Alex MacBeath, CEO and managing director of Island Capital Partners, says companies need access to three things – capital, talent and markets.
And, to assist early stage companies in those areas, MacBeath helped put together a $4-million venture capital fund.
The fund is comprised of $2 million from the province and $2 million from about 23 Island investors. Besides MacBeath, the fund is managed by entrepreneurs Ron Keefe, Steve Nicolle and Paul Lypaczewski. Stefanie Corbett is Island Capital Partners’ director of operations.
MacBeath, originally from Marshfield P.E.I., retired in 2012 after a 35-year career with Grant Thornton LLP. He worked as an accountant, but also served as the company’s CEO for Canada for eight years and had a stint with the global management team in London, U.K.
Retirement was an opportunity to come back to the Island and do some different things, such as sitting on the board of directors at Health P.E.I., Island Advance, Startup Zone and the Wallace McCain Institute.
MacBeath saw an opportunity to tap into the dynamic startup environment that could benefit from mentorship and access to investment capital.
The group announced a $230,000 investment to Onset Communication Inc. As well, the group announced an arrangement with Startup Zone to work with new companies.
In addition to assessing companies as investment opportunities, members of the group also work with companies as “active investors” to provide advice and contacts to help them succeed. MacBeath sat down with The Guardian this week to talk about the venture capital fund and the entrepreneurial landscape on the Island.
Q: What is the process for negotiating and investing in companies and determining how much equity goes to Island Capital Partners?
A: They pitch to us with their business plan and their strategy and their financial projections. (We) will ask what capital they are raising. And, that might be $200,000. We had one in the past few weeks that is raising over $2 million. We will screen that company... is this something that fits our criteria, broadly speaking? Yes or no. If it does, then we will start to do our business due diligence. We’ll look into their business plan. We’ll test their projections. We may talk to some customers. We’ll talk to others we know in that industry. And, if we’re satisfied that this is a reasonable business opportunity, then we will negotiate a term sheet with them. That will include how much we are going to invest and an agreement on what the valuation of the company is at that point in time. When we agree as to what our investment is and what the valuation of the company is, that will determine what our equity stake is. So, that will vary, depending on the company. Once we’ve agreed on a term sheet, then we will conduct legal due diligence – making sure that all of the legal agreements are in place and any intellectual property is properly registered. Then we will disperse the funds. There may be some conditions – a need to raise additional capital or whatever. And, we may do it in two tranches. If we’re investing $200,000, we may invest $100,000 now and here’s some milestones. When you hit these in six months or a year, then we’ll advance the next $100,000. Each of those are dependent on the individual circumstance.
Q: For Island Capital Partners, what is a good business idea?
A: We’re sector agnostic. Most companies, not all, have a technical aspect to them. The ones we’ve heard to date cross different industries. We’re looking for a company that is scalable, that can grow. We’re looking for a company that has the potential for at least $10 million in sales and a sustainable competitive advantage that helps you be successful. We recognize there’s not going to be the depth of management. So, we’re looking for founders that have the potential to grow with the company, that are coachable. So, it’s a combination of the idea or the product, the competitive advantage that goes with that, the potential scalability of the company and the strength of the founders.
Q: Do you guys hear jokes comparing you to Dragons’ Den?
A: Oh yeah, we hear a few of those. But I think perhaps it’s a little bit different environment. We see some excellent companies. It’s perhaps not as dramatic as you might see on Dragons’ Den. We want to work with these companies and identify that they need some additional resources. They may need somebody in information technology or a part-time chief financial officer. And, we will sometimes help them identify those additional resources to round out their management depth and capability. All of these sorts of things enhance a company’s chance for success. That’s how we differ true angel funds and an angel network. There are many across the country and they’re a very important part of the ecosystem. But an angel network just matches investors with companies needing money. And, that’s really about it. We tend to become more involved with them and try and put in place as many elements as we can that enhances their chances for success.
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