visit RIC Centre for more information on how RIC can accelerate your ideas to market.

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By Jeremy Grushcow

Tech startups use social media avidly [rabidly?], but biotech companies? Not so much.  Biotech companies should be blogging, tweeting and linking in like mad, though.  Here’s why:

  1. Your customers (pharma companies) do it. More and more pharma companies are active in social media. Take a look at this article in the December issue of Life Science Leader (h/t @FiercePharma) or read the Dose of Digital blog any day of the week and you’ll be directed to interesting information about how products are being developed, tested and marketed. These are things you need to keep in mind as you move through your own product development process. Also, lots of pharma folks are on LinkedIn, so if you are as well, you’ll maximize your ability to reach out through personal connections when you’re building a constituency for your partnering deals.  Here’s my Twitter list of BioPharma news and analysis.
  2. Your investors do it. Check out this Twitter List of Canadian VCs, Angel investors and other funders.  Look at what they’re talking about, and you’ll see you don’t have to tell people what you ate for lunch (or disclose your latest lab results) to convey that you’re doing something interesting that other people are interested in.  Check out the CVCA’s blog, Capital Rants or the Maple Leaf Angels blog.  In Toronto? Stop in at the MaRS blog or the R.I.C. blog to see where investors will be and what they’re thinking about.
  3. Your peers (other startups) do it. If you’re not participating in online conversations, you’re missing a world of good advice and perspectives.  Click over to Rick Segal’s blog or  StartupCFO, Mark MacLeod’s Blog. It doesn’t really matter that these guys aren’t involved in biotech. Lots of startups are facing similar issues to yours — funding, staffing, etc. and getting out of the biotech bubble from time to time can be a good thing.  Plus, being at a startup is isolating, particularly in biotech with its strong incentives to run a virtual company, so go online to find peers, mentors and other resources.

If this all sounds reasonable, but you’re still skeptical, or not interested, then find someone in your organization who’s excited about it, regardless of their actual job, and set him/her loose.  [Not totally loose, of course. Common sense is critical online because it’s hard to hit “undo” on the web, and appropriate confidentiality remains key to biotech ventures.  But all your people have common sense and discretion, right?]

We’ll be keeping an eye out for biotechs and other bioscience companies that are making good use of social media as part of our Biotech Trends series this coming year.  Other suggestions for 2010 biotech trends?  Let us know.

Re-posted from the Cross-Border Biotech Blog

Jeremy Grushcow is a Foreign Legal Consultant practising corporate law at Ogilvy Renault LLP. He has a Ph.D. in Molecular Genetics and Cell Biology. His practice focuses on life science and technology companies.


The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers pro vide a wealth of information based on their personal experiences. Visit RIC Centre for more information on how RIC can accelerate your ideas to market.

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By Bryan Watson

Capital for early-stage companies around the world has become much more scarce than it was a few years ago. To any entrepreneur looking for investment, this is absolutely no surprise and there are plenty of articles that speak of this. When investments from venture capital firms into companies in Q3 of 2009 in provinces like Ontario drop 87% to $24 million it is hard to miss the fact that the market for money for a start-up, or for growth-oriented companies, has become extremely difficult.

There is a growing ray of hope in Ontario, however. Angels. During 2009, the Angel community continued to invest. There were many investments completed by Angel groups in Ontario (e.g.: Well.ca) and even new Angel groups formed to meet the demand such as the Maple Leaf Angels – West Chapter formed in partnership with the RIC Centre.

Given that Angels represent one of the last sources of capital for start-ups and growth-oriented companies (with notable exceptions in the VC world that co-invest with Angels) another source for hope is the fact that the Office of the Leader of the Opposition (Federal) recently added the Innovation and Productivity Tax Credit (IPTC) to their platform.

The IPTC is a credit that companies would apply for. Once a company has been approved as being eligible and allocated a specific tax credit allotment, individual investors could invest up to that amount in the eligible company. Upon making their investments, investors would apply for a suggested 30% refundable tax credit. (More information can be found here.)

A tax credit of this form has shown to stimulate significant Angel investment into companies in many jurisdictions such as BC, Manitoba, the UK, and others. Similar programs have also been adopted by many other countries, including, most recently, Singapore.

So, though we do not have this Tax Credit yet in Ontario, should the Federal Government adopt it Ontario-based companies can look forward to a significantly increased supply of Angel capital looking for strong opportunities in which to invest.

To learn more about and show your support for the IPTC, please click here.

Throughout his career, both in Canada and the UK, Bryan J. Watson has been a champion of entrepreneurship as a vector for the commercialization of advanced technologies. Upon his return to Canada in 2004, Bryan established his venture development consulting practice to help emerging-growth companies overcome the barriers to success they face in the Canadian commercialization ecosystem.  Visit Bryan’s blog and the National Angel Capital Organization.

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Session 5 of Keep Growing Your Business focuses on raising cash from Angels and VCs. The seminar is scheduled for January 20 at the Faculty Club, South Building University of Toronto Mississauga at 3359 Mississauga Road from 7:30 to 10 a.m. Pre-registration is $20, at the door $25.  Registration fees include parking and breakfast.

The seminar is sponsored by RIC Centre (Research Innovation Commercialization Centre) and the Ontario Centre for Environmental Technology Advancement (OCETA).

Listen to our expert panel talk about the roles of Angels and Venture Capitalists along the innovation continuum. Our panel includes:

Robert Koturbash, Managing Director of Maple Leaf Angels, is the founding Managing Director of the Maple Leaf Angels, an angel investment group based in the Toronto area. He is an active investor and has invested in several early stage companies. He also sits on the investment committee of the Investment Accelerator Fund administered by the Ontario Centers of Excellence. Rob holds a BSME from Tufts University and a M.Sc. in Engineering Management from Stanford University.

Tim Jackson, Partner, Tech Capital Partners, is a founder and Partner of Tech Capital Partners where he focuses on investment opportunities in the wireless, communications, new media, and internet sectors. Prior to founding Tech Capital in 2001, Tim was CFO and CEO at PixStream, a technology company focused on distributing and managing digital video across broadband networks. At PixStream, Tim successfully raised more than $60 million in equity capital and negotiated the $550 million sale of the company to Cisco Systems, one of the largest technology company acquisitions in Canadian history.

Nic Morgan, VP Business Development, Morgan Solar Inc,has developed a breakthrough solar energy technology – a unique design for a high-efficiency, low-cost solar panel. It started as a family venture co-founded by John Paul, Eric and Nicolas Morgan, supported by a growing team of engineers, technicians and business staff. Initially family funded by angel investor Eric Morgan, Morgan Solar has recently completed their round A fundraising by putting together a consortium of strategic and venture capital investors. As VP of Business Development and Marketing, Nicolas led Morgan Solar’s efforts in contacting and connecting with investors.

Don’t miss this opportunity to learn first hand how to raise cash from Angels and Venture Capitalists. Register here

Visit www.riccentre.com for more information.

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Re-posted from the Cross-Border Biotech Blog

By Jeremy Grushcow

Tech startups use social media avidly [rabidly?], but biotech companies? Not so much.  Biotech companies should be blogging, tweeting and linking in like mad, though.  Here’s why:

  1. Your customers (pharma companies) do it. More and more pharma companies are active in social media. Take a look at this article in the December issue of Life Science Leader (h/t @FiercePharma) or read the Dose of Digital blog any day of the week and you’ll be directed to interesting information about how products are being developed, tested and marketed. These are things you need to keep in mind as you move through your own product development process. Also, lots of pharma folks are on LinkedIn, so if you are as well, you’ll maximize your ability to reach out through personal connections when you’re building a constituency for your partnering deals.  Here’s my Twitter list of BioPharma news and analysis.
  2. Your investors do it. Check out this Twitter List of Canadian VCs, Angel investors and other funders.  Look at what they’re talking about, and you’ll see you don’t have to tell people what you ate for lunch (or disclose your latest lab results) to convey that you’re doing something interesting that other people are interested in.  Check out the CVCA’s blog, Capital Rants or the Maple Leaf Angels blog.  In Toronto? Stop in at the MaRS blog or the R.I.C. blog to see where investors will be and what they’re thinking about.
  3. Your peers (other startups) do it. If you’re not participating in online conversations, you’re missing a world of good advice and perspectives.  Click over to Rick Segal’s blog or  StartupCFO, Mark MacLeod’s Blog. It doesn’t really matter that these guys aren’t involved in biotech. Lots of startups are facing similar issues to yours — funding, staffing, etc. and getting out of the biotech bubble from time to time can be a good thing.  Plus, being at a startup is isolating, particularly in biotech with its strong incentives to run a virtual company, so go online to find peers, mentors and other resources.

If this all sounds reasonable, but you’re still skeptical, or not interested, then find someone in your organization who’s excited about it, regardless of their actual job, and set him/her loose.  [Not totally loose, of course. Common sense is critical online because it’s hard to hit “undo” on the web, and appropriate confidentiality remains key to biotech ventures.  But all your people have common sense and discretion, right?]

We’ll be keeping an eye out for biotechs and other bioscience companies that are making good use of social media as part of our Biotech Trends series this coming year.  Other suggestions for 2010 biotech trends?  Let us know

Jeremy Grushcow  is a Foreign Legal Consultant practising corporate law at Ogilvy Renault LLP. He has a Ph.D. in Molecular Genetics and Cell Biology. His practice focuses on life science and technology companies.

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Reposted from Maple Leaf Angels

By Craig Hayashi

PART 1

Continuing my discussion on start-up legal issues, I met with Rubsun Ho, partner and co-founder of Cognition LLP to discuss term sheets. Again, standard disclaimers apply in that topics covered  are meant as general information only and not meant to imply specific legal advice.

Craig: Rubsun, thanks for taking the time to talk . I thought we would talk about term sheets today and walk through some of the common term sheet clauses (see here and here). I’ll provide the (angel) investor’s perspective and you can comment on how this would impact things from the start-up and entrepreneur’s perspective. To start off, let’s begin with the type of deal structure: Equity vs. Convertible debt. What are your thoughts on these two approaches?

Rubsun: From a company’s perspective, I would recommend they try for an equity deal. Although as you and I would both agree, the attractive part of a convertible debt deal is that it postpones the valuation discussion, entrepreneurs need to make sure they have a clear understanding of what they would be giving up with a convertible debt based deal. They should work through the calculations on the accrued interest and the percentage discount and see what the share capital structure would look like if the convertible debenture ran its full course. We have seen cases where this can add a significant amount of shares to the company and thus dilution to the founders. Entrepreneurs should also ensure they understand any covenants placed on the company through the debenture. We have seen term sheets that put in place conditions where the debt can be called (i.e. if the company is not cash flow positive by a certain date).

Craig: So if an equity deal is done, what about common vs. preferred shares?

Rubsun: Again, we’d recommend trying to stick to one share class as it makes it easier to govern. To give a judgement on a preferred share deal, a lot would depend on the additional requirements investors are putting on the preferred share class.

Craig: In today’s climate, investors are putting more emphasis on liquidation preference to give them the greatest chance of getting their money back. This can take the form of terms such as upon sale of the company the preferred shares are paid out first (1x or 2x) and then all remaining proceeds are split pro-rata across all shares. What are your thoughts on this?

Rubsun: Obviously this is what an investor would want. The entrepreneur would need to ensure they work out the implications of this. i.e. run though some scenarios of various acquisition prices and show how the proceeds would be distributed to each shareholder. Depending on the amount of preferred shares issued, having a 2x liquidation preference can dramatically raise the price target that a company would need to be acquired at in order to provide other share classes an adequate payout as well. Investors should also do these calculations as they will want to ensure management still has enough equity incentive to want to stick with the venture. A good way to align management and investors is to have a separate carve out where a percentage of proceeds of an acquisition is reserved for management or to have a clause that eliminates the liquidation preference if the acquisition price is above a certain amount.

Governance and Control

Craig: After ensuring they can get a good ROI, maintaining governance and control over the company is next on an investor’s priority list. At the seed stage, often companies do not have a board constituted. Do you have any recommendations as to how to structure the board at the seed level to provide governance but still allow for expansion with future investment rounds?

Rubsun: I would advise companies to start with a board of 3 with at least one of the seats being an independent director and another to represent the investors. As the company secures new investors with new financing rounds, this structure makes it easier to expand the board to include representation from the new investors or to bring on other board members that can help the company at their stage of growth. If you start with a large board at the seed stage, it can be hard to ask people to leave the board down the road when new investors come in.

Craig: In addition to the board and the term sheet outlining actions that require board level approval (i.e. setting the compensation of the management team, approving the annual operating budget), investors sometimes put actions in that require shareholder approval (i.e. entering into debt arrangements or contractual commitments over a certain dollar amount). What are your thoughts on this?

Rubsun: Corporate law requires that some fundamental changes such as creating a new class of shares, changing the company name or selling substantially all of the company’s assets need to be approved by holders of two thirds of the shares and potentially by each class or series of shareholders independently. Apart from these items, it’s usually better to try to push other actions to the board as it may increase the administrative burden on the company to call shareholders’ meetings or track shareholders down to approve resolutions.

Craig: A common reasoning I see when talking with entrepreneurs on valuation & how much money they are looking to raise is for them to start off and say they want to retain 51% of the shares so they retain control and then work back from this to figure out a valuation and how many shares they are prepared to give up in relation to how much money they are looking for. Can you comment on why this is a bad approach?

Rubsun: For the reasons we discussed above, using separate share classes, certain rights and vetos in shareholders’ agreements and through having a controlling number of board seats, an investor can easily structure a term sheet to have ‘control’ of the company while owning less than 51% of the total shares. Entrepreneurs are better to first decide what important areas of the company they want to retain control over and then ensure the term sheet is aligned to this.

Tomorrow legal costs and negotiating

Craig Hayashi is a founding board director of Maple Leaf Angels, Ontario’s largest and most active angel investment group with more than 40 members and approximately $6m in financings closed since the group’s inception in 2007. Follow Craig at www.mapleleafangels.com and www.startupnorth.ca

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Reposted from Maple Leaf Angels

By Craig Hayashi

I thought I would write a couple of posts on legal issues start-ups should be aware of early in their lifecycle. In particular I wanted to cover some issues, that if not handled correctly, can have a detrimental impact at a later stage in the company’s life such as when they are looking for outside financing.

I recently met with Joe Milstone, partner and co-founder of Cognition LLP. Cognition is quite active in the start-up space in Toronto. They work with start-ups by offering a dedicated lawyer to act in the role of in-house counsel on a fractional, as-needed basis, and at a cost that is about a half to a third of a more traditional business law firm.

Craig: Joe, thanks for taking the time to talk with the StartupNorth readership today. Before we start, I guess we should get the formalities out of the way by stating everything we will cover today is meant as general information only and not meant to imply specific legal advice. For this post, I thought we would talk about intellectual property. From an investor standpoint, intellectual property can be a very strong factor in how an investor values a company and forms a big part of their decision in the company’s investment worthiness. When people think about intellectual property, the first thing that probably comes to mind are patents. However, there are many other aspects relating to the ownership of intellectual property that a start-up needs to ensure are in properly place, correct?

Joe: That’s right. Most start-ups will use their own employees, outside consultants, and external vendors to help create a product. Intellectual property ownership rights need to be clearly spelled out in all of these relationships to ensure when a company goes to file a patent, seek investment or often even to complete and comply with their own sales and marketing documentation, that there is no possibility that an outside entity can stake claim to their intellectual property. We work with companies when they are at the stage when they are looking for angel or VC financing and also when they are targets of acquisition. We know that investors or acquirers will look for this in their due diligence so we advise our clients to ensure they have a strong foundation from the start.

Craig: Ok, let’s start with employees. If you have an employee on payroll, doesn’t general law cover this off and give the employer rights to any intellectual property they may develop while employed?

Joe: That is correct as a broad and general proposition, however it is best practice to get an employment agreement in writing that will cover off this and other aspects that can have a determinant on the success of a company. For example, there are certain slippery residual rights that all inventors of intellectual property retain, whether they are employees or not, and that if not handled correctly, can impede what a company can do with the intellectual property. Also, without a specific employment agreement there will be more grey areas that everyone wants to avoid. Like what if one of their employees works on their own computer/equipment on their spare time – the employee may stake claim that some of the intellectual property is his or hers. Additionally, we have also run into situations where everybody in the company has an employment agreement except the founder. This covers the founder’s interests when he or she owns all of the shares, but when outside entities are looking to make an investment, they are obviously investing in the company as an entity, not the founder.

Craig: What about non-competes?

Joe: From a company’s standpoint, the knee-jerk reaction is to seek a broad non-compete clause if it ends a relationship with an employee. However, this is usually counterproductive, because courts believe fundamentally in the rights of people to work wherever they want. As a result, courts have a strong aversion to enforce almost any non-compete against an employee unless it is framed reasonably narrowly so as to address a specific business concern that can’t be protected in other ways. A company would be better off to have a very tailored and proportional non-compete clause that outlines specific timeframes, geographies, narrowly defined businesses, etc. Even better and more likely to be upheld is the use of other mechanisms to achieve generally the same results such as non-disclosure agreements and non-solicitation covenants with respect to employees, customers and even key suppliers of the company.

Craig: Start-ups often use flexible compensation structures in the early days when money is scarce (i.e. giving people below market salaries in exchange for equities). Any comments on legal aspects around this?

Joe: Ideally in those situations, there should be a cash component and the company should ensure that the market value of the overall compensation is sufficient to ensure that the employee has received adequate consideration in exchange for him or her agreeing to be bound by any non-competes, non-disclosure and IP assignments. The main thing is to get the relationship properly documented so both sides have a record of what kind of ownership is actually being provided and on what terms, and so the company can document and comply with corporate and securities legal requirements. Also, companies should ensure that the value of any services they receive is roughly equal to the fair market value of the shares that they grant in return. This is important from a corporate governance perspective as well as a tax perspective, and companies should avoid the temptation to entice an employee by back dating share grants to a period when the market value was lower.

Craig: Any other issues around the topic of employees / employment agreements?

Joe: The other thing would be around termination (either by the company or employee). Notice and severance period should be spelled out so both sides are clear on what their responsibilities are and so, from the company’s perspective, it can set and minimize its exposure. If the wrong language is used, the company can be exposed to a multiple of four or five times. If the employee has stock options, it should be carefully spelled out what happens to unvested options as well as the exercise of vested options. This can often vary depending on whether the notice period is or is not treated as part of the term of employment, and again there is careful language that has to be used to get it right.

Craig: Moving on to consultants and outside vendors, in today’s outsourced business model it is pretty common that start-ups will use outside entities in the development of their offerings. What should start-ups be aware of?

Joe: Dealing with intellectual property ownership is critical with outside entities such as consultants and vendors, because by definition they are separate business entities from the company offering their own distinct services and sometimes products. Each consultant or vendor contract needs to clearly spell out proper IP transfers , waivers and other cooperation and assistance. Unlike employees where the employer has default ownership of the intellectual property, this is not the case for vendors and consultants, so the scope and phrasing of the contractual inclusions is even more paramount.

Craig: Start-ups often hire people on as consultants vs. employees to reduce exposure to EI/CPP payments, wrongful dismissal, etc. Have you seen any issues with this?

Joe: The biggest issue is with the Canada Revenue Agency. They have published a guide as to how they will examine a situation to determine if a consultant is actually an employee, but the criteria often don’t point all in the same direction. Start-ups should ensure their consulting agreements and arrangements fit into the guidelines outlined by the CRA. Otherwise, simply calling someone a “consultant” won’t cut it. If a start-up has been using a consultant on a consulting basis that the CRA determines is actually an employee relationship, the start-up will be exposed to fines. The other issue is to realize that a true consultant is by law an “outside” entity, meaning that more tailored and elaborate IP provisions are necessary, and also that the company has to be mindful of such relationships when entering into non-disclosure agreements, joint ventures, privacy policies and the like, particularly where that consultant will be involved and will receive sensitive information. For example, a consultant will not be bound to a NDA that a company signs with another commercial party, meaning that those terms need to be properly “flowed through” to the consultant’s company and often the consultant individually too.

Craig: A lot of good information here, thanks again for taking the time today Joe. In my next post, I’ll be talking with Rubsun Ho, also from Cognition, to discuss term sheets from an entrepreneur’s point of view.

Craig Hayashi is a founding board director of Maple Leaf Angels, Ontario’s largest and most active angel investment group with more than 40 members and approximately $6m in financings closed since the group’s inception in 2007. Follow Craig at www.mapleleafangels.com and www.startupnorth.ca

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