VENTURE ADVENTURES: From fungus farming to finance, NovaDX Ventures Corp.’s CEO NEIL MACDONALD has learned the complex venture investment game at the school of hard knocks
Mission: To nurture resource industry diamonds in the rough Assets: Experience on both winning and losing sides of business investments and enterprises and an appetite for high-risk ventures Yield: A fledgling investment capital company focused on early-stage energy and mining companies
 By Curt Cherewayko
NovaDX Ventures Corp. (TSX-V:NDX) recently announced that it turned a profit in the last six months of 2006, its first year as a registered investment issuer. Listed at the bottom of the celebratory press release that details the young investment firm’s climb out of the red and into the black is contact information for Neil MacDonald. MacDonald became CEO of NovaDX in October 2006 and has guided the merchant bank through the private placements, loans and acquisitions that have marked the fledgling company’s first year of business. NovaDX specializes in investing in early-stage junior resource companies whose market capitalization is anywhere between $2 million and $25 million. That puts NovaDX on the often uncomfortable leading edge of high-risk investing. But it’s the thrill of working on that edge that has kept MacDonald in the venture capital business for the past 15 years. “It’s high-risk investing, but it can also be very high reward,” he said. “And it takes a very special skill set and consistency to really harvest those high rewards.” MacDonald hasn’t always had that required skill set. Before he joined his first venture capital firm, MacDonald wasn’t sure what it was. “Frankly, I was kind of floundering,” he said. In 1984, MacDonald completed a degree in bio-resource engineering at UBC. By the end of his first summer out of school, he had started his own engineering firm, Condev Biosystems, an aquaculture and agriculture consultancy. But, being young and restless, it was only a couple years before MacDonald had his eye on another project. He came across new technology for cultivating exotic shiitake and oyster mushrooms. Gourmet mushrooms were becoming a hot culinary trend at the time, and MacDonald and his partner decided to shutdown their consulting firm and throw their hat into the mushroom industry. They began Sylvan Industries and built a state-of-the-art growing facility in Aldergrove in 1987. “When we created it we were the largest mushroom producer in North America,” MacDonald said. “And then we went through what I call the school of hard knocks.” MacDonald received a phone call from his facility manager telling him that production was dropping and the mushrooms were turning an odd colour. It was a mushroom virus, and it would eventually shut Sylvan down. MacDonald searched all over the world for a mushroom strain that was resistant to the virus. He found one, but Sylvan couldn’t adjust financially to its longer growing cycle. “I was washed up from a financial point of view, because everything I owned was in the business,” MacDonald said. Though his foray into fungus was anything but successful, his business connections with Sylvan led him into the world of venture capital. He got a job offer from Ventures West Management, which had invested in Sylvan during its early development. With no previous experience or education in investment or finance, MacDonald – whose father, John MacDonald, co-founded MacDonald, Dettwiler and Associates Ltd. – cut his financial teeth at the venture cap company. From Ventures West, MacDonald joined investment dealer Canaccord Capital Corp. (TSX:CCI) as a founding member of the corporate finance team. After two years there, he jumped to McDermid St. Lawrence Securities, a venture-focused retail brokerage also located in Vancouver. In 1998, McDermid St. Lawrence merged with Goepel Shields & Partners, to become Goepel McDermid. By then, MacDonald had developed a keen interest in venture capital, so he was disappointed when the company shifted its focus away from that form of investing. In 2000, he was lured to Yorkton Securities (which eventually became Blackmont Capital) and was manager of retail corporate finance there until ending up with NovaDX. NovaDX acquired in April the Canadian Small Cap Resource Fund, another Vancouver-based investment management company that focuses on junior mining and exploration companies. According to NovaDX chair Stephen Wilkinson, the CSCRF has raised more than $22 million in the past three years. Wilkinson and MacDonald met about three years ago, when the two worked for Blackmont. Wilkinson described MacDonald as an intelligently aggressive banker. “MacDonald is very well-respected in the banking community here. He has a great technical background. At the same time, he reserves time for family. He has his priorities set.” MacDonald has a four-year-old son and a two-year-old daughter. MacDonald added that NovaDX is unique because it’s one of the few investment companies in Canada to focus exclusively on high-risk resource exploration ventures. However, it limits the size of its investments to between $100,000 and $1 million. That way, if a venture fails, NovaDX can lick its wounds and invest somewhere else, MacDonald said. The approach follows the golden rule of investing, which MacDonald has learned well since his days as a failed fungus farmer: don’t put all your eggs in one basket. •
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Photo: Dominic Schaefer From Business in Vancouver June 26-July 2, 2007; issue 922 |
