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MNP's TAKE: While startups are certainly seeing opportunity from the lower Canadian dollar, so are more established companies. U.S. strategic buyers and private equity firms are more interested than ever in buying or investing in Canadian companies.
The reason is simple. As U.S. buyers seek to diversify, they are also looking to get the most for their money. Many U.S. firms are now in a position to outbid their Canadian counterparts, simply because their dollars are stretching up to 30% further. If you were considering selling all or a portion of your business, now might be the ideal time, as increased U.S. interest means that many more prospective buyers could be at the table, meaning higher offers for your company.
The good news is, there are virtually no drawbacks to taking advantage of this influx of American investment dollars. As long as the deal meets your financial goals and there is a cultural fit, the opportunities for growth or sale are greater than ever.
For more information on opportunities with U.S. investors, contact Wilma Braat, CFA, MBA, at 403.537.7632 or
[email protected], or your MNP Corporate Finance Advisor.
BY PETER HENDERSON FROM THE GLOBE AND MAIL
TORONTO - Industry watchers say the tumbling loonie is a blessing in disguise when it comes to Canadian startups and the innovation economy as U.S. venture capitalists look to make their investments go further.
As the resource boom that helped fuel Canadian growth over the past decade continues to go bust, Canada's commodity-sensitive currency has lost nearly 40 per cent of its value and now trades at near 13-year lows.
While that spells trouble for snowbirds looking to travel abroad and for shoppers facing higher prices on imported goods, it presents an opportunity for foreign investors, says Steve McCartney, vice-president at Communitech, a Waterloo, Ont., startup incubator.
"In terms of the dollar, Canadian companies would look like they would be an excellent value for them at this point," he said.
The cheap loonie is also an advantage for startups when they're making their pitch, he said, because many of them take in revenue in American dollars but pay operating costs in Canadian currency.
And for young companies looking to compete with established players, the low loonie allows them to compete more aggressively on price, he added.
John Somorjai, who heads the venture capital arm of Salesforce, an American cloud computing and customer management company, said his company has seen great results from its Canadian investments, including video marketer Vidyard.
And while the exchange rate is one factor, what's most important is the level of talent being produced by Canadian universities and the quality of the ideas being pursued by entrepreneurs, he said.
"We've made great investments and we'd love to do more in Canada," he said.
Somorjai said Canadian startups tend to look to the United States for growth capital when they're already doing business and looking to scale up their revenues and customer base.
American venture capitalists have helped fund some of Canada's biggest recent tech success stories, including Hootsuite, which has raised more than US$240 million; as well as Kik, which has raised US$120 million, and Shopify (TSX:SH), which raised more than US$110 million before going public last year.
Paul Salvini, who heads the Accelerator Centre in Waterloo, Ont., said $1 million is the level of funding at which most startups look to the American venture capital ecosystem.
One of the big issues for companies at that stage is getting noticed in a crowded marketplace, Salvini said.
Many venture capitalists do not range far from their home base in Silicon Valley and the area surrounding San Francisco, he said.
"The lower dollar might give them a reason to want to come and take a look," Salvini said.
Beyond attracting American investors, the loonie's fall against the greenback is a chance to focus Canadians on startups and the innovation economy and away from more cyclical industries, he added.
"We have to look at what our response is to the low dollar as the world moves towards a knowledge economy and an innovation economy," Salvini said.
Copyright (2016) Canadian Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
This article was written by Peter Henderson and The Canadian Press from The Canadian Press and was legally licensed through the NewsCred publisher network.
Related Topics:Selling a Business
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