Finance Friday

Public Venture Capital: An Alternative Financing Option for U.S. Growth Companies

Hello… I’m Delilah Panio, Vice President of US Capital Formation for Toronto Stock Exchange and TSX Venture Exchange. As a proud new member of the Austin Technology Council (ATC) and sponsor of the upcoming Leadership Dinner on August 18th, I am sharing a series of three articles on public venture capital, how to know if going public is the right fit for your company, and why the Canadian capital markets may be your stepping stone to a U.S. exchange. I hope you can join us on the 18th!

As a U.S. high growth company looking for funding, you are likely considering all capital raising options. While many tech entrepreneurs tend to only consider the traditional route – from angel investors to venture capital to being acquired – there are other options that may be a better fit for your company’s long term growth strategy.

With the resurgence of Special Purpose Acquisition Corps (SPACs) and increased amounts allowed under equity crowdfunding rules, there are now more financing options than ever, including the public markets. But with 218 IPOs completed in the U.S. year to date raising a total of US$80B, the average IPO is US$367M… not exactly early stage growth capital. (Source: Renaissance Capital as of July 13, 2021)

North of the border is a different story. The Canadian capital markets are unique in that TMX Group owns and operates a two-tiered marketplace serving companies from early stage pre-revenue companies on TSX Venture Exchange (TSXV) to multi-billion dollar established businesses on Toronto Stock Exchange (TSX). The idea of going public “early” may not be intuitive to most U.S. companies, but it is an important option worth considering.

TSX is the senior market for larger, more stable companies with a track record. The typical financings on TSX fall in the $50-$150M range and TSX listed companies have an average market cap of CDN$4.7B. These companies often benefit from increased analyst coverage and attracting large institutional investors in Canada and the U.S.

For smaller, early stage growth companies, TSXV is a unique platform that is tailored to companies of this size. TSXV provides financings typically in the $5-$25M range and TSXV issuers have an average market cap of CDN$65M.

Here is what has been happening on TSX and TSXV so far this year…

Breaking Records in the Innovation Sector

2020 was an unexpected and incredible year for financings and listings by innovation companies on TSX and TSXV. And Q1 2021 broke many records including:

  • Best Q1 for capital raised on TSX and TSXV in the last 15 years
  • Best Q1 for corporate IPOs on TSX in the last 15 years
  • All-time best quarter on TSX for the innovation sector IPOs and new listings

Q1 also provided some significant milestones:

  • TSX became the first market in the world to list Bitcoin exchange traded funds (ETFs) when the Purpose Bitcoin ETF began trading in February.
  • Telus International became the largest tech IPO in TSX history raising CDN$1B in February.
  • became the largest new innovation sector listing in TSXV history when it was spun out of Constellation Software in January.

Recent U.S. Activity on TSX and TSXV

In the last six months, several U.S. companies have listed and raised growth capital on TSX and TSXV (see chart below) representing diverse sectors. In financings YTD June 30, 2021, the 112 U.S. companies currently listed on TSX (50) and TSXV (62) raised a total of CDN$745M. Notably, Village Farms International Inc. (TSX:VFF) did the largest capital raise of CDN$172M.

Some recent U.S. highlights:

  • Based in North Carolina, Tantalus System Holdings (TSXV:GRID) provides smart grid solutions. It listed on TSXV in February 2021, raised CDN$10M, and quickly graduated to TSX, the senior market, in May.
  • The Real Brokerage Inc. (TSXV:REAX) (New York), a technology-powered real estate brokerage operating in 31 states, began trading on NASDAQ in June and is now dual-listed.
  • Two recent new listings in June connected to the U.S. were: Salona Global Medical Device Corporation (TSXV:SGMD), a San Diego-based acquisition-oriented medical device company; and Kovo Healthtech (TSXV:KOVO), based in Vancouver and Colorado and offers revenue cycle management services to digitally track and manage patient care.


YTD June 2021


  • HempFusion Wellness Inc.; TSX:CBD; Life Sciences (CBD)
  • Subversive Acquisition LP; TSX:SVX; SPAC (completed Qualifying Acquisition: InterCure Ltd in April 2021)
  • Tilray Inc.; TSX:TLRY; Life Sciences (cannabis)
  • Vintage Wine Estates, Inc.; TSX:VWE; Consumer Products (vineyard)
  • Tantalus System Holdings; TSX: GRID; Technology (smart grids)


  • Skylight Health Group Inc.; TSXV:SHG; Life Sciences (medical care services)
  • ProStar Holdings Inc.; TSXV:MAPS; Technology (mapping software)
  • PsyBio Therapeutics Corp.; TSXV:PSYB; Life Sciences (psychedelics)
  • Salona Global Medical Device; TSXV:SGMC; MedTech (acquisitions)

Access the list of al U.S. listings on TSX and TSXV at

For more information on public venture capital and exploring going public in Canada, contact Delilah Panio, VP of US Capital Formation, at or visit

This article is #1 of a three-part series for U.S. companies on TSX and TSXV. Stay tuned in the next few weeks for article #2 on “Going Public Considerations: Should I Be Taking My Company Public Now?”

* Unless otherwise noted, all data is sourced from the Market Intelligence Group of TMX Group as of June 30, 2021.

Copyright © 2021 TSX Inc. All rights reserved. Do not copy, distribute, sell or modify this document without TSX Inc.’s prior written consent. This information is provided for information purposes only. Neither TMX Group Limited nor any of its affiliated companies guarantees the completeness of the information contained in this article, and we are not responsible for any errors or omissions in or your use of, or reliance on, the information. This article is not intended to provide legal, accounting, tax, investment, financial or other advice and should not be relied upon for such advice. The information provided is not an invitation to purchase securities listed on Toronto Stock Exchange and/or TSX Venture Exchange. TMX Group and its affiliated companies do not endorse or recommend any securities referenced in this publication. Capital Pool Company, CPC, TMX, the TMX design, TMX Group, Toronto Stock Exchange, TSX, TSX Venture Exchange, TSXV, The Future is Yours to See., and Voir le futur. Réaliser l’avenir. are the trademarks of TSX Inc. All other trademarks used in this article are the property of their respective owners.

Finance Friday: 529 Plan – The Often Overlooked Wealth Transfer Tool

Many in the tech industry ramp up their careers and new family simultaneously. As their careers blossom, the focus can change from “making it” to planning for education for kids and eventually navigating the estate tax landscape.

Many of you have heard of the 529 College Savings Plan and the basic tax advantages that these plans provide.  Often times these plans can play a larger role in the overall estate plan of a family. Let’s take a look at some of these added benefits that aren’t always apparent when we think about 529 plans.

As a refresher, 529 plans offer tax free growth on assets that are used for qualified education expenses.  This will typically include tuition, books, fees and sometimes room and board.  If 529 distributions are not used for qualified education expenses, earnings will be taxed as ordinary income and a 10% penalty will apply.  The IRS allows for a $10,000 maximum withdrawal per beneficiary per year if used for k-12 expenses.  Contributions to a 529 are not deductible at the federal level, but depending on the state, may be at the state level.  There are no income limitations, so anyone can contribute.  In addition to the education planning attributes, the 529 offers asset protection benefits from bankruptcy proceedings.

If all this weren’t enough, one of the most unique and advantageous components of a 529 plan is the ability to remove the value from the account owner’s estate while still maintaining control over the assets and beneficiaries.  As the account owner, you make the investment decisions and decide when distributions from the account can be made.  You can even change the beneficiary (within the family) if the funds are not used or needed by the original beneficiary.

The IRS allows you to gift up to $15,000 to as many beneficiaries as you choose annually (or $30,000 per couple) without incurring a gift tax.  However, within a 529 plan, you are able to front load your gift schedule by making a lump sum payment of $75,000 (or $150,000 as a couple) to a 529 plan in the first year of a five-year period.  This could be a great tool to reduce your estate. For example, a couple who has three kids could remove up to $450,000 by gifting $150,000 to each of their 529s.

The 529 College Savings Plan is a simple and efficient estate planning tool that is often over-looked during the estate planning process.  As you consider various gifting and education planning strategies, ask your financial advisor how a 529 plan might make sense for your plan.

Is Your Company Accounting Correctly for Software from the Cloud?

As technology continues to advance, organizations are moving their software away from boxed solutions or internally developed software to hosted, cloud-based computing arrangements. SaaS, or software as a service, often reduces infrastructure requirements and can be customized based on a company’s evolving needs.

As companies access cloud-based software, they need to consider whether they are accounting for it correctly.

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15 to specifically address software accessed through a hosting arrangement, and align the treatment of certain related implementation costs with existing guidance for internal use software (ASC 350-40).  

The new guidance was effective for public companies for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. For private entities, this ASU is effective for annual periods beginning after December 15, 2020, and interim periods in annual periods beginning after December 15, 2021. Early adoption is permitted.

How do I know if the new guidance applies to my company’s software arrangement?

The new guidance applies if an organization is accessing software for internal use (i.e., solely to meet the entity’s internal needs with no substantive plans for marketing the software externally) through a service contract obtained as part of a hosting arrangement that does NOT meet either of the following criteria in ASC 350-40-15-4A:

  • The customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty; and
  • It is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software.

If both of these criteria are not met, the hosting arrangement is considered a service contract and does not constitute a purchase of, or convey a license to, software.

How are hosting arrangements accounted for under ASU 2018-15?

A company’s license, hosting, and related costs for a subscription to a hosting arrangement are recognized as an operating expense over the term the Company has access to the software and services. This has not changed from historical guidance. The expense is typically on a ratable basis over the stated term, unless another pattern of recognition more accurately reflects the consumption of benefits.

The updated guidance treats implementation costs in a hosting arrangement (implementation, setup and other upfront costs) as if they were internal-use computer software project costs under existing ASC 350-40 guidance. This provides a framework for companies to determine whether certain implementation, training or data conversion costs for cloud-based services contracts should be expensed as incurred, or capitalized and recognized over the term of the arrangement.

Applicable implementation costs should be capitalized and expensed over the term of the arrangement. They should be presented on the balance sheet in the same way as software subscription fees, such as prepaid expenses or other assets. The expense recognized as these costs are amortized should be reported in the same income statement line item as the subscription fees. In contrast to internally developed software, these costs would not be reflected as an identifiable intangible asset or component of property, plant and equipment.

The update also provides guidance for how these costs are reflected on the statement of cash flows.  Capitalized implementation costs for a hosted SaaS arrangement are considered operating activities, and the associated expense is a component of overall net income (loss). This is in contrast to internally developed software costs, for which the cash outlays are reported as investing activities, and the associated amortization would have been presented as an adjustment to reconcile net income (loss) to operating cash flows by backing out the effects of the amortization.

Which implementation costs can be capitalized, and how should the expense be recognized?

Using the framework for internally developed software, hosting arrangement implementation costs should only be capitalized in the application development stage. Any implementation costs incurred during the preliminary stage or post implementation / operating stage should be expensed as incurred.

It is important to note that administrative, overhead or training costs incurred during any stage should be expensed as incurred. Data conversion costs also cannot be capitalized. This means companies need to carefully review charges incurred internally or by third parties, evaluate different components and determine appropriate treatment.

The capitalized costs should be amortized over the term of the hosting arrangement. Any options to extend or terminate the arrangement should be evaluated when establishing the term as described in ASC 350-40-35-14. Amortization begins once the software is ready for its intended use and substantial testing of the software has been completed. Companies should periodically reassess the estimated term of the arrangement and account for any change in the estimated term as a change in accounting estimate.

How should companies evaluate the implementation costs for impairment?

If the hosting arrangement is not expected to provide substantive service or be used in the manner or extent as originally expected, the company should evaluate these capitalized costs to determine whether the carrying amount of the implementation costs is recoverable.  Recognition and measurement of impairment is done in the same manner as if it was a long-lived asset under ASC 360-10-35.

For more information about accounting for cloud-based software, contact us. We are here to help.

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