A man, a plan, Canada


Canada's Venture Capital and Private Equity Association (CVCA) has chosen a new leader with legal and business savvy. Rich Nathan will serve as CVCA's new president for the next two years, building on his involvement with CVCA's executive committee and board of directors since 1999.

Nathan comes armed with both legal and investing experience in Canada's venture capital industry. Currently serving as managing director of the venture group at Toronto-based law firm Goodmans, Nathan is the first actively practicing lawyer to become president of CVCA since the association's inception in 1974.

Prior to joining Goodmansin mid-2002, Nathan – along with Tony Davis and Mark Skapinker – founded Brightspark Ventures LP, an early stage investment fund with offices in Toronto and Montreal. Soon after Nathan's departure from Bright spark, the fund received CVCA's ?Deal of the Year Award in 2003 for its investment in Think Dynamics. Nathan was involved in the investment and management of Think Dynamics prior to the software developer's sale to IBM in a transaction that generated a return of 163 percent for Bright spark.

Sitting high on the CVCA's priority listis increasing institutional investor participation in Canadian venture capital and private equity funds, from both Canadian and international institutions. Part of this effort involves creating a more efficient and less challenging process for international investors to buy into Canadian funds, says Nathan. Depending on the situation, ?there can be a number of hoops to jump through to make investments in Canada, notes Nathan. ?We have been working with the government to facilitate the process, and it is now much easier for international investors to participate in Canada's venture capital industry than before.?

On the public policy side, another key concern of CVCAis preserving Canada's income trust structure in its current form, which Nathan says has been ?extremely popular and beneficial to Canadian funds. ?The government is in a period of consultation on whether to make changes to the income trust regime, and we think quite strongly that it should not, says Nathan.

Overall, Nathan expresses enthusiasm at the recent growth and activity of the Canadian venture capital market. ?It is a great time to invest in Canadian venture capital, says Nathan, citing the steady growth in overall valuations and activity levels in recent years, as well as the strengthening of specific industries in local markets such as Ontario's telecommunications industry and the software industry in Toronto.

Regulators delay Basel II in US
The four federal banking agencies in the US have decided to postpone the full implementation of Basel II to allow for further study of ?competitive issues arising outof the proposed implementation, according to a client memo from law firm Goodwin Procter. The revised timetable pushes full Basel II implementation to 2012. In Europe, full Basel II implementation is set for 2007. The new regulations will cover capital rules for banks. Compliance with Basel II has been seen as potentially damaging to private equity fundraising. In Europe, whereas previously banks were required to set aside 8 to 12 euros in cash for every 100 euros invested in private equity, new rules suggest holding between 24 and 32 euros in reserve to better reflect the risk profile of private equity. In the US, regulatory agencies are expected to issue proposed capital rules in the first quarter of next year. Basel II Accord was drafted by the Basel Committee on Banking Supervision. In the US, it is anticipated that only around 10 to 20 ?core banks will be expected to comply, though other banks can ?opt-in if they wish to do so for competitive reasons. Many institutions in the US see Basel II as unnecessarily complex and not cost-effective.

Former VC partner joins elbion as CFO
German pharmaceutical company elbion has hired Thomas Taapken as chief financial officer. Prior to his appointment at elbion, Taapken served as a partner within the life science team of DVC Deutsche Venture Capital, a lead investor in elbion. Before joining DVC, Taapken worked at Paris-headquartered Sanofi-Aventis – one of Europe's largest pharmaceutical companies – for eight years, where he was involved in the firm's research, corporate development and venture capital activities.

New deferred comp proposal from IRS
A recent proposal issued by the Internal Revenue Service regarding last year's new deferred compensation rules ?may have important implications for some hedge and private equity funds, according to a client memo from law firm Debevoise & Plimpton. The much-delayed proposed regulations relate to Code Section 409A. One change includes an exclusion from exception of payments for management services to independent contractors. According to the memo, this means that ?many management fee deferral arrangements will be subject to Section 409A compliance. The memo notes that the treatment of offshore trusts or other funding arrangements are not addressed, nor are partnership issues. The proposed regulations apply to tax years beginning on or after January 1,2007.

Madison Harbor appoints new marketing director
Real estate private equity firm Madison Harbor Capital has hired Mark Petersen as its new managing director of marketing. At Madison Harbor, Petersen will lead the sales and marketing efforts for the firm's primary fund-of-fund investment products. Petersen has accumulated over 24 years of experience with real estate and investments through previous positions held at CNL Investment Company and private equity firm Equus. He is also a member of pension-related industry groups, including the Pension Real Estate Association, Society of Pension Professionals, and the Financial Planning Association. New York-based Madison Harbor invests in real estate through primary fund-of-funds and secondary funds and is led by co-managing partners Edward Casal and Richard Maine.