After sitting dormant for close to 20 years, Brian Davey has pumped life into a Thunder Bay-based investment fund.
Neegani Investment Management, owned by the not-for-profit Nishnawbe Aski Development Fund (NADF), was established as an equity for-profit fund in 1997.
In its recent history, Neegani has invested in Air Suites, a Thunder Bay flight management software company, and Delshen Therapeutics, an emerging medical marijuana company, with plans to establish commercial operations near Kirkland Lake.
“We’re always looking for deals to invest in. Sometimes we need to look at 10 in order to pick one or two,” said Brian Davey, Neegani’s managing director.
The fund had been gone into hibernation within a couple of years of its creation. But Neegani did close to 10 deals before deciding to cash out following the death of one of its corporate directors who was heavily involved in many of the transactions.
The private fund, modest but in the millions, according to Davey, had been wealth managed for a number of years.
“It’s money that’s been sitting there for some time. It wasn’t being invested at all in private placements or equity investments.”
What spurred Neegani’s revival within the last year was getting the necessary expertise in place to manage the fund.
Davey, better known as the executive director of NADF, brings more than 35 years of experience in the public and private sector related to First Nation business and economic development.
Neegani’s four-member board – drawn from the NADF board – come with banking, financial, accounting and business consulting backgrounds.
Whereas NADF provided strictly loans, Davey said Neegani was established to offer different products such as equity investment, something that was sorely lacking and in the demand in the region.
Neegani works in financing startup companies or assist existing companies with acquisitions and expansions. The transaction may involve a share purchase, purchase of business assets or convertible debt.
The fund will invest up to $300,000 into a company with an exit strategy within seven years of the initial investment.
“We like convertible debt,” said Davey. “Many startups have projections that often are optimistic about what they can do. They place an incredible value on their company.
“One way of getting around that debate to use convertible debt where it’s like a loan to get them the money, but it’s only interest payments or no payments at all. Once they reach a certain revenue point, then we convert it to equity.”
“Then we have a better understanding of the value of the company. Right now it’s pure speculation.”
Unlike southern Ontario investment funds that cut deals in specific sectors, Davey said the deal flow is just not there in the North.
“We prefer to be more diversified.”
Davey said their selection process rests on an entrepreneur or company generating a market or having a demonstrated buyer for their product or service.
“It’s very difficult to prove with startups but if you get letters of intent or off-take agreement to purchase, those are very attractive to us. Often we get approached and they don’t have those things.”
They’re also drawn to a company management’s ability to think strategically and entice other investors.
Davey said Neegani often partners with other strategic or angel investors, mainstream banks and investment funds, and Aboriginal financial institutions.
“It always excites us when we see other people who are willing to invest because they’ve done their due diligence, and if they know more than us about that particular business, and we see that they’re excited, then that provides us some comfort.”
Davey said Neegani is not restricted to investing only in Indigenous business ventures. And they’ll look beyond Northern Ontario if they see opportunity.
“Neegani is out to do business and make money for NADF,” he said.
“Our prime target is the return. At this point, it’s very small – like 15 per cent – but we expect to do a lot better. We’re starting out conservatively and building out from there.”
For prospects, Davey said they keep a keen eye on startups that incubate in regional innovation centres. They’re also looking for business spinoffs expected to emerge from some major power transmission projects on the books, such as the Watay Power project in the northwest and the proposed east-west transmission tie on Lake Superior’s north shore.