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In the Media




Dealfind funding bodes well for sector

Jameson Berkow, Financial Post ยท May 16, 2011

TORONTO . Amidst a drought-stricken Canadian venture capital industry, Dealfind Inc. just hit liquid.

The Toronto-based groupbuying website announced Monday $31-million in new funding from three venture capital firms, two of them Canadian. Georgian Partners and the Ontario Venture Capital Fund, both based in Toronto, and New York-based Insight Venture Partners are contributing funds in exchange for minority interests in Dealfind.

VC funding levels in Canada stand at a 16-year low, according to a report last week from PricewaterhouseCoopers (PwC). But new major investments, such as that to Dealfind, could signal a longoverdue resurgence for the industry.

"Think of spring when you see green shoots sprouting up after a long winter," said Richard Remillard, executive director of the Canadian Venture Capital Association (CVCA), emphasizing the word 'long.' "This might be another green shoot that is springing up.

Unlike individual or "angel" investors, which the PwC report said provided the bulk of financing for emerging Canadian software outfits for the past two years, VC funding comes with money as well as a bevy of expertise and coveted industry connections that can help new players compete aggressively on a global level. For Gary Lipovetsky, Dealfind's president, the non-monetary benefits were far more attractive.

"We never actually needed the money," Mr. Lipovetsky said. "What is more important to us than the funds is their contacts in the industry and their knowledge and overall experience with taking companies to a much higher level.

"Because, quite frankly, Mike [Tulman, chief executive of Dealfind] and I had enough money."

That's not to suggest new financing won't be put to good use by the Web-based service, which celebrated its first anniversary in early May. Operating in 25 cities today -technically 28 as of Monday morning -Dealfind plans to quadruple that figure, aiming to be in 100 North American markets by 2012.

The company also plans to double its employees by then, to more than 300.

In the ballooning groupbuying sector aggressively is the only way to expand with any hope of success. Marketleading Groupon Inc. was named last August as the fastest growing company of all time by Forbes.

But Dealfind, which has the advantage of drawing on the resources of MenuPalace. com Corp. -another Web company founded by Mr. Lipovetsky and Mr. Tulman 11 years ago -is not worried about the upstarts.

"The perception is that yes, there are dozens of players in the Toronto market alone," said Mr. Lipovetsky. "In reality, we are only competing with three other companies ... like LivingSocial and Groupon."

As Dealfind grows, so, too, will the investment accounts of Canadian venture-capital firms, hopes Mr. Remillard, as the industry tends to work in cycles.

"The down cycle that we've been in for the past 10 or 11 years has been longer and deeper than usual, but a cycle nonetheless," he said. "So you look for what I call green shoots."

Aside from more investments, additional 'green shoots' would include new funds forming despite what Mr. Remillard still considers a "very, very difficult fundraising environment," as well as more mergers and acquisitions.

Georgian Partners launched just last year and Radian6 Technologies Inc., a social media firm based in Fredericton, was acquired by cloud computing giant Salesforce.com Inc. in March for US$326-million.

It was one of five major M&A deals signed in the first three months of the year, according to a report to be released by the CVCA Tuesday.

"That is not to minimize the challenges that remain, which are considerable," said Mr. Remillard.

"But there might be a little bit of light at the end of the tunnel."

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