VP R&D Capital Inc MBA CPA CMA
Nikhil Rodye | VP R&D Capital Inc MBA CPA CMA

"If there is one thing that has created wealth in every advanced society it's entrepreneurship"

- Nikhil Rodye

Nikhil Rodye on entrepreneurship, angel investing, and the debt market.

Talk Takeaways

Nikhil Rodye, VP for R&D Capital, joins Jeffery Potvin to talk about entrepreneurship, angel investing, and the debt market. He shares the process of tax credit financing and how this can be a good working capital strategy. He also talks about the type of companies they have helped finance through tax credits and what they look for in companies for debt investment.

About

Nikhil Rodye is Vice-President for R&D Capital Inc. He has been with the company since 2013 and has since completed 250+ structured debt financing transactions of varying complexity leading to R&D Capital’s premier position of providing tax credit financing in the Canadian market. He is CPA as well as an engineer and brings a unique aspect that combines financial as well deep understanding of technological aspects of the company. As an angel investor in hi-tech startups and as a witness to explosive growth in path-breaking startups with extremely creative entrepreneurs in the ecosystem he remains committed to them through investment, advising and mentorship.

Prior to joining R&D Capital, he led sales and management teams at top Fortune 500 companies; Cadbury’s( Russian Operations), Levi Strauss( Russia, Swiss and Central European Market) and Staples Canada.

The full #OPNAskAnAngel talk

Jeffery:
Well Nikhil, we like to just jump right into things and we’re right at that right now so welcome to Supporters fund ask and angel. I’m your host Jeffrey Potvin, let’s welcome our investor for today Nikhil thank you very much for joining us.

Nikhil:
Oh thank you. Thank you, Jeffrey for inviting me today. It’s an honor and a pleasure. I’ve seen you working from when the fund was that small or maybe there was there wasn’t even a fund, we were just members as i met you I used to meet you at York Angels and I think from that seed, no pun, intended it has become a big treat it seems right, so congratulations to you and your team. Hard work.

Jeffery:
Thank you. Yeah, we do love what we do so it makes a big difference

Nikhil:
Absolutely. There’s nothing like something that you love to work for right

Jeffery:
Agreed. Gets you going every day. Yeah, well I’m glad that we were able to connect and chat and I know we’ve had many many conversations today, we’re going to have one a lot more specific around early-stage investing and debt, and all these good things but before we jump into that, I’m hoping you can give us a little bit of a background on yourself kind of where you’ve come from. From running operations to Russian companies all the way through to where you’ve been for the last nine years. I think it’s been nine years feels like it’s been nine years at RD. So yeah I’ll turn it over to you to kind of uh —

Nikhil:
Where did you get this Russian operation, I omitted that from a LinkedIn profile, but you got it. Well to be honest uh after I did my MBA in India. I joined I had this opportunity to move to Russia, and that was I was very young it was a fantastic opportunity and I jumped on that I said listen if I don’t take this opportunity right now it’s now or never, right. So and Russia at that time was opening up, this was 95 – 96, so I’m aging myself out there uh young as a young person just out of uh off out of my MBA and I take this opportunity to work with Cadburys so I hop on this plane go to Russia take this opportunity work in this exciting growing market in Moscow and other parts of Russia. So I worked with Calgary’s for a couple of years and then later on I jumped and started working with lewis uh Levis Strauss with the jeans company, I worked there for another five-six years and that made me travel uh that gave me an opportunity to travel all over Europe and see each and every part of Russia. So i you know I traveled to Vladivostok which is on the side of you know near Japan to Kaliningrad which is near Sweden, and all the Baltics and up in murbans we just meet Norway Sweden and Russia meets together so fantastic stuff I was involved in the development of the product’s sales of those products uh and it was a fantastic opportunity I mean. A young person couldn’t ask for more, right. That gave me an opportunity to learn different languages I’m very fluent in Russian. And that gave me the opportunity to learn a lot of languages so even when I travel to Europe I’m more or less okay right uh so after that, we decided me and along with my wife we decided to immigrate to Russia — to Canada, sorry. And that’s how um that’s how I came out here in Canada and I think um this was the best step that we ever took as a family, right. So my wife started on this path to become a doctor she became a naturopathic doctor and I was involved in sales for the next five six years I worked with staples, athletes granger, and yellow pages, and then I decided to — listen it’s funny why I got in finance okay when I was doing my mba I didn’t get good grades in my finance subjects and I thought that I was strong in finance and yet I didn’t get good grades so I wanted to take revenge on those professors and that’s why I did my CPA I said i you know I love finance and so I did my CPA and that’s how I and as part of my project I was involved with R&D capital which is the company that I’ve worked for right now for the last eight years now and they’re the ones who signed up on my CPA so I’m ever thankful to them you know somebody has to sign off on that, you have the requisite work experience and everything right and um and I’ve been there with them for the last eight years fantastic journey as you know R&D capital it’s one of the biggest companies doing street financing uh we structure 250 deals a year and uh so that has been a journey from yeah and i didn’t that i mean I should have told you that I was a engineer by training so there was a slight uh engineering bent of mind always and then into sales speaking different languages and then and then um CPA and finance so that worked out pretty well when you’re working with uh with companies right, you understand the technical aspect as well as the financial aspects of the company so that has been the journey in short

Jeffery:
It’s amazing and uh I’m not sure it’s a short journey i think you’ve got a lot more to go and that’s pretty exciting on what you’ve accomplished today

Nikhil:
Oh thank you, there’s more to accomplish as we move forward there’s so much things happening as you know Jeffrey uh jeff, it’s an exciting — we live in exciting times you know there’s so much to accomplish so much to do um uh some people i mean in the sense despite the pandemic, i should say despite the sad news, we have despite the fact that we are locked in homes uh for so long a time i think I think we can look at the future with a level of optimism. i always believe that there’s always a silver lining in the dark clouds that are always there right so…

Jeffery:
I like it it’s fantastic and optimism is the best way to go

Nikhil:
I’m — you die without optimism to say…

Jeffery:
I agree i agree so i want to well before i have to ask this question just because i ask it in every instance of the events and the talks that we do have what’s what is um one thing about you that nobody would know? after all the things you’ve shared what’s one thing about you know would know

Nikhil:
Yeah my love for quantum mechanics

Jeffery:
All right

Nikhil:
Yeah nobody would know that but uh I don’t understand it and yet that’s just that’s most of the time if I have some time that I need to spend I spend on that trying to learn as much as possible about quantum theory and quantum mechanics but I can tell you something I don’t understand even after going through it spending so many hours so so don’t ask me what it is and how it works and everything it’s just that I think I love it. And yet i don’t understand it.

Jeffery:
All right well I’ll hold the questions off on quantum mechanics until uh later time but I’m also a fan so I can understand why you like it there are so many interesting parts to it, uh from all computing speed power everything else that can go into this space… it’s absolutely amazing

Nikhil:
yeah yeah and and a few books out here uh the one behind scene is one of the best books that is there obviously talks about Einstein and discovery of is equal to mc square, but i love quantum mechanics but anyway go ahead sorry

Jeffery:
i like it that’s a good thing it’s good passion is good um well we can go back a little bit into your background and because i think it’s it’s quite fascinating that you’ve worked in such a broad market which being Russia especially and it’s an open market, opening market, and how much it’s changed and i always like to look back at the things that we’ve done in our past that helped shape our future and you got into finance, you got into being a cpa, and all of those things came from all the experiences that you have had over time and i like that yeah you’re going back against your teachers and you’re proving them wrong i think we’re very similar when i was going through finance in high school couldn’t stand it, got into university and it just was easy so i did it and did well and i was like ah this is kind of interesting and maybe i can apply myself but it’s amazing how much the world works off of this, but when you go back into the Russia times i’m sure there’s a million stories i’m super intrigued i know that back in the 80s everybody wanted levi strauss pants jeans they’re all about the denim but you’re obviously that’s before your time in this area.
But when you were in russia what were the things that really caught your eye on this new emerging market and what were you having to do to compete but also to get the attention of the buyers because this is a pretty big segment uh it’s a country that’s opening up and i’m sure they weren’t just peppering money everywhere so what kind of were the things that you had to do to kind of really get yourself invested you learned the language which is huge so you really went above and beyond

Nikhil:
Yeah i think uh to start uh we were working with distributors and dealers and they were speaking only Russian and I had a translator with me and i know that sometimes she didn’t translate it as well i could feel it so i said that you know i think i gotta learn uh learn this language right away right so i took it upon myself i didn’t have a teacher i just watched a lot of tv and uh uh tried talking to people all the time so that’s that’s how i learned the language. I think understanding the nuances in a country which is different from where you come from it’s very important to build-up those relationships and that helped a lot, so that’s one thing.Russia as you know i had always had special liking to Levi Strauss because it being a rebel brand right so from that perspective the brand people were very much aware of the brand at that point in time in Russia i mean you could talk to anybody and it was sold as a premium so if you go to Finland or if you go to Sweden or you go to any of the other European countries the jeans that used to sell at fifty-five dollars uh levers Russia would sell it at 85. Because of the premium of the brand so i think the challenge was around when it came to Russian market is because how the Russian market was evolving right so initially there was no concept of branded stores right and so so we had to come in and and and educate the dealers and distributors on the on the concept of branded stores right so we used to bring we had a contract with the Swedish companies to bring the whole uh their own concept the device concept and they started building those stores so that was one second was around merchandising was a challenging thing in that part of the world at that time i went working with categories I remember they used to put the bars upside down when you couldn’t see it because it didn’t really matter in the soviet times whether you put it like this or like that right. So merchandising was another challenge that something that we open the third was the evolving regulations around space rules what you can do and cannot do where you can sell you cannot sell there was a lot of one of the things that uh that you have to which I take from that is dealing with uncertainty on almost a daily basis right there were so many uncertain things uh you could sell this here you cannot sell it here you can sell at this price you cannot sell at this price the dealer will work with you the dealer will not work with you here’s a mafia involved here’s no mafia involved you cannot so so the so the level of uncertainty that is there you almost had to deal on an on an day-to-day basis right. And that is something that helped me a lot in terms of navigating an unstructured environment and plus add to the fact that she always had language challenges all over the place right so that is something which is essentially navigating an uncertain environment right with very less information that you may have about the situation and yet coming at the end of the end of the process with the level of success both in terms of branding internal merchandising in terms of sales and all those kinds of things i think this is something that i definitely carried over and the fact that you’re dealing with different people all the time. Your ability to deal with different types of people because I’m interacting not only with the Russians but the Swedish the Hungarians office was in Brussels uh my office initially from for the Moscow region was in was in switzerland so dealing with a whole sort of people with different backgrounds, different way of different way they come at different problems solve the problems kind of thing and to work collaboratively and get produce some results at the end of the day is something that that that experience definitely helped me a lot

Jeffery:
And it sounds like you’d be going in there into an environment that is just opening up again you’re taking all of the ways that they’re doing and conducting business like you mentioned mafia and other things so you’re actually trying to learn that process which is how can i sell into you how can i get you interested in my brand and they’re just putting roadblocks up after roadblocks because they’re protecting their own domain while making sure that they’re making money so i’m sure there’s a lot of nuances and then you’re coming in from other cultures as well you’re not just coming from say a Canadian perspective you’re coming in from a Sweden side Denmark whatever the angles are so you’re almost fighting a million battles just to get them to have a conversation

Nikhil:
Absolutely and you’d be surprised if you sit in a meeting where you have teams of polish, Hungarian, Swedish, British, and some French people working for an American company the amount of jokes that fly around and the amount of —

Jeffery:
I’m already thinking of a million but yeah I’m sure that you can’t believe that like you know —

Nikhil:
I as you know I came from India of course i was not I was not Canadian came from india so i used to sit at a corner and they used to just barb at each other all the time it was crazy but it also helps you understand where they’re coming from, how they’re coming from and adjust your message and how you work with them you’re right in instead you gotta have avery nuanced approach working with all these people.

Jeffery:
And it was and I think learning that new language would also have helped you in the sales side because people would see that you were trying so they’d feel more interested in what you were doing because you actually made an effort right

Nikhil:
You’re bang on that the you know the very fact that i tried when I first you know uh so so to tell you i was talking to a distributor and I was talking to him on the phone and i said something in Russian which in my pronunciation sounded like a four-letter word, everybody looked back and you know when I talked to the distributor, he said when i talked to him later hey listen i said something that sounded like really bad and said no no the fact that you tried is everything right not many people try that right not people even want to do that and —-

Jeffery:
That’s brilliant

Nikhil:
So yeah so yes you’re right in the sense that the fact that you know you try and try to come from their point of view and understand try to understand them is a big plus it is a big plus

Jeffery:
No, I can see that even when I’m uh when i’m traveling through if I know I’m going into a certain country where the language is different i’ll try to rehearse and practice as much as I can as much as I feel awkward saying it because I know it’s coming out wrong i think people appreciate that and they’ll probably change into English and try to help you as best as they can and you know it’s a good way to communicate and I think it puts you in the right stage in the right foot forward so kudos for learning that. now you kick that and you’re shifting your way through and you decide to come back i believe it was to the US before you came to Canada is that

Nikhil:
No i came to Canada from Russia uh no I didn’t go to u.s i came to Canada because —

Jeffery:
Was it a US company you work for?

Nikhil:
When I first came out here, no i didn’t work for US company I work for so once I came back here I worked for you know some odd jobs like any other immigrant at that point in time and then I joined a small office supplies company called office central here in Richmond hill in Markham

Jeffery:
okay okay

Nikhil:
Which is now a huge company now but I joined a small company and that gave me a jump into staples uh uh i was managing GTA at that point in time and later on i went to atlanta stranger uh which is another Canadian company which is now granger now bought by granger in us but yeah

Jeffery:
okay granger that’s the one the u.s based one yeah okay very cool awesome so when you shift it into the Canadian domain, I’m assuming that the Canadian side might have been a few years a little bit more advanced but now taking all this experience all these things that you’ve gained you work through staples you’re working your business along when did you start getting interested in startups and did that come when you started working in the finance CPA debt side was that kind of the shift that started to get that startup flare or bug or when did that kind of happen

Nikhil:
yeah oh it’s an interesting story so i joined R&D capital and that obviously uh we do shred financing which means that obviously most of them are startups that avail of the straight financing, but I wasn’t so in the years you know i it was not until I was in MARS and you have uh rudy and there was a small uh small you know I think a talk about angel investing or angel investors rudy was there right he was on the panel I was sitting in the front right and I was listening to him and in the end he just came I just talked to him a little bit about you know asking angelinvestor what is it this is that all this kind of stuff he gave me a card that says the archangel says come and see me we have a meeting this Thursday or friday I don’t remember whether it was Thursday or Friday and took out myself because I was living in the market at the time I took it upon myself just go and check what it is right and I went to the first meeting there were you know uh there were a handful people it was not as big in 2015 or 2014 if I’m not mistaken the number of members were very limited at the time. i liked what I saw I liked the people that I was meeting we had a common interest uh both otherwise and business-wise right I mean if we spoke a common language everybody was interested in startup doing well you know there was this commonality around and that interested me a lot and that piqued my interest okay but i didn’t i didn’t jump on the angel invest in bandwagon right away i mean didn’t didn’t yet right took me it took me at least a year after meeting all those people within our group and also financing a lot of companies through my day job that i said this is fantastic you do you know I’m doing my business right and you meet such smart people the founders you come across such exciting ideas you come across folks who have made a lot of money and interested in taking that part of the money that they made in and investing in the society it was to a certain extent that was that was amazing that was amazing you know it hits you on a different level right in different layers you know you have people investing because they have earned money they want to give back to society then you meet very intelligent people both on the investors side as well as founders side and you have network and connections right and that got me really interested into angel investing and i started my back to angel investing through york angels

Jeffery:
i love it! i’m a big fan of york angels as wel,l i’m a member.

Nikhil:
Yeah yeah

Jeffery:
(inaudible) but yeah the the i’m sure we could kick some crazy stories of different events and different angels i’ve pitched over the last 10- 15 years been around them and I do find that when you find that group that you fit in or that you can have common ground with and share stories and feel part of, it makes a big difference because you all are looking at can I make an investment in this company and it’s collectively all having that same desire and goals. And i do think that that makes a big difference in that investment community versus being yourself trying to decide if it’s a good fit

Nikhil:
Absolutely, you’re 100 right on that. 100% right on that and of all the things i believe that if of all the things that you can do with angel investing, one of the things that really motivates me if i have earned some money i have some some net worth part of the network that can give it back to the society especially as an immigrant coming to — this country has been so good to us uh to our family — amazing amazingly good. And you have that thing within yourself that if I’m in a position to give back to society, I should and I must and even if it’s a small small percentage of that right and that gives you a lot of satisfaction to do something to the society if not in any other way at least this way you can contribute to something that the country has given back to me in you know since I came to this country right i think that feeling is fantastic

Jeffery:
And that’s a great approach and I’m happy to hear that you feel that same value towards the country but also towards the future of creating more jobs, more opportunities…

Nikhil:
100%. This is you know my country my kid lives here my wife lives here they’re gonna live here you know for for generations right and we have to create um prosperity for them so that they can live can be as prosperous as we are,
you know. So uh and it’s not just because of my son that’s a metaphor I mean to say that everybody who lives in society should be as prosperous as we are right we have to contribute to that prosperity and this is the i mean — if there is one thing that has created wealth in every advanced society it’s entrepreneurship. You know there is nothing else that has created so much wealth as entrepreneurship and i think we should absolutely encourage that

Jeffery:
Wholeheartedly agree. 97% of most economies are made up of small enterprise companies and the more help they can get the better off they are so as a continued cheerleader of the space, i do agree and i think that i might sound bite what you just said and push that out everywhere because everybody should find a way in any format to give back and help other people get off the ground because in today’s world every little bit helps and it really does create a nice balance for society when people are helping each other.

Nikhil:
Absolutely and entrepreneurship is such a difficult job. It’s not a job though but i’m just trying to describe it’s it’s a difficult thing it’s it’s not easy unless you have this passion and focus and that relentless drive you can’t do entrepreneurship unless you have those things right and and you have to be that positive stuff to help them out there right

Jeffery:
i agree i love that and to go on that now you’re working inside of a capitalized business can you explain and share a little bit more about how the debt side works because most investors obviously take an approach by going in equity they’re doing convertible notes which is that but wait a second how does that all work because i think that’s what people are looking for is they’re thinking to myself hey i’m going to go i want a piece of your company i’m going to give you some cash you’re going to give me some common shares some equity but then there’s this whole debt side so maybe we can start with just the most basic format of it you guys are doing a specific format of debt maybe share a little bit about that and we can kind of patch the story together to give people a better idea of what types of opportunities are out there

Nikhil:
Yeah so so let me first say that if you’re an entrepreneur, and if you’re in a highly risky business and i always start extremely highly risky business — equity is your best option. All right always all right highly risky business that’s that’s something that i underlined right because when my wife started a business i lend it i lent her fifteen thousand dollars in debt, right and but that’s the business we knew that had had a certain horizon for cash flow and therefore it could be it could be paid back kind of thing right so. The debt market is as you know is it’s probably 10 to 15 times larger than equity market worldwide right. It’s one of and its most in one of the most creative, diversified markets that there is right. But it serves and the the variety of debt that is available in the market is is just huge right. you could have debt that just finances your shop floor, your merchandising, right your purchase orders, your account receivables, the whole variety.. and what we focus on as a company rnd capital is one very specific which is shred tax credit financing or you can say tax credit financing, as you know R&D tax credits in canada is probably one of the best program that there is in so far as uh as incentives for startup is concerned right for every dollar at least in the province Ontario you get 55 cents back on an average given take here and there in in Quebec it’s much higher. And what it does is that it does take time to get that money back. i’ll put it very simply it does take time to get that money back from the government right so if you have invested 100 if you’re supposed to get hundred thousand dollars back from the government it’s gonna take six to eight months maybe in a year to get the money back, we’ll give you the money now right away and take the money back when it comes back from the government right? So what it actually does is that for an organization that’s growing very fast, they require cash all the time, instead of it being frozen on their balance sheet for the next eight ten months we’ll give the money right now you can use that for a variety of purpose you can use it for patent filing, you can use it for sales and marketing, you can use for setup you know set up an office or expansion in the us china what have you right so there’s a whole lot of variety of use for that that you can use strategically and tactically there are folks when the shred credit is very very high use it for buying some small companies. So you can also use it for acquisition small equity hires right kind of thing the two-person shop three percent shops you can have so that’s what we do it’s a time arbitrage of a tax credit, that’s about it. Right but it serves a very important purpose today uh if you look at the Sr&Ed tax credit it’s a four billion dollar line item on a federal budget. All right and i may be off here but something like i think 20-25% of that amount is refundable tax credit which means that you actually get a check back from the government so there are two types of tax credits one is refundable other is non-refundable. Non-refundable adjusted with your future tax reliability okay as you start making money uh that’s when your tax liability goes down, the one that you’re concerned about is a refundable way where you actually get a check back from the government. right and uh and it’s it’s around it’s around it’s around a billion-dollar. Right so and imagine a billion dollar being delayed by six to eight month that creates a huge opportunity for people to use that money and put that into into into different uses right so so yeah that’s what we do and um —

Jeffery:
And this is a payment all one-time payment at the end so you get to use the capital right away you give them the full hundred thousand and then eight months they pay you the full hundred thousand with a percentage of interest?

Nikhil:
Yeah uh exactly so so so you get the money a hundred thousand dollars and then then at the end of six seven eight months you get the check back and we are just the interest and everything else the cool part of what we do uh jeff out here is that not only we give Sh&Rd credit based on what they have already expanded we can also look forward and say what’s going to be your projection for the next year and we’ll give you a percentage of that too. So for example last year you spent hundred thousand dollars, you had a hundred thousand dollar Sh&Rd tax credit next year is going to be hundred thousand dollars we can combine that too right and give you that extra working capital to work on right up to a maximum of 150 so what it does is that it gives you a whole bunch of capital which you can then invest into r&d whatever you want right and and that can be a good working capital strategy.

Jeffery:
And now the companies that you guys are tending to put this capital into by tax credits what are the types of companies that you look for, are they service-based companies? Are they cpg companies? Or product companies? Are they software companies? Or are they all of them?

Nikhil:
All of them. And it’s funny so you have high-tech companies that are doing quantum computing that we just finessed we just financed a company that does chip design very innovative series b is at 100 million dollars very innovative you could you could design chip sitting anywhere in the world chip design on the other hand i have financed bakers that are developing new varieties of cakes and that is also Sh&Rd eligible in certain pieces so it’s agnostic as long as you meet the criteria for shred Sh&Rd we will finance you and the best part of what we do is the financing is very easy no personal guarantees and we can turn around this financing within seven to 15 days. so that’s what makes it very attractive instead of raising hundred thousand dollars or two hundred three and four hundred dollars going to wherever they wanna go to and raise it which is gonna take some time, you could raise this amount very quickly get this money and then go on with your raising whatever you are raising from the banks from your cities ac plus whatever what have you right. so it’s a very it’s a very easy way to get that money quickly and put it into action.

Jeffery:
i like that that’s uh it sounds like a very exciting opportunity and model to get into and work with lots of great companies.

Nikhil:
absolutely and that gives us so on the other side it gives us exposure to a whole lot of companies. Coast to coast. And that gives you a very good overview of what’s happening within the space. and that makes and again it just connects back to angel investing so well you come to know exactly what’s happening which space is getting funded which space is not getting funded was a long-term view what’s not a long-term view and all this kind of stuff. it’s it’s it’s fun, it’s fun.

Jeffery:
i love it now can we share a little bit about just briefly um some statistics around the debt financing side and the success rate or the default rates just to give us an idea of the safety measures that are taken in order to make these you guys do 250 a year does that mean that 249 and a half are successful in work or does that number drop by 10% where does that average industry average, because i think i read that you guys do a lot better than the industry average which means you take all these experiences you guys have had compiled them into a nice um uh matrix that then lets you decide which companies work best and boom you go at it so where does those numbers sit?

Nikhil:
Yeah so so that’s uh you know you typically budget for five percent in your in your you know in your uh P&L but we have been pretty good in terms of working with companies and ensure making sure that risks are mitigated on both sides right so we have seen rates as low as one percent on a practical basis on our side and sometimes it goes up a little bit sometimes it’s not a function of however you try to mitigate at risk if the cra comes back heavily on that particular client for whatever reason right i’m not saying cra is wrong here or whatever uh you can’t do much about it right so that has to be factored in but it could range anywhere from one percent to five percent depending on the year the circumstances the client but we have been lucky in terms of making sure that ours is uh i don’t know the exact number what it is but it seems that we we do much better than industry average. five percent is the industry average.

Jeffery:
I love it can you give us five things that really you look for when defining out a company to make a debt investment into?

Nikhil:
Well i think it first of all i think that’s a good question and that might get me into an hour of talking about i think uh should have a sustainable cash flow right so that is an important thing second i think it should have good management that is critical third is that you look at the history and make sure that you know they say that leopard rarely ever change the spots okay so uh so you have to look at what were the spots in the in the past and you know that the spots are gonna remain the same so you gotta make sure that you know what the spots are right so that is that um yeah you got to look at the what is the growth rate within the within that firm right and how is that growth rate being managed and one of the things that people who can i look is the structure of the company how is the company structured and i especially eyes place a lot of importance on having a cfo within the company if there is a cfo in the company uh the instances of default rate statistically and related to i don’t know about others but for us has been low well so there are two things so so another thing is that if they have a board member operating board right and a cfo you you are your default rate will sort of go down a little bit. You know you understand you can understand you can make it why why that would be the case because there’s an oversight from the board side right

Jeffery:
We’re governors

Nikhil:
Yeah um obviously assuming that the board itself is is not out to lunch kind of thing right so you have a a board a good governance and then have a cfo who is a was the knowledge of the numbers and it was feeding that numbers to the ceo so that he or she can take or that person can actually take better decisions right.

Jeffery:
i love it nope that’s awesome well i think we’ve uh we’ve got a good understanding of how the debt vehicles and the process works and the success rates and how you guys go and approach this is there a minimum in a maximum that you have or you work with when it comes to debt on tax credits? Like is it a minimum 50 000 and the maximum is 2 million or can the maximum go higher?

Nikhil:
yeah we we work from 75 000 to a couple of million dollars the the 2 million mark high watermark is a natural high water mark for the simple reason that beyond that any Sh&Rd becomes non-refundable which means that you actually don’t get a check it gets adjusted in your future tax liability right so that’s a natural so from 75 000 to a couple of million dollars is what we can do. But in certain cases when we had companies that had one and a half a million last year and then they’re projected for one and a half million next year we would combine that and make that as packet for three million dollars so we have gone beyond two million dollars but that those instances are very very rare most of the time is between between those numbers.

Jeffery:
i love it all right we’re going to kind of shift now a little bit into a question that i have for you which is in the last eight years that you’ve been working the debt side and investing in early stage companies have you come across any story that really stands out to you that just wowed you that you couldn’t believe this entrepreneur really crushed it that she or he was able to like overcome all these barriers you guys gave them money and they just took off like a rocket ship any real cool story that you can share with us?

Nikhil:
Absolutely so um so as you know uh uh when it comes to entrepreneurship it’s never a linear line, you know you get money you just fly off you crash all the time and you know that only you come to know when the company’s successful that you know that people are crushing it but it’s a hard it’s a hard route, right. and it’s it’s not linear it’s ups and downs a lot of stuff so we had this company out of winnipeg that uh that you know it was a bold concept that they were doing and they had a lot of struggles in the first year we financed a small portion that went to pay their payroll just in time, second year very very grueling again, uh we just provided the money in the nick of time so that he can do the payroll and he did it. And you know okay good right. now we are in 2020, uh sales are less than a million dollar struggling cost high development cost high bottom line looks very very bad moving into that, so he comes again and say listen we need this money can you and we look at all the criteria i said based on the criteria we cannot right uh but then we had a discussion very you know listen this is what the path looks like this is what how it looks like this is what technology we are adding and this is the interest and all this kind of stuff and i said let’s and we had this internal discussion and we said let’s take a bet on this guy right how much you’re going to lose how much it’s going to win and you do that asymmetric analysis and and and come to conclusion it’s worth taking that bet and we gave him a certain amount of money that added to the working capital this is around february march and then comes pandemic and so everybody at that point in time didn’t know what to do right and the entrepreneur was pretty smart and take he took that money from us he got money from other institutions a little bit of money here and there got her a couple of million dollars together and then uh through his contacts and through his technology and through the kind of people that he had hired he moved that company from a million dollar to 16 million dollar by the end of the year right. 16 when i saw his he said we require them to report uh every six months kind of thing and when they send me the report i said his name is jeff there is an error on the i think there’s an error should be 1.6 no no it’s 16 million dollars right so and then at the end of the year he came back and said listen and he told me that listen without your help this wouldn’t have been possible that small working capital maybe it was around 300 400 000 of working capital give helped him to buy stocks during the pandemic times and that he rotated the stock so fast right that his company took off from a million dollar 16 by the end of 2020 and they are now on to 40 million dollars by the end of this year and i think i i won’t be surprised if these guys go an ipo in a short period of time. right so uh so this is a fantastic story where a small help from our side and with this person’s grit, vision, understanding and taking advantage of the opportunity converted that a million dollar into 16 to 40 and now most probably a company that will go i will ipo or will have some kind of big exit right. So and this guy i remember he used to used to present to the VCs and everything he was turned on like there is no tomorrow right uh and not that the VCs were wrong or you know there there has to be a match but what i’m saying is that it’s it’s uh you have to stay you have to have that grit and you have to have that vision you have to have that ability to street smarter take up take advantage of the opportunities out there and also uh ensure that also make sure that every kind of capital should be part of your capital stack right not saying hey i only want equity i only want this so i only want that right so so you should be smart enough to understand what kind of capital should be in your in your capital stack so that you can take advantage of that at the right moment.

Jeffery:
i love it

Nikhil:
that yeah so that that’s something that stands out in terms of a company that that was struggling along became a rocket ship

Jeffery:
no i love that have a vision have some have some strong hustle behind you and know how to take an opportunity and move it forward

Nikhil:
yeah absolutely

Jeffery:
great story great story all right we’re now going to transition into the rapid fire questions which are going to be business and then personal

Nikhil:
oh my god okay

Jeffery:
Here we go, favorite part of investing?

Nikhil:
Favorite part of investing is seeing — is basically contributing to society that is big part for me

Jeffery:
i like it number of companies you invest in per year?

Nikhil:
I invest to uh invest through syndicate uh so so i can’t really say how much i personally invested but a personal investor right but uh i should say at least four companies a year

Jeffery:
perfect! preferred terms?

Nikhil:
common class a shares

Jeffery:
okay

Nikhil:
everybody’s the same

Jeffery:
very true any verticals of focus ?

Nikhil:
right now? space d5 and uh space and d5 and and quantum computing

Jeffery:
love it all right now these are the real rapid fire questions okay choices: founder or co-founder?

Nikhil:
founder

Jeffery:
unicorn or four-year 10 times exit?

Nikhil:
four uh four times the other one that you said

Jeffery:
four times ten exit , you’re a true cpa. take the money the unicorns are damn unicorns i like that. Tech or cpg?

Nikhil:
Tech

Jeffery:
Brand or tech?

Nikhil:
Brand or tech? Tech.

Jeffery:
AI or blockchain?

Nikhil:
Yeah

Jeffery:
First time founder or two times two three times founder?

Nikhil:
two three two three times founder

Jeffery:
first money in or series a?

Nikhil:
first money in.

Jeffery:
angel or vc ?

Nikhil:
angel

Jeffery:
board seat or observer?

Nikhil:
Seed.

Jeffery:
Safe or convertible note?

Nikhil:
Safe

Jeffery:
lead or follow?

Nikhil:
Lead.

Jeffery:
Equity or interest payments?

Nilkhil:
Equity coming from a debt, you know permanent day job is that equity

Jeffery:
Yes well there’s a mix right you kind of do two things in the same space so we’re trying our best here to balance it out all right we’re shifting more into the personal space now book or movie ?

Nikhil:
book

Jeffery:
superman or batman

Nikhil:
that’s a hard choice.. Superman.

Jeffery:
Pizza pop or ice cream bar?

Nikhil:
Pizza pop

Jeffery:
five minutes with Bezos or Oprah?

Nikhil:
Five minutes with bezos

Jeffery:
Arsenal or manu?

Nikhil:
i’m not a football fan uh you can take arsenal

Jeffery:
done good choice it’s my favorite team so i had to put it in there. Biker or rollerblades?

Nikhil:
Bike

Jeffery:
50:10
big mac or chicken mcnuggets?

Nikhil:
big mac

Jeffery:
trophy or money

Nikhil:
money

Jeffery:
beer or wine?

Nikhil:
beer

Jeffery:
alarm clock or mobile phone?

Nikhil:
what a choice! alarm clock. let’s let me
50:28
be boring

Jeffery:
hotel or hostel

Nikhil:
Hostel

Jeffery:
Awesome. all right i love it these are fun i keep changing them up but uh i find them more interesting and uh way some people answer them. i can overanalyze you now after but this is good. you’re not boring you’re past the boring line so that’s good that’s good all right final three questions what is your favorite sports team?

Nikhil:
i’m not a sports fan you’ll come to know that right so raptors

Jeffery:
Well they’re a good team they were not last year but the year before that they were the best so all right it’s a good choice favorite movie and what character would you play in the movie?

Nikhil:
not a movie buff man… i gotta pass this

Jeffery:
how about i’ll give you some hints because you’ve heard so many of them i’ve heard lots of them so they’re the ones that were most common are and people have picked off the wall stuff that i’ve never heard and it’s amazing but i’ve got a lot of great movie selections but things from uh let me see here star trek, shawshank redemption, um star wars, Matrix?

Jeffery:
i’m not a movie fan i can tell you that. all right all right we’ll let that happen yep you’re not letting you’re not allowing me to profile you so this is not helping me alright last question what is your favorite super or what is your super power

Nikhil:
what’s my super power um i think to to to help others without expecting anything in return zero right i think that’s my superpower uh i i you know uh i love helping people wherever i can you know whether it’s jobs whether it’s finding a friend, finding a company, getting access to capital without anything at anything in return so that’s what i love to do

Jeffery:
well i love it. So nikhil thank you very much for your time today you did a fantastic job we learned a lot, i took lots of notes and the way we like to end our show is we like to give you the last word which is anything you want to say to investors or to startups the floor is yours but thank you again for all your time today

Nikhil:
yeah so to all the investors i mean investors and investing community i think i think it’s uh i think we are at a unique inflection point in canada and i think we should believe and trust in canadian companies and invest wholeheartedly in supporting our entrepreneurs so that they go on to become world-class companies uh that’s you know and invest in that’s like investing in the prosperity of our country canada right i mean that’s uh that’s what i really would like to uh like to say

Jeffery:
all right that was fantastic nikhil being able to share all of that great insight because really at the end of the day when we do a lot of equity investments we don’t get into the debt side and he shared a lot of great insights around obviously the size of markets and what they do and just the fact that there’s four billion dollars a year that’s going into the debt side of it absolutely incredible and he shared his five things that they look for and i love them they’re all great sustainable cash flow good management, history on their financials and business growth rate management structure of the company do they have a cfo operating board all of those things make a big deal when you’re making a debt investment and it’s the same thing when it comes to equity but there’s a lot more scrutiny on the the debt side because they are working to get paid back so a great understanding of that and it was really great to learn a little bit more about mikal as well so you know they fit in that one to five percent on the default side which is a pretty great standard and certainly helps drive a business forward so very impressive and learned a lot so at the end of the day it was you know the environment’s changing like he said and it’s great about giving back and that’s what i loved about uh what Nikhil is saying it’s all about being social and communal and giving back to the uh the industry so thank you for joining us today if you enjoyed the conversation please subscribe to our youtube channel or follow us on spotify apple podcast or stitcher you can also check us out at supportersfund.com or for startup events visit opn.ninja
thank you very much and have a fantastic

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