Editorial Brokers turn to COIN

Stock brokers see their job as one of bringing together buyers and sellers of securities for their mutual benefit. For their services, brokers have traditionally received a handsome fee.

But times are changing. Deregulation has resulted in more competitive commissions for brokers, although returns can still be considerable. The volume of securities traded these days is high, but much of that comes from institutions in a much tougher competitive atmosphere with much lower commissions. So, while the stock brokers’ trade can be an extremely lucrative one, the incentive to do small deals is waning.

Given this reluctance of brokers to enter into the “small” deals, a computer program has entered the breach, filling the perpetual need to bring entrepreneurs and investors together. Operated on a non-profit basis, the Ontario Chamber of Commerce’s COIN (Computerized Ontario Investment Network) system is filling a gap where few stock brokers dare to tread — the small, young company that needs money to get started. For an entrepreneur who has just about tapped out uncles, aunts, cousins and acquaintances but who isn’t big enough to undertake a financing through a reputable stock broker, COIN may be just the thing.

COIN is basically a computer database of entrepreneurs who need money to fund their ventures and investors who have money to invest. It tries to match the two, much the same as a dating service tries to match people with similar interests. In mid-March, after slightly more than a year of operation, the system represented a capital pool of between $23 million and $47 million (potential investors give a range of funds available for investment). Some 2,500 initial matchups have been made which have led to 448 face-to-face meetings to discuss investments averaging $300,000.

The system has proved to be so popular that chamber executive director James Carnegie says the program will go national this summer.

The system was initially developed by the University of New Hampshire. The chamber bought the software and adapted it and, with the support of the Ontario government, had it working in early 1987. So far, the cost has been about $200,000. Those looking for funding pay $150 for a one-year listing; those looking to invest pay $250.

COIN offers entrepreneurs a chance to seek equity to finance their ventures instead of relying excessively on debt financing. It also provides confidentiality and removes geographic and gender bias.

While this computer matchup system may seem to be cutting into stockbrokers’ territory, reducing the number of potential financings they could handle, the opposite may be true. A system such as this could actually create potential clients for brokers by providing startup ventures with seed money, ventures that may later require the more sophisticated services of a stockbroker.

If tax reform does make life difficult for the very small junior mining companies, if the Ontario Securities Commission’s new policy of financing for junior resource companies means fewer brokers want junior mining companies’ business, COIN could provide a most valuable service. It may not be a perfect solution, but it might be one more tool for exploration companies to make use of.