In a statement, the company said LP2 will build on the successful closing of the first limited partnership (LP) in 2019 which raised C$18 million.
Upon completion of customary closing conditions for LP2 expected on or before July 21, TIMIA said it will have the C$10 million in new capital to invest in software-as-a-service (SaaS) companies in North America as its assets under management (AuM) increase 34% from about C$29 million to C$39 million.
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Similar to the first LP announced in 2019, the company said its management expects to have further closings in LP2, which will boost AuM over the next 12 months.
"Our increased AuM and related investment capacity provides the resources for us to drive additional investments, revenue, and ultimately reach our goal of profitability," said TIMIA CEO Mike Walkinshaw. "The LP structure provides the scalability to our non-dilutive capital acquisition strategy and allows us to continue investing in exciting SaaS companies through our fintech platform."
He added: "TIMIA's existing portfolio continues to see stability through the COVID downturn, making this a robust asset class to lend to. As funding from traditional banks, venture capital and private equity funds is pulled back in light of the pandemic, Timia is seeing an increase in quality companies seeking growth capital through the next 12 months. TIMIA anticipates that this will allow TIMIA to continue to deliver strong risk-adjusted returns to limited partner investors, while growing fee and performance revenue for common shareholders."
Transaction highlights include:
- Accretive to the company with no dilution to the shareholders
- TIMIA will provide about 10% of the capital in LP2, continuing to earn interest revenue from the current investment portfolio while aligning interests with the limited partners
- TIMIA will increase its consolidated cash position to about $12 million
- TIMIA, through a wholly owned subsidiary, will receive a 1.5% servicing fee to manage LP2 as its GP
- TIMIA will receive a performance fee based upon the profit of LP2 for the life of the fund, subject to investors achieving their preferred return first
- LP2 is denominated in US dollars, reflecting the intention to invest a majority of the LP proceeds into US-based companies
- LP2 can hold follow-on closes over the next 12 months, increasing the non-dilutive capital and assets under management
Under TIMIA's revenue-based financing model, the company advances capital to SaaS businesses with recurring revenue streams allowing the portfolio company to make monthly payments, which are a combination of principal and interest, to TIMIA with a repayment schedule sculpted to the portfolio company's revenue streams. The amounts advanced are secured and may be repaid early.
TIMIA, based in Vancouver, said it expects to make further investments in the coming months in the pursuit of its business model, which is to earn a combination of monthly payments and periodic gains on investments.
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