What does A V A C stand for?
AVAC Ltd. is the formal, legal name of the organization -- it is not an acronym. However early in the inception of AVAC it was referred to as the Alberta Value-Added Corporation and may be commonly, although incorrectly referred to as such.

Is AVAC a government agency?
No, AVAC is a member-based not-for-profit company. AVAC did receive initial startup funding from the Government of Alberta and Government of Canada. The funding agreements outline some basic criteria AVAC must follow when distributing public funds; an industry based Board of Directors directs AVAC.

Who are the shareholders of AVAC?
AVAC, being a not-for-profit company, does not have any formal shareholders. A Board of Directors governs AVAC and its members participate in the strategic direction of the Company.

Why is AVAC’s investment limited to a maximum of 50% of the eligible costs associated with my innovative project?
AVAC will help entrepreneurs and new venture developers pursue their ideas by sharing some of the early stage risk. Shared investment establishes commitment and increases the likelihood of success.

Does AVAC provide grants?
Yes, AVAC does provide grants. AVAC will provide grants to research focused on agrivalue™ with the expectation of specific outcomes. All other investments made by AVAC are made on commercial terms.

Pre-commercial investments made by AVAC are made as “off balance sheet” investments, which are neither loans nor equity investments. AVAC expects an eventual return based on royalties earned from the commercial success of the venture. This is a reinvestment by successful entrepreneurs in AVAC for the support that was provided in assisting with that success, and is intended to help other entrepreneurs in becoming commercially successful.

If funds are provided by AVAC, what is the expected return?
Investments in private sector initiatives are made with the expectation that successful commercial ventures reinvest in the AVAC seed capital fund. Normally, investment return is based on a royalty approach calculated as a percentage of gross revenue of the client business, or of a specific new product or service. Other remuneration vehicles may be contemplated as an alternative to the royalty approach to meet unique investment situations.

Are the royalties expected to be ‘in perpetuity’?
No, the royalties will be capped at an amount agreed upon in the investment contract.

Does AVAC require security or collateral?
Yes, when it is deemed prudent to do so. Also, AVAC does impose certain performance covenants in its standard business contracts. These performance covenants are clearly described in the term sheet and contract.

Will AVAC make an investment in a venture from outside Alberta?
Yes, if the investee can demonstrate a substantive potential economic benefit in Alberta.

Can AVAC make referrals to other sources of financing?
Yes, part of our business model is to assist applicants to reach the point where they are commercially viable, and become candidates for other forms of financing such as venture capital, bank debt and public share offerings. We also play a role in referring people with ideas to other sources of assistance or information as may be appropriate to grow that idea or service.

Does AVAC provide assistance for research?
Yes, AVAC will fund research focused on agrivalue™ with the expectation of specific outcomes. The research must be focused in such a manner that an ultimate commercial application could be contemplated, even if the persons/organizations conducting the research would not be ultimately involved in the commercialization activities.

If a project uses existing, or “not new” technology, will AVAC still invest?
Yes. AVAC is interested in projects that ultimately increase value-added industry activity, even if they do not use a proprietary technology. Examples are better access to end customers, new customer driven products or superior product formulation.

1. An initial review is initiated when a completed proposal is received. The proposals are reviewed internally. This process can take anywhere from 2-4 weeks for Idea Builder and Pre-Commercial applications. The statement choices made in the application are compared and contrasted with the collated scores for the review panel, and a summary report is generated. The decision to proceed with the proposal is based on:
   • Additional supporting information included in the proposal (e.g. executive summary, proposed use of funds, and supporting information).
   • Personal and corporate credit bureau checks.
   • Discussions with the applicant.
   • A report is provided to the applicant, as well as a letter outlining the application status and next steps.
2. Following a favourable review, AVAC undertakes appropriate due diligence. The level of investigation is determined on a case by case basis and may include:
   • A review of financial statements (historical and projected).
   • A review of the business plan.
   • Personal discussions with client references and business contacts.
   • Visit to the client premises.
   • Evaluation of sample products.
   • Market and competitive assessment.
   • Assessment of management, partners and advisors.
   • Fit between proposed sources and uses of moneys.
   • Technology due diligence.
   • Test to ensure full disclosure has been made including all applications to others for funding.
   • Other information as appropriate.
3. At the conclusion of the due diligence supporting a favourable investment opportunity, a draft Term Sheet is prepared and delivered to the applicant for discussion.
4. Once a Term Sheet is signed by the applicant, formal approval is sought. Following a favorable decision by AVAC, the final execution documents are completed with the applicant.

What types of financial information does AVAC need?
Financial information is an important part of the due diligence component. The type and degree of financial information detail required by AVAC varies and is dependent on the specific or unique attributes of each proposal. The mandate of AVAC is to provide funding to proponents on a shared basis where the funds AVAC provides are matched by industry or other sources. The intent is to fund projects with a reasonable expectation of becoming viable commercial ventures.

Does AVAC require a business plan?
No, AVAC does not require a complete business plan, especially in the early stages of the application. Since many ventures are pre-commercial in nature, a complete business plan may not be applicable. However, the process of completing a business plan can provide the applicant with some valuable information for proceeding with the commercial venture.

Initially AVAC will ask for interested persons or organizations to complete an AVAC formal proposal. A business plan can be included as part of the supporting documents if available. A business plan may be required as part of the due diligence phase of the project assessment process.

What will the financial information be used for?
Financial information will be used to support the application, identify terms and determine appropriate project investment milestones as well as to assist with the development of the investment agreement.

The information will remain confidential and will not be shared externally.

What financial information should I include?
Any historic financial information available that is relevant to your business. This may include: past several years of financial statements, pro forma budgets for the next three years, cash flows, finance needs and balance sheets. Further information will be requested during the due diligence stage.

Since this venture is pre commercial – why should I be expected to provide cash flow information?
Cash flow information helps AVAC determine the matched funding status, identify the need for funds and assist with the valuation of the enterprise.

What format does AVAC expect for my presentation?
AVAC expects requests for financial assistance to be presented as a formal proposal, which includes a specific reference to moneys requested from AVAC.

My idea is so unique there are no competitors. Why would I need to assess the competitive environment?
Substitute products or alternative products often prove to be more foreboding than initially anticipated. A complete competitive environment assessment is intended to identify threats or opportunities for further consideration. A complete competitive assessment is an integral component of the due diligence process.

What management skills does AVAC expect my team to have?
AVAC recognizes that a strong set of management skills is critical to an enterprise’s success. AVAC looks for a management team with mastery in the following five areas: production, technical, marketing, finance, and human resources.

AVAC recognizes that some of these skills can be accessed from the outside, but expects the management team to consider its own strengths and weaknesses and ensure all required managerial skills are accessible at the appropriate times to increase the projects likelihood of success.