Linda hohol is determined to spread the word about the TSX Venture Exchange across Canada, both to entrepreneurs looking to access capital for their start-up businesses and investors looking to get in on the next market success story.

“We want to dominate and own the venture capital space from coast to coast,” says Hohol, CEO of the Calgary-based junior market.

Hohol is a true believer in the venture exchange model of nurturing new businesses. Since taking the top job in April 2002 — hard on the heels of a technology bust that flattened the junior bourse — she has led the exchange from relative instability to solid ground, establishing a national institution with a strong Western Canadian base.

“When people say: ‘Your investors aren’t sophisticated,’ I don’t believe that,” she says. “We’ve created a culture of what I call ‘serial investors’ who like the excitement of putting some of their money into these kinds of opportunities.”

For Hohol, serial investors are those who believe in the value of investing in start-ups and aren’t frightened by the flameouts that can occur in the venture marketplace.

“A lot of the money that goes into venture stocks doesn’t care about volatility,” she says. “A lot of it is patient money because [investors] understand it may take time — in a mining or an oil and gas exploration company — to find something and actually do something with that capital.”

Hohol describes a typical scenario in which an investor may have a bundle of 10 or so venture stocks, most with share prices of less than $1, with a little money invested in each. A few of the stocks may stay static, a couple may fail outright, but the two that take off big make the proposition worthwhile.

She is the first to admit that investing in the venture exchange isn’t for everyone. but she believes it isn’t as risky as some fear.

“We have to rely on the brokers and financial advisors who sell our stocks, and the investors themselves to make sure they know their own risk tolerance,” says Hohol, who was executive vice president of wealth management at CIBC in the late 1990s. “I don’t advocate that anyone hold all his or her investment assets in venture capital stocks, no matter at what stage of life this person is. But having a certain percentage of assets invested in the venture exchange can actually increase your reward.”

The TSX Venture Exchange composite index, which sat comfortably around the 2,000-point plateau in late November, has more than doubled since its launch four years ago this month, when it was valued at 1,000. So far this year, 33 venture exchange companies have performed well enough to “graduate” to the Toronto Stock Exchange, while another 15 have merged with or been acquired by TSX companies.

“The quality of companies on the exchange is much improved from three or four years ago,” Hohol says.

Previously known as the Canadian Venture Exchange — or CDNX — before it was acquired by the TSX Group in 2001, the TSX Venture Exchange has come a long way since it was created out of the 1999 merger of the Vancouver and Alberta stock exchanges, with subsequent mergers of the Canadian Dealing Network, the Winnipeg Stock Exchange and the equities portion of the Montreal Exchange.

The western exchanges had long histories dating back to the early part of the 20th century, but over the years had earned somewhat dubious reputations because of stock scandals.

Hohol says that when she took over in the spring of 2002, the venture exchange was struggling; it was “pretty much at bottom,” trying to find its feet after so much change.

Her first step in righting the ship was to look at staffing, especially at the exchange’s five regional offices in Vancouver, Calgary, Winnipeg, Toronto and Montreal. “I made a couple of [staff] changes, not too many, but a few,” she says.

She then set out on a communications campaign, both with her staff and externally, gathering ideas and feedback. There was a lot of turmoil, she admits: Alberta and Vancouver were worried about the acquisition by the TSX, and were upset that they had lost their identities and their brand.

Hohol stabilized the situation and turned the exchange around, a fact recognized by the marketplace.

@page_break@“[There has been] a solid improvement since the consolidation and merger of the smaller exchanges and acquisition by the TSX,” says Ian Russell, senior vice president of the Toronto-based Investment Dealers Association of Canada. “[The junior exchange’s] image has improved quite a bit.”

He praises the venture exchange for striking a balance in demanding due diligence from its listed firms and sparing them from the worst of the duplication when various bodies — the provincial commissions, Market Regulation Services Inc. and the venture exchange itself — oversee regulation.

“[Hohol]’s done a great job. She understands the concerns of small companies and eases their regulatory burden,” he says. “Some would argue the venture exchange hasn’t gone far enough in eliminating regulatory duplication, but it has gone quite a way.”

In the past few years, Hohol has focused her attention on building the brand awareness the exchange has established in Western Canada and exporting it to the rest of the country.

Her plan has had some success. At the end of September, 44% of the companies on the exchange were based in British Columbia, 21% were based in Ontario, 20% were in Alberta and 9% Quebec.

She says Ontario — especially conservative Toronto — has been a hard nut to crack. Business people and investors there are used to the big deals of the Toronto Stock Exchange. As a result, they can be skeptical of the venture marketplace, or simply unaware that the venture exchange is even there.

Bay street support

“What has been tough for us [in Toronto] is the infrastructure to support the junior market. By that, I mean the lawyers and brokers who will do these smaller deals,” Hohol says. “Finding the supporters on Bay Street has been tough, but that infrastructure is building.”

One reason for the drive to attract start-ups from across the country is to achieve more diversification on the exchange. Most of the companies on the junior bourse are in the mining and oil and gas sector, although the number of technology and biotechnology companies listed is increasing.

“Geographical diversity will help us, because within that, you’ll get some sectoral diversity,” says Hohol, who says the venture exchange tries to create opportunities across the country that bring together investment professionals and private companies looking for capital.

For instance, the venture exchange has exported its capital pool company program, which has its roots in Western Canada, to Ontario, Quebec, New Brunswick and Nova Scotia. Under the program, a group of investors pool their money to create a shell company listed on the exchange. Then, the investors wait for someone with a suitable idea or business venture who is looking for capital — sort of like a matchmaking service for entrepreneurs and investors. Nearly 1,600 capital pool companies have been listed since the program’s inception in 1987.

The venture exchange also features about 75 foreign listings — most of which are from the U.S. — but is careful when bringing in non-Canadian companies.

“To this point, the strategy has been to consolidate Canada,” says Hohol. “We will look at certain [U.S.] cities and sectors in which we know there is support from brokers and lawyers. Outside the U.S., we’re pretty careful. It’s harder to judge the risk the further away you go.”

While the TSX Venture Exchange has grown, it has also received some competition in recent years from AIM, the alternative market of the London Stock Exchange, which has tried to woo small Canadian companies to list on it.

AIM operates on a different regulatory model than the TSX Venture Exchange, placing the due diligence burden on “nominated advisors,” the broker dealers who bring companies to market, rather than the standards-based approach used by the TSX Venture Exchange.

Hohol says even though she sees AIM as competition, she does not see it as a threat. First, she points out, the cost of listing on AIM is substantially higher — around $1 million compared with $150,000-$250,000 for the TSX Venture Exchange. Second, the companies that list on AIM tend to be bigger, whereas the Calgary-based exchange is for smaller companies.

“I think we have an opportunity to work with AIM because a listing on AIM, especially for resource companies, and on the TSX Venture Exchange, can be a good thing,” she says. “[Companies] can get financing from European institutional investors and liquidity from the Canadian market. We bring liquidity that AIM doesn’t necessarily have.”

This year, Hohol received a distinguished business leader award from the chamber of commerce in Calgary.

She takes pride in running a national organization, and exporting a business model born and honed in Western Canada. “I’m passionate about the junior market and what the venture exchange does because these companies don’t have a lot of options. These are small, fledgling firms, many of which go on to become great Canadian companies.

“The impact we have over time, the positive impact we have on the economy, is incredible. We have created some incredible companies. How can you not be passionate about that?” IE