Hello, it’s Victoria here…once again live-blogging the seminar tonight.  I will be picking up key points so excuse the impartial sentence structure.

First up: Steven Lukas from Fasken Martineau. He talks about options of making your company an association.

Goes over shareholder, employee, director options. Anybody can be a shareholder and you can have as many as you want! His opinion is that you need to see a lawyer before you raise money. As a shareholder, the only liability is your initial investment.  All shares are not created equal. Shareholders have pre-emptive rights.  They can decide who the director is going to be, they have to have at least one and there are no residency requirements. He says it takes time and effort to find directors.  It’s not a position that many want to fill quickly.

Why? Directors have a lot of responsibility.  They manage the affairs of the company, they have duties to the company and they appoint the officers.  They don’t manage the day to day. Officers: you can have as many as you want. CEO, COO, CTO.  Under the officers are the employees. They do the work and they are different from contractors. Other issues that might arise? Conflict of interest, investor and inventor, public vs. private, within other companies.

Initial Corporate Structure: Incorporation-US vs. Canada vs. International

Financing: Where is your company going to come from?
Government grants: only available to Canadian companies
Taxation and employment issues: simpler if you are building here

BC vs. Federal: either BC Business Corporation, or Canada BC Act

are fine and both are investor friendly. If you incorporate federally, you have to register externally in BC.  It’s filing a piece of paper and paying for it. Steve recommends we have an unlimited # of common shares and a “blank-cheque” preferred shares. (these have been approved by shareholders) The financiers dictate the financing terms.  If you can avoid: issuing secured debt, using shareholders’ loans because they’re complex, using multiple shares that have classes, incorporating offshore. I asked if you had to incorporate to get a loan. For insurance purposes he says, yes. A question was asked about which state to incorporate in for the US?  Nevada or Delaware.

What are Founder’s Shares?
Large block of shares issued at a low price, it recognizes the sweat-equity contribution. They should be common shares and preferred shares. To who should they be issued? Founders and senior officers.  Common mistakes in allocating issues? Not setting aside enough shares (4-8 million), not setting aside for future management team (15-25%), not vesting it  (2-4 years), or issuing to the wrong people.
Preparing a Road Map for Financing
What are the milestones? They have to be integrated into the budget and you need a timeline. Initial equity seed financing can come from: friends and family (50-150K), founders (variables), pre-public, angels (250-500K), VC (1-3 million), investment bankers, underwriters (1-5 million), public financing, IPO, Strategic Partners (this is big, they can be a good source, supplier etc.)

Securities Legislation: You can’t just take $$ from anyone that you want. You need a prospectus or rely on exemptions (family and friends, accredited investors, private issuer, offering memorandum). Goes over Offering Memorandum and Stock Options plan. He says it should be issued at last round of financing 10-25%.  Companies must plan for growth and make notional allocation.

Next Up: Sean Hodgins, CA

BC Tech Bootstrap Model:

1 in 100 companies get VC funding so don’t quit your day job, adopt good expense reporting, register for GST to get your ITC’s back, raise your first $25K from friends and family, build in smart-sweat equity (R&D pay partially in equity, key hires and use stock options), register as an EBC, do the circuit, find customers who will help you, leverage telefilm, NRC-IRAP, NSERC, build SR&ED programs, build partnerships, visit Bootup Labs!

Financial Modeling

What to include in your financial modelling? (3-5 years) Income statement, balance sheets, cash flow, opportunity analysis, list of assumptions, capitalization table.  Keep you business model simple and focus on revenues.  Make it believable, test suing your network, costs should focus on R&D. Your revenue model needs to focus on very practical answers to questions.

Who’s buying what you’re selling?
What price are you going to charge?
Who’s going to your site?
Customer support growth?
Compare to competitors?

Opportunity Analysis: Calculate the size of your market, story to market take ratio (5-10%) rate of growth analysis, valuation analysis,

Case Study: QC Docs