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newsletter - fourth quarter 2004Ventures West News The fourth quarter of 2004 capped off a busy year for Ventures West. We saw two of our companies go public and one be acquired by a global telecom company. We invested in three new companies and participated in four follow on financings. This trend seems to be industry wide as 2004 numbers indicate the best year in terms of financings since the year 2000. More details on our activities during Q4 can be found in this newsletter's year in review article below. Liquidity Events
New Companies Funded In the fourth quarter of 2004, Ventures West participated in seven financings, both new and follow on, investing a total of $17.7 million. The new portfolio companies are Avokia, TimeSpring Software and Zeugma Systems. Communications
Information Technology
TimeSpring Software Corp.is a provider of continuous data protection (CDP) software. www.timespring.com Articles and Opinions Year in Review – Back to Normal At the end of 2003 we were hopeful that the fallout from the bursting of the technology bubble was coming to an end. We were also optimistic that the technology and venture capital markets would return to stability and sustainable growth. As hoped for, this has happened in 2004. Venture capital investments in Canada increased in 2004 over the previous year and this is the first year since 2000 that we have seen year over year growth. Funds raised by venture capital companies in Canada declined again in 2004 but there was a significant increase in the amounts raised by private independent funds (such as Ventures West), that raise their funding from large institutions. The improvements were also seen in the US where disbursements by venture funds, and amounts raised by the industry both increased. Exit opportunities returned, with the most IPOs completed since the record set in 2000. In Canada, 87 IPOs were completed in 2004, up from 56 in 2003. In the U.S. 216 IPOs raised US$43 billion, a sizeable increase over 2003 numbers. M&A activity also increased year over year in both Canada and the U.S. In the US there were 333 venture backed M&A deals (up from 291 in 2003) with an average disclosed value of $84.5 million, up from $62.8 million in 2003. Ventures West Highlights 2004 was a very successful year for Ventures West. In September we announced the close of Ventures West 8 at $250 million, one of the largest private venture capital funds in Canadian history. Investors included most of the leading institutional investors in Canada—British Columbia Investment Management Corporation, Business Development Bank of Canada, Caisse de dépôt et placement du Québec, CPP Investment Board, EdgeStone Capital Partners, OMERS, University of Toronto Asset Management Corp., Teachers´ Private Capital, the private equity arm of the Ontario Teachers´ Pension Plan, and others. We have seen excellent investment opportunities over the last 12 months and made investments in seven new companies from our new fund. These totaled $20.5 million. The investments were spread across the technology sectors where we are active and they included both seed and early stage financings. The new portfolio companies are: Avokia—a provider of real-time transaction replication technology, which allows companies to horizontally scale database servers to achieve high availability and rapid disaster recovery. GaleForce Solutions—a provider of Microsoft CRM Solutions exclusively tailored to the financial services industry. HR.com–the premier Internet destination for HR professionals and vendors of HR related products, covering issues such as training, retention, leadership development, and controlling HR costs. Neuraxon Inc.—a developer of new selective drugs for the treatment of chronic pain, in the context of migraine, peripheral neuropathies and cancer breakthrough. Novadaq—a medical device company developing diagnostic and therapeutic procedures for human vascular and ophthalmic diseases using a proprietary imaging technology. TimeSpring Software Corp.— the company's patented software provides file-based continuous data protection for the Microsoft Windows platform giving immediate access to all information for instant file and data recovery. Zeugma Systems—a Vancouver based seed stage company lead by industry veterans developing a product for telecommunications service providers. We continued to actively support our existing portfolio companies, investing $35.7 million in 16 follow on deals. The largest of these financings were Polyfuel Inc., a developer of membrane technology for portable fuel cells, which raised US$18.4 million in July and Salmedix Inc., an oncology drug development company, which raised US$45 million in March. 2004 was a successful year in terms of exits as three of our portfolio companies were acquired and two companies went public. The year started off with a bang as OctigaBay Systems Corp. was acquired by Cray Inc. (NASDAQ NM: CRAY) for US$115M. OctigaBay was conceived while CEO John Seminerio was an Entrepreneur in Residence at Ventures West, and the company has developed an innovative high performance computing (HPC) system. Ventures West co-led OctigaBay’s C$24 million seed financing in 2003, one of the largest technology seed financings in Canadian history. The acquisition married OctigaBay’s groundbreaking technology with Cray’s established position in the supercomputer market, to the benefit of both companies. In March, QLT Inc. announced that it would acquire Kinetek Pharmaceuticals, a Vancouver-based biopharmaceutical company. The liquidity events continued in the fall with the announcement that Siemens would purchase Chantry Networks, a Ventures West portfolio company since 2002. Siemens will use Chantry’s Beaconworks suite of products to expand its wireless LAN product portfolio and will take this technology to markets around the world. In December, SemBioSys Genetics, a Calgary based biotechnology company, completed its IPO and commenced trading on the TSX. The same month, QuestAir Technologies, a developer of gas purification systems, went public on both the TSX and the London AIM. On the personnel side, Ventures West welcomed Barry Allen, former President & CEO of VSM MedTech Ltd., to the Entrepreneur in Residence team. Ventures West’s EIR program, which hosts successful entrepreneurs who work with Ventures West temporarily while they are finding their next venture, is one of the largest in Canada. These EIRs create new companies, provide valuable advice and input to the investment team and counsel existing portfolio companies. We also welcomed Paul Kedrosky as a Venture Fellow. Paul is an internationally recognized investor, essayist, academic and speaker. Dr. Kedrosky is involved in sourcing and evaluating deals, and providing advice and analysis on a wide range of venture capital issues. In August, Dr. Maha Katabi joined Ventures West as Vice President. Maha is involved in deal generation and portfolio management in the Biotech sector. She divides her time between the Ventures West Toronto office and the newly established office in Montreal. We now have four offices across Canada, in Vancouver, Toronto, Ottawa and Montreal. Our optimism continues heading into 2005. We are seeing a large number of very high quality investment opportunities, we have a large new fund to invest, most technology markets are growing, and both M&A and IPO activity seem healthy. Internally at Ventures West, we have added to our investment team and we now have personnel in all four of the key technology cities in Canada. We are looking forward to another great year! Portfolio Companies' Financings, Acquisitions and Awards
Spotlight - Sam Znaimer Each quarter, the newsletter will feature a member of the Ventures West investment team.
Prior to joining Ventures West, Sam conducted chemical engineering research and development and analyzed process commercialization studies with the International Coal Refining Co., a U.S. synthetic fuels company. Sam currently serves as a director of Convedia Corporation, IVL Technologies, and Quadrus Financial Technologies Inc. Sam represents Ventures West as the General Partner of the Western Technology Seed Investment Fund, a venture capital fund co-managed by Ventures West that was created in 1997 to provide seed stage financing for early stage technology projects in Western Canada. He also serves as a director of iCORE, Alberta´s Informatics Circle of Research Excellence, and is a member of the Inno-centre Alberta´s Selection Committee. Sam was a founding Director of BC Technology Social Venture Partners and leads their efforts with EMBERS, an economic development group in Vancouver´s downtown eastside. Sam received an A.B. (cum laude) in chemistry from Harvard University and a M.Sc. in chemical engineering from the Massachusetts Institute of Technology. He holds three patents. Subject to fads in life as well as in tech, Sam is looking to adapt his skill as a BeyBlade warrior to a new domain. Location: Vancouver, BC Ventures West Offices
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Chantry Networks specializes in WLAN technology that offers solutions for the wireless convergence of voice and data transmission. In December, Chantry announced that it has agreed to be acquired by Siemens, one of the largest players in the global telecommunications industry. Ventures West 7 initially invested in Chantry in 2002. 
SemBioSys Genetics Inc. (TSX:SBS), a Ventures West 7 portfolio company since 2000, began trading on the Toronto Stock Exchange in December, 2004. The company issued 3,500,000 units priced at $5.00 per unit, for gross proceeds of $17,500,000. SemBioSys is a biotechnology company developing a broad pipeline of protein-based pharmaceutical and non-pharmaceutical products. 
QuestAir Technologies Inc. completed its Initial Public Offering, and began trading on London AIM and Toronto TSX markets on December 21st (AIM: QAR; TSX: QAR). QuestAir, a developer, manufacturer and supplier of advanced gas purification systems, issued 8.6 million common shares priced at 74.5p (C$1.75) per share, for gross proceeds of pnds stlg 6,407,000 (C$15,050,000). 
Zeugma Systems is a seed stage startup currently developing telecom products. The company is headed up by President and CEO Andrew Harries, co-founder and former Senior Vice President of Sierra Wireless Inc., and CTO Siegfried Luft, former software director of Redback Networks Inc., founding member of Siara Systems Inc., and former Architect at Fiberlane Communications Inc. (later Cerent Corp.).
Avokia is a developer of data center optimization solutions. Former Ventures West Entrepreneur in Residence Alan McMillan joined the company as CEO. 
December, 2004 - Chancery Software announced that the Company’s premiere Student Information System, Chancery SMS, is a recipient of the Technology & Learning (T&L) Legacy Award. Each year, T&L judges select the “best of the best” in educational computing. To read the press release, 
November, 2004 - The Canadian IT & Biotech Financing Forum, the leading showcase for information technology and biotechnology venture capital investment in Canada, named GaleForce Solutions the 'Forum Favourite.' For full details, 
Sam Znaimer is a pioneer of the Canadian venture capital scene with over 20 years of hands-on early stage technology investing experience. He joined Ventures West in 1983 and actively leads investments in the telecommunications and IT sectors.