Private firms’ fundraising tactics studied
A University of Calgary finance professor is researching how private companies in Alberta raise money to grow their businesses.
Ari Pandes, of the Haskayne School of Business, is using confidential private- market financing data from the Alberta Securities Commission for the study, which involves firms that filed their first private financing with the commission in 2006.
“For those companies, we tracked all the financings going forward and we also tracked, because we had the company names, what happened to them.
“Whether they were acquired. Whether they went bankrupt. Or some of them, of course, are still private,” said Pandes.
“A lot of studies have been done in the public markets but very few studies have been done on the private markets and the problem is data limitation.
“People just don’t have access to data like that.”
He said the study is looking at what types of investors firms are accessing in their very early stages — friends, family, business associates — and as they grow larger are they expanding their sources of capital to more accredited angel-type investors or private equity investors.
“The neat thing in this data is we also have the names and addresses of the investors ... Of course, that’s confidential so we’re not allowed to disclose that but we can aggregate that data,” said Pandes.
“So we can also see what is the geographic dispersion of these investors.”
Pandes said it’s important to discern how private companies are accessing capital.
The companies are being tracked until the present time. Pandes is looking at more than 100 Albertabased companies. The data will also be able to look at investment amounts and levels of return. The intent is to make this research into a paper that will eventually be published in an academic journal.
Pandes is working on the project with co- author Michael Robinson, associate professor of finance at Haskayne.
It’s one of three capital market research projects Pandes is undertaking as part of a $ 35,000 grant from the Canadian Securities Institute Research Foundation.
A second study is looking at the junior public markets, the TSX Venture Exchange, and the performance of companies that sought public venture capital and eventually graduated to the senior market. The third will look at the role of the underwriters’ legal advisers in initial public offerings.