As a venture capitalist looking to invest in the technology sector I have noticed a very interesting phenomenon—related to junior mining, of all things.
I have been increasingly sought out by brokers, investment bankers and investor relations professionals looking to raise money for private tech companies. The interesting phenomenon is that almost all of them have a background in mining. So why are they trying to raise money for tech companies? According to them, it’s because the junior mining sector has "completely dried up," and thus they aren’t able to sell clients on the private placement of prospectors. Moreover, they see the tech sector as an industry that is sexy and extremely lucrative with no end of its expansion in sight.
It’s no secret: the tech sector in Canada is heating up while the mining sector is forecasted to be dismal. The result? Canadian investors, as well as brokers, who once reserved the "high- risk/return" portion of their portfolio for junior mining are starting to look elsewhere, and they’re increasingly discovering the vast opportunities in tech.
When you look at the predicted tech trends of 2014 and the ever-expanding reach and how it further engage consumers, it’s easy to get excited. More everyday appliances will evolve into devices that transfer useful data online as the "internet of things" touches more areas of our lives (i.e. GE’s refrigerator that can tell you when your milk has soured and Statis’ connected toilets that can track your bowel movements). Wearable devices are making it possible for individuals to "quantify" themselves. The Muse is a headband by Toronto's InteraXon that allows you to monitor your brainwaves thus giving you a tangible way to read your stress levels and ability to focus. Nike will be releasing products that allow users to monitor their vital signs such as heartbeat and blood pressure from sensors in hats and shoes.
The growth in the tech sector has been fueling more VC exits. Examples of VC-backed Canadian tech companies include ViXS Systems (TSX:VXS), Spectra7 Microsystems (TSXV:SEV), and Halogen Software (TSX:HGN).
As the excitement builds around the innovations of technology, the allure of geological surveys is continuing to wear thin. 2013 was brutal for commodities as global commodity asset values dropped by a record $88 billion. The forecast for the mining industry in 2014 is also bleak. As the US dollar strengthens and economies continue to have low growth rates, commodity prices will continue to take a beating. Moreover, the fluctuating metal prices, and gold prices falling over $450 an ounce since last year, are causing difficulties for mining companies to plan and execute M&A deals. With these harsh times ahead, investors are leery of cashstrapped junior mining companies’ ability to weather the storm.
One example of an organization that is looking to be on the forefront of this trend from mining to tech is the Cambridge House International, the second largest mining conference provider in Canada. In Toronto, on January 16, they will be adding another type of conference to their event series called Cantech, which will be all about technology in Canada. The event has a very impressive roster of exhibitors and guest speakers. Sir Terry Matthews (founder of Mitel and Wesley Clover), and John Ruffolo (CEO of OMERS Ventures), representing some of the biggest names in Canada’s VC/tech sector, and Canadian astronaut Chris Hatfield.
According to Jay Martin, the president of Cambridge House, due to the popular demand of his mining conference attendees, he is adding this new "Investor Tech" conference to satisfy their curiosity, and give an insight into this exciting new world.