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Tech Futures:  September 10, 1999 By Michael Volker   Canadian Venture Exchange, Spotlight on NewMedia, Portfolio and VCP Updates Canadian Venture Exchange (CDNX): Well, as surmised in my Apr 23rd column, the soon-to-be-merged junior exchanges will be calling the new entity the CDNX, the Canadian Venture Exchange. The CDNX is the combination of the junior exchanges in Canada, i.e. the Vancouver Stock Exchange, the Alberta Stock Exchange, and various "parts" of the other, more senior exchanges (the Toronto Stock Exchange and the Montreal Stock Exchange) as well as the CDN, the Canadian Dealing Network (which really isn't a stock exchange but is more like the OTC-BB in the USA, i.e. a market for "unlisted" stocks). The CDNX will be the exchange for venture (i.e. young, emerging) companies.  The CDNX will list, in 3 difference categories, smaller, emerging companies such as junior technology ventures.  At the risk of not appearing patriotic, I was suggesting 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). Americans may think that they have to be a Canadian venture in order to be listed on the Canadian Venture Exchange. Similarly, investors such as our risk-oriented southern friends may think that they are investing in a Canadian company when they may, in fact, be investing in an emerging Silicon Valley deal. Calling it the CDNX sounds catchy but it may cause it to be identified with the current CDN (Canadian Dealing Network) market which will eventually be absorbed by the CDNX. The CDN is Canada's version of the OTC-BB (Over-the-Counter Bulletin Board) market which I was pooh-poohing in my last column. In any event, I'm delighted that it's coming together. It'll be up and running within months and I firmly believe that our technology sector will benefit greatly.  This move by the existing exchanges will push our disparate provincial securities commissions towards a unified national securities policy which will facilitate the raising of venture capital for Canadian 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 (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!  Other anomolies exist. For example, a Venture Capital Pool (VCP) company 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 screwing up some of the advantages which we currently enjoy in B.C. For more details, check the CDNX website at http://www.cdnx.ca. For you domain name poachers out there, forget trying to reserve cdnx.com - guess who owns it? (answer: it's the VSE!) That tells me that they are really pushing the "Canadian" affiliation while at the same time knowing that down the road, the dot-com designation will be really useful when marketing the Exchange south of the border.  Spotlight on New Media Companies in B.C. This past week I heard a speech given by Ian Wilkinson, founder of Radical Entertainment Ltd., the largest privately owned game developer in Canada. Radical has been in the news this past year because of its financial difficulties and, until recently, was operating in receivership. However, as Ian highlighted in his talk, Radical has managed to address these problems and looks forward to a bright future.   Radical now employs more than 150 video game developers working on interactive entertainment software. Recently, Radical's Bloodlines game for the PSX was released in Europe by Sony and development was completed on an ESPN X-Games Pro Boarder title for release this Fall. Also, Electronic Arts published X-Games Pro Boarder for Radical. Currently, Radical is creating NHL® Hockey for Fox Interactive and Fox Sports. Radical is a so-called New Media company. So, what's New Media? Although there's no precise definition, it generally includes technologies and products related to digital production - and the productions themselves (i.e. the "content") -  in computer-generated animation and special effects, interactive learning and entertainment products, the Internet (the Web), and digital images and television. The creation and delivery of new forms of media is transforming the entertainment and information industries. You may have heard of the term "convergence". This deals with the trend towards  the merging of digitized text, graphics, audio and video on various platforms. This is a hot new growth area in technology. We've seen lots of hype around the internet, but that's just the tip of the iceberg. There will be a lot of exciting new developments taking place. For example, a joint industry-university initiative involves the University of B.C. and Simon Fraser University working establishing joint research centre, called NewMIC (for New Media Innovation Centre) which will be housed downtown at Harbour Centre. What really turns investors on is the fact that a company which produces "content", like a game or a unique internet resource, is that there's always room for more and products don't necessarily compete with each other. With software applications, like a word processor, one will usually win over others. But with products like games or movies, you can have several best sellers and one will not displace the others. After all, users won't keep watching one movie or play one game at the exclusion of others. In June 1999 PriceWaterhouseCoopers released a survey on the NewMedia industry in B.C. which was done in consultation with NewMedia BC, a newly formed industry assosciation,  and Simon Fraser University. The survey involved 42 firms (out of some 70 that were identified). The highlights are: 65% of firms are less than five years old $557 million in revenues >1800 people employed (1998) 67% are private and 23% are public companies 51% of companies expect to double workforce by 2001 30% of companies have no revenue yet One need look no further than Electronic Arts (NASDAQ:ERTS) as an example of what can be achieved. Electronic Arts Canada got its start in B.C. as Distinctive Software, founded by Don Mattrick. Some companies, like EA and Radical focus mainly on content, i.e. creating titles. Others produce tools and products for creating content. Most of the respondents to the survey provide on-line internet products and services.  This week, I'll identify the public companies (B.C. based) that participated in the survey and a few others that I happen to know about (did I miss any?). Classifying a company as New Media is, admittedly, arbitrary. Check them out. In the weeks to come, I'll take a closer look at some of these.   Symbol Company Last Trade More Info EDUV EDUVERSE Accelerated Learning Systems $1.00 quote/chart, website ELE.V Electric Mail Company $1.50 quote/chart, website EUIN Destiny Software Productions Inc $3.05 quote/chart, website FCS.V FirstClass Systems $0.10 quote/chart, website IPZ.V Image Power $0.49 quote/chart, website MAC.V Mosaic Technologies Corp. $0.52 quote/chart, website MCZa.AL MC2 Learning Systems $2.55 quote/chart, website MER.V Medera Life Sciences $3.15 quote/chart, website MFE.TO Mainframe Entertainment $2.25 quote/chart, website MTV.V Multivision Communications Corp. $0.61 quote/chart, website NNCI NetNation Communications Inc. $4.56 quote/chart, website NNS.V Net Nanny Software $0.83 quote/chart, profile, website ORTG Orion Technologies $3.13 quote/chart, website PNI.M PhotoChannel Networks, Inc. $0.70 quote/chart, website POST CyPost Corporation $8.13 quote/chart, website RNK.TO Rainmaker Entertainment Group $1.00 quote/chart, website SCE.V SoftCare Electronic Commerce $2.40 quote/chart, website SCS.V SCS Solars Computing  $1.00 quote/chart, website SWEB stockgroup.com $3.00 quote/chart, website SYD.V Sideware Systems $2.85 quote/chart, website THW.AL Totally Hip Software $0.40 quote/chart, website UTOb.V Uniglobe Travel Online $4.15 quote/chart, website OTC traded companies (the ones without a .V, .TO, or .AL attached) are quoted in US dollars. IPO Performance Update For those of you returning from holidays, you may not have been following some of this  summer's hot IPOs, notably Sierra Wireless Inc. (TSE:SW), Creo Products Inc. (NASDAQ:CREO), and Pivotal Corporation (NASDAQ:PVTL). Creo, now trading around U$25.38, has showed the strongest gain. Pivotal follows next trading around U$16.50. Sierra Wireless is trading at C$14.25, near its IPO price of C$14.50. Junior Technology Portfolio - Update In July 16, I "invested" $25,220 in 10 small,  micro-cap companies selected from the T-Net listing of all B.C. publicly traded technology firms - just for fun to see what would happen if we tracked this group. This "starter" portfolio, as updated below, shows that the original investment of $25,220 has declined to $21,905. We'll sit tight awhile longer. After all, we're investors, not traders, right? In comparison,the T-Net20 portfolio index of the 20 biggest (by value) tech companies in BC is up 33% to 2897 in the comparable period. And, the T-Net20 does not yet include Creo and Pivotal, soon to be added.  Sample "Starter" BC Technology Portfolio:   Company Price 16Jul99 # Shares Price 9Sep99 Current Value Sierra Wireless Inc. (TSE:SW) 13.00 200 14.25 2850 A.L.I. Technologies Inc. (TSE:ALT) 9.60 300 6.15 1845 Sideware Systems Inc. (VSE:SYD) 3.18 1000 2.70 2700 Burnt Sand Solutions Inc. (TSE:BRT) 1.95 1500 1.71 2565 Inflazyme Pharmaceuticals Ltd. (VSE:IZP)  1.35 1500 1.53 2295 Spectrum Signal Processing Inc. (TSE:SSY) 7.00 400 3.35 1340 Avcorp Industries Inc. (TSE:AVP) 2.00 1000 1.96 1960 Pacific Insight Electronics (VSE:PIH) 2.81 1000 2.75 2750 Marine Bioproducts International Corp. (VSE:MBP) 0.90 2000 0.90 1800 Avcan Global Systems Inc. (VSE:ACN) 1.10 2000 0.90 1800 TOTAL PORTFOLIO VALUE $25,220     $21,905 GAIN (LOSS)       ($3,315) VCP Update I've been keeping track of "VCP" companies in this column because they may provide funding to, and in the process acquire, technology companies. A VCP company is a Venture Capital Pool which is created on the VSE by financiers interested in acquiring and active enterprise through a publicly traded vehicle. New additions to the list in the past two weeks include Brisbane Capital Corp. and Spartacus Capital Inc. Also, SVC Second Venture Capital Corp., First Castle Enterprises, First Harbour Enterprises, First Tower Enterprises, and Darwin Capital Corp. have now begun to trade. Check our Venture Capital Pools chart for a complete updated list of the VSE's VCP companies.  Michael Volker is the Director of the University/Industry Liaison Office at Simon Fraser University, Chairman of the Vancouver Enterprise Forum, and a technology entrepreneur. He owns shares in many of the companies he writes about. Contact: mike@risktaker.com. Copyright, 1999. What Do You Think? Talk Back To Mike Volker Tech Futures is a bi-weekly column that focusses attention on new and emerging BC publicly listed technology companies. Mike Volker is the Director of the University/Industry Liaison Office at Simon Fraser University, Chairman of the Vancouver Enterprise Forum, and a technology entrepreneur. He owns shares in many of the companies he writes about. Contact: mike@risktaker.com Tech Futures Archive T-Net 20 High Tech Stock Index