by Kim Hanson
The Financial Post, Friday, September 1st, 2000.

The champagne corks popped yesterday in the offices of a group of Canadian venture capitalists who cashed in on Cisco Systems Inc.'s US$369-million purchase of PixStream Inc. of Waterloo, Ont.

Good payoffs come few and far between in the venture capital world and the group of PixStream investors -- including Celtic House International, VenGrowth Funds, Business Development Bank of Canada and J.L. Albright Venture Partners -- turned $57-million in funding over a three-year period into $545-million.

None were rewarded more than the early stage investors. Celtic House, started by Terry Matthews, founder of Newbridge, put $4.3-million into PixStream. Today, that stake is worth about $58-million. That is not a shabby return for making a bet that a couple of university buddies would be sitting on a technology that would one day result in the fifth-largest price ever paid for a private Canadian technology company. Celtic put up a $3-million seed round in 1997
and attached the Newbridge name to the startup, after Andrew Waitman, Celtic's president, reunited with former classmates and PixStream co-founders Marc Morin and Brad Siim.

Other investors that reaped rewards included VenGrowth Funds, which turned $11-million into nearly $60-million. A $6-million investment made by J.L. Albright in November, 1999, is now worth approximately $27-million.

Such wins are still the exception in Canada, but the latest transaction reveals that some venture capitalists are getting good returns fairly quickly and at an earlier stage in the game. The figures also illustrate the kind of rewards that come with the risks of writing that first $1-million cheque.

It also says a lot about the current market conditions. PixStream was said to be on a hot track to do an initial public offering. But the investors instead chose to sell the company to Cisco in an all-stock deal. Were the investors betting that Cisco's future was brighter than PixStream's?

"As one person put it here today, Cisco stock is better than U.S. dollars," said Tim Jackson, PixStream's chief financial officer and acting chief executive.

Michael Cohen, of VenGrowth in Toronto, said it was never an issue of whether the company could go public. "I think there was a good chance we could have gotten more [going public] but we didn't know exactly when that would have been and often companies like PixStream are better off with Cisco. They [Cisco] already have the infrastructure in place and potential customers lined up."