Wellington Financial Provides $10 Million growth financing in Support of the Merger of TUC and CareWorx

We just announced our third financing in a row for a Canadian-based firm. Given the reality that 80% of our portfolio is made up of US-based, VC-backed companies, I’m almost ready to declare a trend!

This one is a $10 million tranche for Ottawa-based TUC Managed IT Solutions (to be renamed CareWorx Inc.). The funds will help TUC, a market-leader in managed IT and cloud services, acquire CareWorx Inc., a North American-leader in technology solutions serving senior care facilities. From our press release:

TUC provides IT service organizations including small and medium-sized enterprises, technology vendors and service providers with a comprehensive suite of managed IT and cloud services for end-users, supported 24×7 through our North American-based service desk. The merger represents the next level of managed services providing the complete technology stack for senior care – devices, applications, service and support.

CareWorx is a provider of advanced technology hardware, cloud products and related services to senior care facilities leveraging a strategic partnership with PointClickCare® – the market-leader in Electronic Health Records (EHR) software for senior care. CareWorx provides customers with focused expertise, wireless networking and out-of-the-box point-of-care and mobile technology designed specifically for use in senior care.

The combined company will eventually adopt the CareWorx brand and will establish Managed Services and Senior Care divisions that will continue to support all existing TUC and CareWorx customers. The Senior Care division will aim to vastly improve technology and IT support options for senior care facilities. The Managed Services division will continue to offer managed IT and cloud services with a specific focus on expansion in the midmarket and healthcare through a channel-first strategy.

“TUC and CareWorx have been working very closely since November 2014 – strategically, taking our partnership to the next level just made sense,” said Mark Scott, CEO of TUC and the newly-merged company. “Together we saw new opportunities emerging in this market set to explode over the next decade. The financing provided by Wellington Financial will help us realize on these opportunities and build a stronger company for the benefit of each of our customers.”

“Our products and services affect how more than 500,000 senior care workers impact the lives of over half a million residents daily,” said Mark Tomzak, former CEO of CareWorx and now President of the merged company, focusing on the Senior Care division. “Our goal is to help senior care facilities strategically plan what technology best meets their needs, help them get the most out of it, and ensure they have the support they need when they need it – allowing them to focus on what matters most – resident care.”

We are delighted to welcome both teams to our portfolio.

MRM

 
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John Scott: there’s always a cubicle for you at Wellington Financial

An open letter to John Scott, an Edmonton-born Engineer currently residing in St. John’s, NFLD:

What a few weeks you’ve had!

To be honest, I only got to watch a bit of the NHL All-Star festivities (but it is saved on the PVR somewhere, just in case). Between the kids’ swimming lessons, skiing lessons, a Friday evening GTHL game…. Taking in the Raptors’ 11th consecutive win vs. the Detroit Pistons on Saturday night. Sunday’s trip to Skyzone and the regular Minor Atom hockey practice…there wasn’t really time for the couch. As a Dad yourself, you know what I’m taking about. But that doesn’t mean we’ve not heard about the excitement in your life. Who could have missed it? And that buzz got me thinking:

Your recent whirlwind has more in common with investing in the tech sector than you might think.

First and foremost, we don’t always chart our own course, much like most careers in professional sports. In the venture debt world, we see hundreds of innovation companies each year from across North America. We do our due diligence and if we see a great fit for our model, invest between $2 million and $40 million in a business with prudent — not high — hopes that management’s business plan will be achievable. Once our money goes in, however, a variety of factors take over that invariably determine whether or not the company achieves great success. Several of these drivers will be obvious to you: customer behaviour, management acumen, competitive reaction, macro factors, economic swings, luck…. One likes to think that you can control the outcome of our business through canny portfolio company selection, but that would be naïve. To succeed in our industry, the best or the bunch are able to navigate the path that life brings. And in that way, you’ve already shown you have this capacity in spades.

As such, on the assumption that you’ve kept up your math and engineering skills since leaving Michigan Tech, perhaps you don’t have to settle for a General Motors cubicle in “sleepy Ontario”, as outlined in your beautifully-written essay in The Players Tribune last week. This may not be your only career option once you decide to hang up your professional hockey skates.

You see John, I think there’s a chance that the venture debt sector is the place for you.

As a foundation, a specialization in math and engineering is a good fit for our business. Technology evaluation and analysis is an underlooked discipline for many business and engineering programs, which is why our firm has begun endowing University scholarships in the hopes that will change over time (see prior post “Western Engineering student receives Wellington Financial’s Award in Technology Evaluation & Analysis” Jan. 15-16).

Our business is spread out across 12 different U.S. States and Canadian Provinces at any given time, so local knowledge is helpful. That you’ve lived and worked across the continent, despite being only 33 years of age, is a plus. Although we have offices in both Santa Monica and on Sand Hill Road in Menlo Park, California, the majority of our team is based in downtown Toronto. This is what our cubicles (more of a pod, really) look like:

cubicle

Part of our role is relating to people, and learning to work / collaborate with every possible personality type. If you’ve been playing hockey since you were a kid, I’m pretty sure you’ve come to excel at reading people and situations. There’s some travel in our business, for sure, but you’ve already got a PhD on that front. And I doubt you’ll ever achieve 75k airmiles in any given year. Work / family balance is important at our firm, which will be a Godsend to you and your wife given that you have four little kids at home. Not that the NHL doesn’t value family, but I doubt you ever get the chance to leave work early to attend a swim meet or ballet recital. Who is kidding who? 😉

We have a simple HR strategy: fit-to-role, role-to-fit. Which means that if we find someone who we think would be a good fit for our culture — culture being one of the most important success factors in our minds — we try to find a role for them. Likewise, if we have a specific role that needs filling, we make sure the candidate has the right toolkit to fit the specs. And then check to see how they’ll integrate into our culture.

Your candidacy for one of our humble cubicles is intriguing. Appreciating that so many former NHLers find great financial success with car dealerships or money management, I recognize that this idea is a bit our a curveball. However, as you said yourself, the last few weeks weren’t expected, either.

This isn’t a promise of a carer, but most definitely an invite to a “tryout” whenever that day comes. You’ve shown the world that you’ve got skills, intestinal fortitude and a collegial and self-deprecating nature. How could you not succeed in business?!

Until then, bon chance.

MRM

 
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What’s up with Ontario’s Scale Up Ventures?

It has been nine months since Ontario Premier Kathleen Wynne announced that Ontario taxpayers were committing $25 million to a new $50 million venture capital fund that will provide not just capital, but mentorship from a host of senior Canadian business leaders. One requirement was that entrepreneurs had to be running a “successful early- stage start-up”, but that can’t have been a barrier; I’ve had the pleasure of meeting a few that fit that description over the past week alone. That this new fund included both provincial and private-sector investment (matching the Province’s $25 million) is in keeping with the capitalization behind the once “troubled” and “struggling” OVCF initiative (see prior representative post “Here’s hoping OVCF 2.0 fixes the bugs in version 1.0” Mar. 20-13) as well as the prior federal government’s VCAP strategy (see prior representative post “Northleaf’s Venture Catalyst Fund gets to work” Feb. 27-14).

When the announcement went out last April, the government stated that “to qualify for investment, start-ups will have to go through the same pitch and due diligence process as they would with a regular venture capital fund.” That made sense, and the promise of initial investments in the $500k to $3 million range was well-suited for Seed and Series A opportunities. Our nation has more Canadian-based capital available from later stage venture groups, such as our new $300 million fund, than the Seed-oriented fund community. As such, every incremental bit of Seed capital helps; and that’s an understatement. The Premier advised that the new money was “expected” to flow to worthy Ontario-based start-ups in the “summer” of 2015. And, if companies needed more capital later, there was a potential for the Scale Up Ventures Fund to go higher than the original $3 million ceiling by way of follow-ons.

Sounds pretty fabulous, don’t you think?!

Last April, the Premier called this initiative “an important next step for Ontario’s innovation ecosystem”, and there’s no doubt about that. Every dollar that helps seed or expand a new venture in the Province serves to create jobs and innovation that our particularly weak economy badly needs.

The group of 36 mentors (32 men and 4 women) was equally fabulous, representing a broad cross-section of industries. The fund is Chaired by Nadir Mohamed, former CEO of Rogers Communications. Although some might have criticized that the panel of mentors was dominated by current and former CEOs of mega companies, much like the MARS Board of Directors, I think that’s misplaced. Who better to describe to a software developer what his bank really needs to modernize its infrastructure backbone than the CEO himself? Moreover, which big bank CTO isn’t going to give a local start-up a chance to test their new product when it was his/her own Chief Executive who made the introduction? That most of these mentors didn’t start the businesses they run doesn’t take away from the fact that they can truly play a very positive role in the make-or-break period that most early stage ventures go through.

The only question the impatient within Ontario’s innovation ecosystem will have is this: what’s up at Scale Up?

Since Scale Up’s founding hit the newswire nine months ago, the fund seems to have been in stealth mode. No subsequent press releases. No announcement of a fund manager. Nothing on the website advising who has bee hired to serve as the day-to-day team. Not a peep about any closed investments in promising, “successful start-ups.”

There was one “Summer Update post” on September 1st (don’t be cheeky, Summer didn’t officially end until Sept. 22nd last year):

Scale Up Ventures has been working over the course of the summer to move forward with the launch of the fund. To this end, we have been consulting with the leadership council and our partners to build out the team and the infrastructure.

We are pleased that there has been a significant amount of interest to date, and the team is looking forward to making further announcements on the first close of the fund towards the end of 2015. While this is slightly later than planned, everything is moving forward as expected.

This post naturally leaves one with the impression that the private sector’s $25 million slug hadn’t been organized prior to the Province’s fund launch announcement in April 2015. That this essential $25 million of matching capital hadn’t been solidified before 2015 came to an end, as the fund’s proponents indicated above, begs many questions. Particularly when Teralys, Northleaf, Kensington and Harbourvest have all demonstrated that they could make a compelling case to Corporate Canada in keeping with the matching requirements of the VCAP program, for example.

Missing the initial money will flow in the “summer” undertaking is one thing, but failing to hit the second, self-imposed “end of 2015” deadline for the fund to be up-and-running is a real shame given the relative paucity of Ontario-based Seed and Series A stage capital. In 2015, for example, U.S. entrepreneurs raised US$903 million via Seed rounds and another US$19.8 billion for their “early-stage” firms. The “early-stage” figure was 23% higher than 2014! Every quarter that’s missed is crucial. The Provincial government must now regret having shelved OETF (“Ontario government puts $250M Emerging Technology Fund on ice” June 21-12) before getting its ducks — such as Scale Up Ventures — lined-up.

Fortunately, many of the mentors involved are as accessible as they are talented and energetic. I’m hoping some of them will fill us in. That $50 million needs to flow. Quebec’s FTQ has $11.2 billion to invest in local companies, and that’s just one of several Quebec-based funds that have capital allocated to build and grow that Province’s start-up ecosystem. Scale Up Ventures was never going to serve every need, but it was and remains a good idea.

Given the current Star Wars craze, I can’t help but quote Yoda from The Empire Strikes Back: “Do. Or do not. There is no try.” As hundreds of Ontario-based entrepreneurs will attest, there’s no time to waste.

MRM

 
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Flaherty’s VCAP doing its thing with new IVP and iNovia fund announcements

When was the last time anyone had the chance to write about three different Canadian VC Fund closings in the same week?

As exciting as the news of the new Leaders Fund was (see prior post “New Leaders Fund just what Canada needs” Jan. 24-16), two other funds have had similarly great news of late. Information Venture Partners announced its initial $72.5 million close earlier this month. IVP is focused on fintech and enterprise software companies in Canada and the United States, and is led by three very experienced folks: Robert Antoniades, Kerri Golden and David Unsworth. (Sadly, it is noteworthy that IVP is one of the rare Canadian PE or VC funds with a female at the Partner level.)

For Montreal-based iNovia, its $175 million Fund IV close is a stellar uptick the team’s previous two $110 million funds. With a deal pedigree that includes names such as Lightspeed POS and Vidyard, it is no surprise that they were able to raise a meaningful uptick from their last outing. We’ve worked with them on two Montreal-based investments over the years, the MBO of Airborne Entertainment and BeyondTheRack.

It was a relief to see Northleaf commit $30 million of the prior government’s $400 million Federal Venture Capital Action Plan to these two firms. This is exactly what the late Jim Flaherty had in mind when he took the CVCA’s 2008-era advice regarding the creation of new Fund-of-Funds (see representative prior post “CVCA letters to Messers Flaherty, Clement and Ignatief” Dec. 26-08). I’m also delighted to see Northleaf support a first close below $75 million, as it did for IVP II. I always thought that the BDC’s rumoured $75 million minimum first close threshold was artificial. Many a good fund, such as Edgestone III, would still be around today if it wasn’t for slothful turnaround times and artificial fundraising thresholds. Perhaps prior mistakes have been learned, but in any event, the development is very positive.

With these two new closings — and more expected (Georgian?) — Canadian entrepreneurs are finally seeing the benefits of the three year old VCAP. And not a moment too soon.

Congrats to everyone involved.

MRM

 
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Juniper Networks to acquire Wellington Financial Fund III portfolio co BTI Systems

A nice bit of news hit the Boston Business Journal earlier today:

California tech firm Juniper Networks (NYSE: JNPR) said Tuesday that it will acquire Littleton-based cloud networking firm BTI Systems.

Terms of the acquisition were not disclosed, and the acquisition is expected to close during the second quarter of this year.

Juniper Networks has a market capitalization of about $10 billion.

BTI Systems aims to solve that problem for content providers (companies with heavily-used cloud applications) and service providers (telecom firms that run the networks used by those applications). The company’s software-defined networking technology aims to let those customers handle massive traffic growth — while also reducing costs and complexity.

Since BTI Systems began focusing on cloud services in 2010, BTI has raised about $60 million from investors such as Bain Capital Ventures, BDC, Covington and GrowthWorks. A funding round late last year was oversubscribed at $27 million.

In a blog post on Juniper’s website, Jonathan Davidson, executive vice president of Juniper Networks, said the company has entered into a definitive agreement to acquire privately held BTI Systems.

“We expect the acquisition will allow Juniper to accelerate the delivery of open and automated packet optical transport solutions that integrate with our NorthStar Controller and include network management features that enable end-to-end provisioning of new services,” he wrote in the blog post.

Juniper said it’s not disclosing the terms of agreement until the transaction closes.

Of course, the Canadian VC community knows BTI Systems as an Ottawa story. That the U.S. media have a different sense of the situation is just one more example of the life and times of a successful Canadian tech firm: you have to be many things to many people.

Our $5.5 million financing closed in May 2008, and came out of our $150 million Fund III. At the time, I believe BDC Venture Capital, GrowthWorks, Kodiak, Loch and VenGrowth Partners were leading the charge. EDC’s Venture arm and Bain Venture Capital came on board soon thereafter, and in a very meaningful way in each case. Fujitsu and Lucent Venture Partners rounded out things out as the supporting cast.

There has been lots of water under the bridge since then, and Juniper was always a natural fit. And that’s a compliment.

Congrats to everyone involved.

MRM

 
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