Quantius Insights - Monthly Newsletter
Communication matters. It's the bedrock of every successful relationship, business and otherwise. At Quantius, we believe that it's not only about communication and speaking openly, we are also pretty good listeners.
Would you like to join the conversation? Please get in touch via email@example.com and request to sign up for Quantius Insights, for monthly commentary on fund performance, Quantius news etc.
SEPTEMBER 2019: TO ALL OF US IN THE ARENA.
Back-to-work. Back-to-school. Back-to-the-hustle. Back-to-reality.
In this volatile and seemingly unstable economic environment, the stakes are high - whether you are in the private or public markets, as a manager, allocator, lender or entrepreneur; whether you seek value or growth; whether you are emerging, in hyper-growth mode or already an institution. Some of us will successfully reap the benefits of our efforts. Some of us will outright fail. Some of us will earn yet another rejection. Some of us will make it to the next step. And some of us will get another infamous long “Canadian maybe”.
AUGUST 2019: Are you in town? Be sure to read this.
You could be in town, you could be not
Markets are roller-coasting, is your stomach in a knot?
Back at our office, August has brought on cheer
We’ve had two exits, time to bring out the beer.
After holidays in July, with barely time to unpack,
“We’ve grown our business, we’re paying you back”,
“We’ve signed term sheets, we’ve raised some more”,
Great to hear, that’s what our loans are for!…
july 2019: Alone and crazy no more.
When the Quantius team got together more than three years ago, we thought we were the only ones who believed in the growth and opportunities of IP as an asset. Most other lenders considered intellectual property as too risky as an asset class to spend any significant time and effort on; and that asset-light companies are not worth the work of underwriting.
It was not uncommon for people to think that analyzing and valuing a borrower’s IP could in any way strengthen a loan underwriting. We felt that we were a tribe of one, alone (and fringe) on our IP financing soapbox.
And then, over time, we started realizing and seeing that we weren’t the only ones.
Over the past few months, we have seen movement in the industry that is signalling the inevitability that our way of investing will soon be hitting the mainstream. Almost every other week, we see evidence of a groundswell within the area of IP and finance slowly and surely taking hold.
June 2019: Controlling the tempo of the game.
“A key basketball skill is imagery. The best players “see” situations before they happen so they can be prepared." ~ Dr. Jack Ramsay
As I write this month’s commentary, Toronto is celebrating the Raptors’ first NBA championship. I join the countless managers all trying to get in a basketball analogy. Hey, if you can’t beat 'em, then join ‘em.
As a child growing up in the Philippines, I was a basketball baby. Professional basketball was a way of life. Weekends were spent watching games with my father. I first learned the word “import” not in the context of economics, but rather when a team brought in a foreign (mostly American) player. And “Toyota” was not an auto industry giant, but rather the best team, in my humble opinion, that ever dominated the Philippine Basketball Association.
So, in a country where most of the population is on average only five feet tall, yet still ranks as the third largest basketball market behind the US and China, how does one grow an expertise in a sport designed for giants?
It all boils down to one phrase: Controlling the tempo of the game.
MAY 2019: It's Great to Be 3...Happy Birthday to Us!
“You have everything going against you. Are you sure you want to do this?” ~ M.L., 2016
It was great to bump into you at the Second Cup at the Bay Adelaide Centre a few weeks ago. I fondly remember doing coffee when we had only just launched Quantius. You had reminded me that as a start-up fund, a team that had never worked together, with no financial sponsor, no track record of coming from a large institution, and starting an innovative new strategy, that we had everything - yes, everything - going against us. I vividly recall you saying that we would be lucky if we made it to our first year, let alone our third.
Fast forward to a few weeks ago. It was great to see the smile on your face when I told you that wedidn’t just make it to our third year, but we thrived along the way.
April 2019: a worthwhile rant.
“I’m sorry. We can’t lend to you. You don’t own land or a building.”
As a former CFO of a technology company, I heard this exact phrase uttered to me by my banker about 5 years ago during a fundraising process. In fact, I also heard it from a second bank I approached out of frustration with the process. I wondered: “Do they teach bankers to memorize this phrase word-per-word at Banking School?…
MARCH 2019: THE WOMEN OF QUANTIUS.
“A woman is like a tea bag - you can't tell how strong she is until you put her in hot water. ~ Eleanor Roosevelt
Quantius was purposely built to be a diverse and inclusive ﬁrm. This is one of the key reasons why I joined the team. The participation of women on our board (40%), leadership (50%) and investment committee (60%), make us rather unique in the industry and shows our commitment to bringing the best minds and talent to the table. We truly believe that diversity drives better decision-making and is a key component of a best-in-class team.
FEBRUARY 2019: will you be our valentine?
"There's nothing you can do that can't be done
Nothing you can sing that can't be sung
Nothing you can say, but you can learn how to play the game
It's easy....All you need is love, love
Love is all you need..." ~ The Beatles
Before it became a Hallmark holiday and resplendent with a 200% premium on just about everything, Valentine’s Day was celebrated to honor St. Valentine – a kind-hearted doctor who chose to leave his cushy and comfortable life to become a priest. A priest who ended up being imprisoned and martyred for performing marriages, which were outlawed by Emperor Claudius II.
JANUARY 2019: INVESTING IN OURSELVES.
"Ultimately, there's one investment that supersedes all others: Invest in yourself" ~ Warren Buffett
January is typically a time for big changes for a lot of people - especially those who seek out self-improvement.
Resolutions to live healthier or fitter lives are made, and gym memberships or new diets are started. People sign up for classes to pursue a new interest, such as yoga or meditation. And in some cases, those who feel they need to make bold changes decide to go back to school, pursue new careers or take steps in starting a business.
In all these cases, significant investments of time, energy and money are made. Lives and routines are changed with the intent to create more long-lasting impact in line with one's passion and purpose.
I believe that those who make an investment in themselves as a way to build from the momentum of a previous year have a higher degree of success. The changes that they make are a purposeful part of a journey towards a goal.
DECEMBER 2018: HAPPY HOLIDAYS & HAPPY RETURNS!
"Year’s end is neither an end nor a beginning but a going on, with all the wisdom that experience can instill in us. Cheers to a new year and another chance for us to get it right." ~ Oprah Winfrey
As we all look forward to enjoying quality time with family and friends (and some well-deserved R&R), I'd like to take this opportunity to extend my best wishes to you for a wonderful holiday season.
2018 has been quite the year for each of us as well as the world at large. Woven into the past 12 months were successes and failures, new beginnings and some abrupt endings. For the markets, in particular, it has been a year of stark contrasts and stomach-turning volatility. Yet - and at the risk of sounding a bit braggy - 2018 has been an outstanding, record-breaking year for Quantius…
NOVEMBER 2018: SLEEPING WELL AT NIGHT.
"Ultimately, nothing should be more important to investors than the ability to sleep soundly at night." ~ Seth Klarman
A year before I joined Quantius, I sought out the advice of one of my mentors about being a professional investor. She forewarned me that all the investors she knew "don't sleep well at night."professional investor. She forewarned me that all the investors she knew "don't sleep well at night."
Fast forward to October 2018. The markets have been, to say the least, extremely volatile. Wealth and portfolio managers that I know, including some of you, have been busy on the phones reassuring their clients.
"Do I buy?" …"Do I sell?" ..."Do I hold?"
At Quantius, we feel for those who have been pulled into the vortex of market dynamics in the last few months. It takes a lot of mental and emotional energy to understand what's happened and sift through the signal-to-noise ratio.
OCTOBER 2018: WE DID IT AGAIN.
"Just when you thought it was over
Just when you thought we were done
Just when you thought it was safe now
We did it, did it again."
~ We Did It Again by Metallica (featuring Ja Rule)
Yes indeed, we did it again.
We are pleased to announce that late last week, Quantius celebrated its fourth loan exit - a full repayment of a $5 million senior secured credit facility to Acerus Pharmaceuticals Corporation (TSX: ASP) ("Acerus") which we entered into on December 6, 2017. For this month's newsletter, we are inviting you into our offices to give you a quick peek at the behind-the-scenes workings of this deal.
SEPTEMBER 2018: What We Did Last Summer.
“Everything good, everything magical happens between the months of June and August” ~ Jenny Han, Author
If the current weather is any indication, it seems that summer is sticking around for a little while longer. And I expect that all the wonderful experiences, memories and adventures of the lazy, hazy days of the past three months are still top of mind for you.
At Quantius, we had a very different type of summer. Lazy and hazy? Not at all. Crazy-productive and wonderfully magical? Yes, that's more like it.
We had two loan exits over the summer. Early in July, we announced the exit from the second loan we underwrote. And just as we came back from the Labour Day long weekend, we were repaid in full by Thornhill Medical, a medical technology company we funded last year, who in August announced a Series A financing.
In just over two years from our first loan in the spring of 2016 since we started down this path, Quantius now has three successful exits under its belt. This represents a 50% realization rate on the first six loans we underwrote.
AUGUST 2018: GETTING OVER THE LINE.
“You don't get to the finish line unless you start" ~ Unknown
Summer 2018 has turned into a season of portfolio company milestones at Quantius.
In late July, our portfolio company, Thornhill Medical secured a Series A financing. The e-mail message we received was, without exaggeration, jubilant:
"We finally got it over the line!...We couldn't have done it without you."
Aside from being delighted for the Thornhill Medical team, this milestone reminded us of the start of our journey with them in early 2017 when we were still conducting our due diligence, as Quantius broke new ground in the still relatively uncharted territory of IP-backed lending.
JUly 2018: EXITS.
“Every exit is an entry somewhere else” ~ Tom Stoppard
Adding to our loan exits, Quantius was recently paid out of the second loan we underwrote. With that, here is a special commentary on our perspective of exits by Len Kofman, our Chief Credit Oﬃcer.
JUNE 2018: THE GRADUATION ISSUE.
“The moon is the first milestone on the road to the stars”
~ Arthur C. Clarke
Last week, I attended my daughter's graduation from elementary school. Like any "firsts", this was a very big deal for our family, marked with so much joy in her achievement of such a big milestone; and for me as a parent, the joy of having watched her evolve and thrive in school, as well as in her young life.
As I sat in that auditorium, beaming with parental pride, watching her receive her diploma as she warmly embraced her teacher and the school principal, I was transported back to some extra-special moments over the past nine years as they flashed by like a video montage in my mind's eye...
May 2018: PERSEVERANCE.
“You wanna be taken seriously, you need serious hair.”
~ Tess McGill (played by Melanie Griﬃth) in the 1988 award-winning ﬁlm Working Girl”
Every year on May 16th, I say a prayer while feeling an overwhelming sense of gratitude for the men and women who gave me some very important breaks along the way, and have helped me become the person I am today.
How and why I came to Canada is a little-known story. Born and raised in the Philippines during the Marcos era, I joined my family in Toronto exactly 27 years ago to escape an extorting band of communist insurgents.
APRIL 2018: VALIDATION.
“And, when you want something, all the universe conspires in helping you to achieve it.” ~ Paulo Coelho, The Alchemist
Validation. A word with a variety of applications ranging from the banal (e.g. validated parking)… to the crucial (e.g. the single best thing you can do for your relationship with your moody partner)… and to business (e.g. a critical factor in the probability of start-up success).
Validation. And just like the protagonist in Paulo Coelho’s The Alchemist, we at Quantius have doggedly believed in the place that intellectual property has in lending to companies in knowledge-based industries.
This is the cornerstone of the creation of Quantius, one that fundamentally believes in the importance of the innovation economy and the underlying value that intellectual property and intangible assets play in driving economic growth.
MARCH 2018: CONNECTING THE DOTS LOOKING BACKWARDS
Steve Jobs famously said: “You can't connect the dots looking forward; you can only connect them looking backwards. So, you have to trust that the dots will somehow connect in your future.”
The “dots” that are Quantius are now two years old – from our ﬁrst moment going to market in early 2016. And this month, we hit another all-important milestone: the ﬁrst anniversary of the Quantius Innovation Income Fund LP.
Time certainly ﬂies, and it is rarely uneventful.
Obstacles, setbacks and the obligatory freshman rites of passage aside, I am proud of what Quantius has been able to accomplish in such a short time.
FEBRUARY 2018: PASSION, LOVE AND MONEY.
Even though Valentine's Day 2018 is in the rear-view mirror, the subject of passion, love and money seem to be evergreen and hot button.
It’s a cliché, but anytime you do something only for the money, inevitably you are going to feel empty and unsatisﬁed. Based on my own personal and professional experiences, I feel very strongly about that.
Don’t get me wrong: Money does indeed make the world go around, but it shouldn’t be the sole objective of any relationship, business or otherwise. Financial success results from partnerships that work, and a foundation built upon a passionate and clear WHY.
JANUARY 2018: WHAT'S YOUR BHAG FOR 2018?
Happy New Year! Hopefully the winter blahs aren't getting in the way of your 2018 BHAG - your Big. Hairy. Audacious. Goal.
The Canadian Imperial Bank of Commerce (CIBC) appears to have declared a BHAG of its own last week by going back into technology lending and announcing its acquisition of Wellington Financial, a large venture debt player. For us, the announcement is the best thing that happened last week.
Why, you may ask?
DECEMBER 2017: HAPPY HOLIDAYS
As 2017 comes to a close, we wanted to give you a quick update on Quantius' recent investments and company news.
NOVEMBER 2017: NEWS & UPDATES
It has been a while since you last heard from us, and it is only because we have been busy. We are thrilled to give you a quick update on what's new and noteworthy at Quantius, including recent investments.
APRIL 2016: COMMENTARY - A potential trade war looms...
"We are in a trade war. We have been for decades. The only difference is that our troops are finally coming to the rampart. We didn't end up with a trade deficit accidentally.” Wilbur Ross, US Commerce Secretary.
The issue of trade protectionism between Canada and the US has been front page news lately with softwood lumber tariffs and clashes over the dairy industry being the first moves in a potential escalation that could affect commodities like thermal coal in the short term and a broader NAFTA rewrite not too far down the road. The market impact of this shift manifests in many ways including pressure on the value of the loonie, increased business anxiety, and investor caution or retraction in the face of increased uncertainty and risk.
MARCH 2016: COMMENTARY - LENDING IN A GLOBAL VILLAGE
In the last few weeks, we have been qualifying a medical technology company, which over the last two decades, has evolved from an ad hoc part-time laboratory to an internationally recognized innovative commercial enterprise. With an IP portfolio consisting of dozens of patents, this dynamic organization, through providing mobile critical care technology, has gone to expand its customer base across over 30 countries including a number of NATO defense departments as strategic clients. What should we take away from this experience?