Last week, BDC Capital soft launched its new Bridge Financing Program . With this new co-investment program, BDC Capital will match investments made by qualified venture firms in startups on a 1:1 basis, with a minimum of $250,000, using convertible notes. BDC shared additional details about the program this week through a series a webinars organized by the CVCA, C100 and Réseau Capital. It provided some good insight on the standard terms of the convertible note. The key takeaways are that it will be secured, have no cap, a discount of 20% and a maturity date of 36 months. One important factor to keep in mind is that the note will not automatically convert at your next equity raise. BDC made it clear that the goal of this program is not to increase the number of companies in their portfolio. Instead, they want their notes to convert only in the most interesting opportunities for BDC. So startups applying to the Bridge Financing Program should be aware that they may need to repay the BDC debt at maturity.

What are the eligibility requirements to participate in BDC Bridge Financing Program?

  • Be a Canadian corporation.
  • Your startup has raised at least $500,000 in external capital before applying for the program.
  • You have signed a term sheet between February 1st, 2020 and today.
    • Note : Even if your financing round is now closed, if you have a signed term sheet backed by a qualified VC that is dated February 1st or after, you may still be eligible to the Bridge Financing Program.
  • The term sheet is backed by at least one qualified venture capital firm.
  • Your startup has been specifically impacted by Covid-19.
    • The impacts of Covid-19/social distancing are very industry specific. But here are some examples which may help you determine if your startup meets this requirement:
      • Your supply chain is disrupted.
      • You had to lay off employees.
      • Your sales/revenues/productivity decreased.
      • You are unable to travel for important sales and business development meetings.
      • You have difficulties recruiting, onboarding or training talent.
      • Your growth rate decreased.
  • You are able to demonstrate that your current financing round will allow your startup to have a runway of 12 to 18 months.
  • You are able to demonstrate that the funds raised will allow your startup to operate until your next financing round or exit.

How to apply?

If your startup is eligible for the Bridge Financing Program, talk to your investors. Qualified investors will be the transmission channels between BDC and the startups to apply for the program. So your investors should be the ones  getting in touch with BDC to take the necessary steps. BDC will want to review the impact of Covid-19 and your plan demonstrating that your round will allow your startup to operate for the next 18 months. Make sure you start preparing documentation to that effect.

The Fasken Emerging Tech team is here to help you through this process.  So  do not hesitate to contact one of our team members to discuss your financing, and your eligibility for BDC’s Bridge Financing Program.