As young businesses grow, they often face two key concerns – financing and revenue stability. One way of securing financing and pursuing stability is going public. An Initial Public Offering (IPO) has historically been seen as an important milestone for private companies. It provides access to institutional financing both in Canada and globally, as institutional investors won’t typically consider investing in private companies, requiring the liquidity and structure of the public markets. It also provides liquidity for shareholders and a toolkit of employee incentive mechanisms.

A rising trend: Companies are staying private longer

In the changing technology landscape, many companies are increasingly opting to stay private longer. Key reasons behind this emerging trend include: the ability to avoid the reporting requirements that come with being a publicly-traded company, the availability of many different investment models for private funding, and potentially more patient investors who understand the struggles of a growing company.

Amidst this trend, there have been concerns that some startup companies may be waiting too long to go public. The main concern is that by setting the bar for an acceptable valuation too high, companies will eventually be unable to raise ample funds in the private market, and be forced to accept lower valuations. There are also those who see the less stringent reporting requirements of a private company as a disadvantage, arguing that the scrutiny of the public market would bring more discipline and transparency, which would lead to better business growth.

Taking your startup public

The TSX Venture Exchange (TSXV) is a great option for young startups looking to go public, as it is designed to assist small and early-stage companies gain access to capital, and can be done without all of the attendant costs of a traditional IPO. It acts as a growth path to the larger Toronto Stock Exchange.

The main initial listing requirements for technology companies are:

  • Having CA$750,000 in net tangible assets, CA$500,000 in revenue, or CA$2 million in arm’s length financing;
  • Having a significant interest in business or a primary asset used to carry on the business;
  • Maintaining a history of operations or validation of the business;
  • Raising adequate working capital and financial resources; and
  • Meeting shareholder public distribution requirements and board experience requirements.

For further information on the initial listing requirements, as well as considerations for financing once listed, please see the TSXV Policy or contact the undersigned.

An alternative path: venture capital financing

Increasingly, companies are raising money through venture capital (VC) funding. In short, VC financing is private equity capital provided as seed funding. This can provide an immediate cash infusion to a growing company. This practice has significant advantages and disadvantages when compared to a more traditional funding model.

  • Expedited growth – VC financing could enable your company to hire additional staff, make necessary purchases, and make other important decisions that would otherwise require a steady revenue stream.
  • Connections – The right VC partners will not only provide financial support, but also leverage their social and professional networks to connect you with others in the space, and those able to help your business. This strategic support alongside a financial contribution is ideal.
  • No debt – Venture capitalists are not loaning you money, but instead investing in the business. As such, if your business succeeds, so do the venture capitalists. If the business fails, there is no obligation to repay the funds.


  • Loss of control – The tradeoff for the investments is an equity share of the company. By diluting the number of shares you hold, you may have to share—or even cede—controlling decisions to the investors. This can come in the form of board or management positions or different share classes with dilution, ratchets, additional voting powers or preferred dividends. The terms can be complex.
  • Lack of discipline – A common theme that arises in interviews of many successful startup companies is that a lack of capital early on forced them to develop disciplinary spending and management skills necessary for long-term growth. Excess capital early in the development of a company can stunt such development.
  • Different priorities – The long-term success of your business may not necessarily be the top priority for the investor.