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Streetwise Michael Wekerle’s Difference Capital Financial gets windfall from Toronto’s Vena Solutions

Michael Wekerle, chief executive officer of Difference Capital Financial Inc., speaks during an interview in Toronto, on Dec. 1, 2014.

Kevin Van Paassen/Bloomberg

There was a rare bit of good news Wednesday for Michael Wekerle’s Difference Capital Financial Inc.

The publicly-traded investment firm, which is 46-per-cent-owned by Mr. Wekerle, the former Dragons' Den star, ran into some challenges earlier this decade after incurring heavy losses on some of its venture investments, struggling with indebtedness and undergoing management changes. Now, Difference says it is set to become debt-free, by retiring $6.7-million of its debentures – which pay 12 per cent – a year-and-a-half early.

The reason for the good turn of fortune is Toronto’s Vena Solutions Inc. The enterprise software firm said Wednesday that it had closed a $115-million financing led by American growth capital firm JMI Equity.

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Difference was an early backer of Vena, investing $3-million in its convertible debentures in November, 2013, and an additional $1.5-million, in total, in 2014 and 2015. Vena has since become one of Canada’s fastest growing startups and has emerged as the company to watch in the hot “corporate performance management” software sector. The investment by JMI is a big vote of confidence in Vena, considering that JMI was an early backer of one of Vena’s U.S. rivals, Adaptive Insights Inc., which was sold to Workday, Inc. last year.

That has left Difference sitting on a big potential winner – in fact, its most successful investment holding to date, according to the investment firm. Difference has backed some of the biggest names on the Canadian startup scene of the first half of the 2010s, including Hootsuite Media Inc., Vision Critical Communications Inc., BuildDirect.com Technologies Inc. and Mogo Finance Technology. But those and other investments haven’t quite panned out yet. Hootsuite has been in talks about a possible sale or IPO, Vision Critical is looking to re-establish itself after recent internal issues, while BuildDirect.com emerged from creditor protection last year and Difference wrote down the value of its $8-million investment in BuildDirect to nil. Mogo has struggled as a publicly-traded company. All told, Difference’s investments carried a combined fair value of $58.5-million as of Sept. 30, 2018, compared with an average cost of just under $70-million.

It looks like Vena will boost that fair value, as Difference says the latest transaction gives it a four-times return on its investment to date. With the JMI-led deal, Difference is taking some money off the table by selling some of its Vena stake; that deal and other recent transactions leave Difference with $13.4-million in cash, up from just $200,000 on Sept. 30, which will allow it to retire its debentures. The deal will also contribute $8.3-million, or $1.43 per share, to Difference’s net asset value (NAV) – amounting to a more than 20-per-cent bump to its NAV as of Sept. 30.

Investors appeared to like the news: Difference’s thinly traded stock closed at $3.91 Wednesday, up 30 per cent.

Mr. Wekerle stepped down as CEO in 2015 but is still (non-executive) chairman of Difference.

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