Silicon Valley North #13 Nov'99

The Way I See Itů by Michael Volker

Canadian Venture Exchange will fuel growth in our technology Sector

The newly created Canadian Venture Exchange will undoubtedly boost investment in our growing technology sector. The CDNX, as it is being called, is the merger of the Vancouver Stock Exchange (VSE), the Alberta Stock Exchange (ASE), and various "parts" of the Toronto, Montreal, and Winnipeg Stock Exchanges as well as the Canadian Dealing Network (CDN).

In this column last December, I advocated such a proposal and suggested that we avoid using a geographic component in the new name so as to give it the appearance of a more global market (like the NASDAQ in the USA). Otherwise, American firms and investors may think that the exchange favors Canadian ventures - which may be true, but let's think big. Why not call it the "National Venture Exchange"? When NASDAQ merged with the American Stock Exchange last year, the "American" was dropped.

The new exchange could be home to North American junior technology companies just as NASDAQ is home to many senior technology listings. NASDAQ's small cap market lists companies with a market cap of at least US$50 million and which trade at a minimum of $4 per share. Our new exchange would nicely fill the gap between this market and the unregulated and unruly Over-the-Counter (OTC) market. The OTC has indeed been attracting a number of B.C. companies because of a lack of a better alternative. Companies would graduate from this new exchange, as they do now in the case of VSE companies, to the TSE or NASDAQ.

This amalgamation of our existing exchanges will hopefully push our disparate provincial securities commissions towards a unified national securities policy which will facilitate the raising of venture capital for Candian firms. It is a known fact that most of the new capital raised by VSE companies is via "private placements" of shares. Such financings must be conducted in accordance with the applicable provincial Acts, which vary from province to province. Here in B.C., we are very fortunate (and this is unknown to many entrepreneurs) in that as little as $25,000 can be raised by a company with minimal bureaucracy and red tape whereas in Ontario the entry level is over $100K! The VSE's Small Financing Exemption, which allows companies to raise up to $1 million from retail investors in B.C., is yet another benefit offered by the VSE to its listed companies.

Other anomolies exist. For example, a Venture Capital Pool (VCP) company on the VSE can only sell its shares to British Columbians. Although an Ontarian or a Quebecer can form a VCP, they can offer shares only to British Columbians. Figure that out! I'm hopeful that the CDNX will push us in the right direction while not messing up some of the advantages which we currently enjoy in B.C.

The new exchange will be up and running before the end of November, provided that the Alberta and B.C. Securities Commissions approve the deal in early October. If not, a Y2K blackout imposed by the CDNX would delay the process until next Spring. Initially, the CDNX will list all of the ASE and VSE companies and then gradually add other listings from the other exchanges.

This reform in our trading markets and our regulatory system bodes well for technology companies seeking risk capital. It will also allow more retail investors to get in on earlier stage opportunities.

In junior markets, it is easier for scam artists to get their companies listed. Such operators can tarnish the reputation of an exchange and this is what happened to the VSE in the late eighties. I'm confident that the VSE's overhaul  by new management and a move towards more disclosure - as opposed to more regulation - will allow the CDNX to operate a fair venture market.

The way I see it, all we need to do now is to choose a better name in order to get our American friends into the game!

Michael Volker is a high technology entrepreneur and director of Simon Fraser U's University/Industry Liaison Office. He is a former executive director of the BC Advanced Systems Institute and is chair of the Vancouver Enterprise Forum. He may be reached at

Copyright, 1999.