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With Delilah Panio

Raising capital on the Canadian public market for your climate startup

While it might not seem intuitive to list on a Canadian exchange if you’re a US company, this route can allow you to go public at a much earlier stage than you might have considered, and enable you to raise equity capital via an alternative route than traditional venture. 

Delilah Panio is the Vice President of US Capital Formation for the Toronto Stock Exchange and TSX Venture Exchange. We sat down with her to discuss the benefits of taking this route, how you can weigh up whether it’s right for your company, and tactics for making sure your listing goes ahead smoothly. 

Why list on a Canadian exchange?

If you’re around the Series B stage and looking to raise capital, your first port of call will often be later-stage venture capital, or potentially private equity. Another option is going public in the US, such as through the Over the Counter (OTC) market, where many early-stage companies go to raise capital. But the OTC is unregulated - no one is looking as deeply at listing requirements or conducting background checks to filter out bad actors.

Your next step might be looking at NASDAQ or the New York Stock Exchange and their junior tiers. However, being on such a huge market has considerable disadvantages - you’re a tiny fish in a huge pond, so it’ll be hard to draw attention, plus on NASDAQ you’ll have to maintain a minimum share price or risk being delisted.

Listing your company on the TSX Venture Exchange, a regulated stock exchange in Canada, avoids these issues. While junior public markets might exist around the world, the unique benefit of Canada’s is that it has developed over many decades, and so has the right infrastructure, including tailored-to-small-caps listing requirements and corporate governance, lower listing costs, and investor interest, to support early-stage public companies. And because you only need to float 20% of your company to list on the TSX Venture Exchange, you’ll retain a significant level of control over the business.

Questions to ask yourself if you’re considering listing

1. Is it the right fit?
Companies that fit the bill are typically raising $10m to $20m, and are ready for significant, explosive growth - i.e. you should see yourself on NASDAQ or the New York Stock Exchange in three to five years. TSXV offers the path from a junior lising to graduating to the senior board - Toronto Stock Exchange - a stepping stone to then dual list onto one of the US exchanges.

But going public isn’t a decision you should take lightly, as it can result in major tax and legal implications. Really interrogate whether the benefits - flattening the cap table, gaining access to permanent capital, and the ability to use your stock as currency in acquisitions - are worth it, and align with your long-term growth strategy to list on an US exchange.

2. Have you already taken on venture funding? 
If you’ve raised significant institutional venture capital, this path is likely not for you. Going public means everyone, including Preferred Stockholders, convert to Common Stock (losing liquidation preferences, and other benefits), and most VC investors won’t be happy about that outcome. In most cases, companies that go public on TSX or similar exchanges have been largely bootstrapped to date or raised capital from high net worth individuals and family offices.

3. Is your company ready? 
The total cost of going public, including legal, audit, and listing fees - but not the broker-dealer success fee, which is typically 4-8% - is between US$200-400k, plus ongoing fees to maintain your listing.

Listing will also place huge demands on you as a founder - you need to be prepared to devote a significant chunk of your time to investor relations, and ensure your company is completely transparent, which will force you to implement fiscal controls and address any issues in your company. While the sheer amount of work involved might seem overwhelming, the TSX Venture Exchange offers a mentorship program that provides support and guidance. 

What to expect from the listing process

1. Getting your paperwork and team in order 
The requirements to list on TSXV include supplying a minimum of two years of audited financial statements (in IFRS vs US GAAP), having both a CFO and a formal board of directors with public company experience, and directors and officers insurance. You’ll also need to engage with a Canadian securities lawyer to structure the deal and submit the application to TSXV, and a Canadian investment banker to raise the funds. 

2. Ensure sufficient capitalization
TSXV’s listing requirements are based on the financial fundamentals of the company, including a matrix of revenue, net tangible assets and working capital. Without revenue and NTA, a key condition of listing on the exchange is raising at least 12-24 months worth of working capital via the listing. So, if that amounts to $10m, you’ll need to have $10m in the bank on the day that trading starts.  This means you need to line up sufficient investors, together with your investment banking partner, to hit this target.

3. Traditional IPO or CPC? 
You can either do an IPO, or a reverse merger into an existing shell or Capital Pool Company (CPC). Going through the CPC program splits the IPO process in two - first the CPC shell company is created raising up to CDN$10M, then the “qualifying transaction” or QT takes place when the private company merges into the CPC. This is less risky than doing a conventional IPO, because you’ll have already earmarked all of the money. The shell company has a minimum of 150 public shareholders, and you’ll need at least 200 in order to list. The other beneftis of the CPC are the money in the treasury, experienced Canadian capital markets people to help guide the transaction, and a Canadian C-Corp if the US company chooses to restructure to become a Foreign Private Issuer and delay SEC registration.

Expert advice for the listing process

1. Fine-tune your pitch for your audience
Pitching to a retail investor is completely different to pitching a venture capitalist with a deep tech background. You’ll need to calibrate your story so that it’s coherent and attractive to this market. There are specialists that build out this narrative for this specific purpose, so you’ll want to get professional help. You’ll also want to map out a short-term investor relations strategy to achieve the financing at listing, and then a longer-term one to engage investors and enhance liquidity post listing.

2. Dig into the structure
In your discussions with a Canadian securities lawyer, really look into the structure that makes sense for your company. Will you delay SEC registration? Can you be a foreign private issuer? And if so, what are the tax implications? 

3. Be prepared for the task of quarterly and annual reporting
A lot of founders aren’t ready for the demands this will take on their time. Make sure you have the correct systems in place to effectively report in the public market and comply with all corporate governance requirements.  Also think carefully about how you set achievable milestones and communicate them to investors.

4. Ask how much investment you’ll need to bring to the table 
You’ll need to push the investment bankers on whether institutional or retail investors will be interested in your company, both today and in the next round. You should also get clarity on how much heavy lifting they’re going to do when it comes to raising, and how much you should be bringing in from your own network to ensure sufficient capitalization.

Delilah is a capital markets expert with over 20 years advising companies on raising public and private capital in Canada and the US. Based in Southern California, she currently counsels US companies on the opportunity to list and raise capital on Canada’s premier equity markets. She is a frequent speaker and runs a global accelerator with UBS in Europe for early-stage female founders. Delilah is also Co-Founder of We Are Enough, an non-profit that educates women globally on why and how to invest in women-led businesses and/or with a gender lens in the public markets.  


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