Small emerging companies and startups play a significant role in the economic growth of many countries. The growth of these companies depends on access to capital since most financial intermediaries like the banks shy away from lending to these so-called high risk emerging enterprises. Company founders and senior management teams are compelled to depend on equity capital, a task that is challenging owing to the substantial expenses associated with information asymmetry and agency costs among entrepreneurs, managers, and investors. To this problem the Toronto Stock Exchange has provided a solution, since 1986, via the Capital Pool Company (CPC) programme. In this paper we examine the experience and views of the CPC issuers (company founders and senior management teams) that have not found an investment target or a qualified transaction (QT) up to June 2023. We find that Issuers and Toronto Stock Exchange (TSX) authorities both believe that the Canadian public VC market can provide innovatively and effectively equity capital to Canadian and global startups and new ventures. We also identify interesting insights from the surveyed issuers and the interviewed TSX managers.
Nick Demos
