Trendlines Venture Capital Group Files For IPO In Canadian Capital Market

The Trendlines Group Ltd. has just filed a preliminary prospectus with the securities regulatory authorities in Ontario, British Columbia, Alberta, Saskatchewan, Manitoba and Nova Scotia in connection with a proposed initial public offering of its ordinary shares.

It does not say how much money the company expects to raise from the offering, which is being made on a best efforts agency basis and is led by the Toronto based boutique capital markets advisory firm Octagon Capital Corporation. In addition Euro Pacific Canada Inc., Paradigm Capital Inc. and M Partners Inc. are part of the syndicating group.

What is especially interesting about the filing though is that the Trendlines Group is an Israeli company, based in the northern Galilee town of Misgav. Not only is the company Israeli but it is primarily a venture capital company, to boot, and has a very interesting story investing in medical devices and agritech.

Trendlines was founded in 2007 by two partners, Todd Dillinger and Stephen Rhodes, who formerly ran an international business consulting practice together from Israel after earlier having emigrated to the country. One of their early backers was the entrepreneur Zeev Bronfeld, who still sits on the board of directors.

Bronfeld himself is a co-founder of Bio-cell Ltd., an Israeli publicly-traded biotech company, serving as its CEO since 1986. He is also Chairman of the NYSE MKT listed company Protalix.

Trendlines discovers, invest in, incubates and provide services to, life sciences companies in the medical and agricultural technologies fields, all of which to date have been based in Israel.

Like other venture firms Trendlines provides technology support to its portfolio companies including R&D and commercialisation services during their first years following start-up.

Trendlines also delivers the typical business strategy, market strategy, funding strategy, financial support and business development and marketing communications support during their first years as well.

Since it began in 2007, Trendline has established and incubated 52 separate companies and aims to create as many as between eight and ten new companies every year. Of their current portfolio nine are now at the “commercialisation” stage and already generating revenues.

To date four exits have come about for Trendlines, through acquisition by multinational corporations, three of which occurring within the last twelve months alone. Two of their companies have even gone public on the Tel Aviv Stock Exchange.

The company has three separate business units;Trendlines Medical, which focuses on the discovery and development of novel medical device technologies with a focus on improving medical outcomes while reducing costs; Trendlines Agtech, which focuses on the discovery and development of new agricultural and food technologies addressing a wide range of agricultural needs focused on increasing food yields and reducing costs, with an emphasis on sustainability.

Finally, the third is Trendlines Labs, the company’s own dream factory, set up to address un-met market needs with proprietary intellectual property, primarily in the medical device market.

To go public on Canadian capital markets you need much more than just dreams however, and the prospectus offers some interesting numbers. The company has reported financial results, audited by the Israeli affiliate of Ernst & Young, representing increasing levels of net income – US$16.7 million, US$6 million and US$4.5 million for each of the three calendar years 2013, 21012,  and 2011 respectively.

Of course, sans exits, in the venture capital business each year you record a lot of implied fair market value changes for each of the elements of your portfolio. Whilst these can, quite frankly, be significantly subjective, shall we say, in principle this can be a reasonable process if done in conservative and transparent ways, and is standard for the industry, too.

Even when such valuations are conservative though, it is the cash flow number that counts as far as liquidity is concerned, and in 2013 Trendlines, on a net basis, burned through a comparatively modest US$3 million of cash, before issuing more shares for US$4.5 million to finish slightly up for the year.

Immediately prior to this offering Trendlines, in April 2014, has also issued a couple of million dollars of convertible debentures to Octagon Capital to meet current needs prior to, as they hope, completing the public offering itself.

Internationally Israeli technology is very highly regarded these days, and that is particularly true of both medical technology and agritech. Since the diplomatic policy of Canada has been favourable to Israel as well, in recent years, it seems therefore quite natural for Trendlines to seek to raise some money there. The prospectus is a very lengthy and, it seems a thorough document,  offering full disclosures of all aspects of its various businesses and we can only wish them well. The amount they are hoping to raise is not stipulated, and there is no minimum for closing.