Wade Dawe has already done a billion dollars’ worth of investment deals—and he’s not done yet
Posted on December 01, 2020 | Atlantic Business Magazine | 0 Comments
Let’s start near the beginning of investor and serial entrepreneur Wade Dawe’s most recent rollercoaster ride in what has been a 25-year, zigzagging but ever skyward trajectory.
It began—as his deals often do—with a suggestion from someone he knew, in this case a business associate whose niece happened to work for a small Nova Scotia biotech company. “You should take a look at it,” the associate suggested. So Wade Dawe did.
The fledgling company, Sona Nanotech Ltd., had begun in 2013 as a seemingly esoteric university science research project. The short, simplified, simplistic version: scientists have long known that super-small—we’re talking millionths of a human hair wide—gold nanorods contained “tunable” properties that could make them ideal for all sorts of medical (and other) applications, including various sorts of diagnostic testing for infectious diseases, even possibly early detection and treatments for cancer.
Except… those nanorods also contained dangerous cytotoxins, which meant they couldn’t be used inside the human body.
Enter St. Francis Xavier chemistry professor Gerrard Marangoni. He charged two of his research associates, Kulbir Singh and Mike McAlduff, to figure out a way to simply—well, not that simply—develop toxin-free gold nanorods, and then imagine ways to manufacture those magical particles cost-effectively so they could be produced in numbers that would make them commercially viable.
Four months of experimentation later, the researchers succeeded with Job 1. Their toxin-less nanorods could be used inside the human body. And Sona, the Hindi word for gold, was born. The startup company began incubating—experimenting, perfecting, replicating—inside the Verschuren Centre, Cape Breton University’s commercially-focused research and development centre.
The company’s potential continued to seem potentially—even exponentially—better. According to one upbeat news release from the time, “the company’s particular type of gold nanoparticles would allow such tests to indicate more than one result, allowing a user to test for two different conditions—such as pregnancy and a human papilloma virus infection—at the same time.” And users could get their test results faster, with less need for expensive and time-consuming lab work.
But, in order to goose the company’s development potential into commercial reality, Sona’s science-smart principals understood they also needed to find some business-smart outside investors.
Wade Dawe was no scientist. But he is a savvy investor who had the experience and expertise to put all the puzzle pieces in the right places and in the right order to transform someone else’s good biotech idea into a commercially successful business for both its founders and also its investors. Better, in a complicated technology space that requires thinking long-term, Dawe was a patient investor. He had already proved that during a wild, 10-year, up-and-down investment ride with another biotechnology company called Immuno-vaccine (see “Trial and Error, Atlantic Business Magazine, September-October 2017). His hands-on work there was only now beginning to pay dividends.
With Sona, Dawe did his due diligence—his friend and former investing partner, Denis Ryan, says Dawe is “like a dog with a bone” whenever he’s investigating a potential investment—and he eventually invited Sona’s founders to Halifax for a meeting. He liked what he learned.
“I like a company that has something proprietary where there’s some intellectual property that gives them a potential competitive edge,” Dawe explains. “I like companies that are seeing or capitalizing on an opportunity that’s not evident to others. There has to be something distinctive, something unique, something proprietary, or something leading edge in order to check that box.”
Check that Sona box.
“Then, secondly, the people behind it, their track record. And are they reasonable? Are they honest? Are they in it for the right reasons? Oftentimes, you can take a great technology and give it to the wrong people, and they will find a way to mess it up, regardless of the technology. So, the people are incredibly important.”
Following his meeting with Sona’s founders, Dawe was able to check that box too.
“And then, lastly, the third point is the valuation.” The biotechnology sector had become so trendy the market was flooded with shiny startups looking to lure big dumb investment dollars. “There’s a lot of junk,” Dawe says flatly. “The valuations, across the board, are generally too high. So, you have to be more vigilant than ever when assessing any particular opportunity before investing because there are more players. There’s more money flowing around, and there’s certainly many, many, many more startups.”
Once again, Dawe could draw on his own experience at Immuno-vaccine, now known as IMV. “The company didn’t really increase in value sustainably for several years,” he acknowledges. “It took years to get it beyond the penny stock status. So the value that we put on the company when we invested turned out to be correct, especially looking back. Valuations have to be reasonable.”
OK. Tick that last box.
Dawe, through his venture capital company, Numus Financial Inc., agreed to become a major private investor in Sona Nanotech. But, in fact, he became much more. As Numus’ web page describes the company’s role: “We believe an investment is about more than money. We regularly support our partners with financial, accounting, communications and regulatory and securities compliance expertise. Our partners run their businesses, but we provide mentorship and advice to complement their skill set.”
Denis Ryan is more direct. “When Wade gets in it, he dives in. He’ll jump right into the deep end of the pool. He’s one of the best board members I’ve ever seen in my life of any company. He drives management. He doesn’t take shit from anybody. When he gets excited about something, he’ll walk through a wall.”
Dawe’s excitement about—and influence in—Sona began to become publicly evident in 2018 when he recruited Darren Rowles, a “highly experienced,” commercially minded scientist and biotech executive from the BBI Group, to become Sona’s new CEO. Rowles, whose specialty at Wales-based BBI had been the manufacture and development of metal nanoparticles, already knew about Sona because he had tried—and failed—to acquire it for BBI.
That same year, Dawe “reversed the company into a public shell,” which is one of his favoured ways to efficiently take a small but promising company public.
Hold your questions. We’ll come back to that.
Fast forward to February 2020. While most of us were still trying to wrap our heads around the unthinkable implications of a new super-spreadable mystery virus, which we were told was still mostly confined to China, Rowles announced Sona had begun urgent round-the-clock research to develop its own COVID diagnostic test using its nanoparticle technology. Unlike the standard 24-48 hours turnaround time required for a molecular-based test, Sona’s antigen test promised results in 15 minutes, and the cost would be a quarter of that for the standard testing regime.
On July 2, 2020, the company announced outside scientists had validated its rapid screening test and Sona was ready to move on to the next level of testing and, hopefully, onward to final authorization, manufacturing and then distribution to as “as many hands as possible around the world.”
The scientific—and investing—world began to take notice.
At around the same time, however, Sona also shuffled its management deck again, announcing the appointment of David Regan to replace Rowles as CEO. Regan, the former vice president of strategy and corporate development at WildBrain, a Halifax-based international children’s entertainment company, had no previous experience in the biotechnology sector until he had become a “strategic advisor” to Sona just four months earlier. But he was already well acquainted with Wade Dawe—and Dawe with him. Dawe had been one of the major investors in what became WildBrain, beginning during its early incarnation as Salter Street Films (see “Michael Donovan’s Epic Odyssey,” atlanticbusinessmagazine.com).
Regan would now run the company, but in collaboration with Rowles, who remained as chief scientific officer. “[Rowles’] centre of gravity will be around getting the test to market and developing new tests,” Regan explained, “and mine will be more around corporate management and capital markets.” The goal: a listing on New York’s NASDAQ stock exchange.
One more piece in Wade Dawe’s careful, long-term business-building puzzle had been put in its proper place.
Almost overnight, thanks to all the promising news—but especially, of course, the prospect of a rapid low-cost coronavirus test—Sona’s market capitalization tripled to $540 million and it unexpectedly, dizzyingly became the most valuable tech company on the Canadian Securities Exchange.
Six months before, Sona had been trading at just 10¢ a share and struggling to attract investors. Suddenly, Dawe’s 5.9 million shares—he is Sona’s largest single shareholder—went from being worth around $600,000 to $51.2 million. Numus, his venture capital company, held shares worth another $15.5 million.
Lucky? Well, yes, that’s true enough. It’s not every day that a company arrives on the scene with a potentially significant new test for what ails much of the world. But Wade Dawe has been lucky often enough that you could more logically ask yourself: what’s luck got to do with it?
Wade Dawe was born and raised on Newfoundland’s Avalon Peninsula in a place called Kelligrews, one of nine tiny communities within an inter-connected town known as Conception Bay South (total pop. 26,000). In the 1970s, when Dawe was growing up, Kelligrews was a 40-minute-to-one-hour’s drive to St. John’s, “depending on how far into the city you were going.” Dawe’s father was a plumbing contractor who dabbled on the side in house construction and rentals. “It was through his entrepreneurial pursuits that I got the bug,” Dawe says now. He studied business at Memorial University where he won an entrepreneurial scholarship. He and a couple of friends started a fast-food restaurant in the Avalon Mall as part of a school-work project.
After graduating in 1992, Dawe joined ACOA as an account manager, coincidentally just around the time a prospecting team discovered huge nickel-copper-cobalt deposits in remote Voisey’s Bay, Labrador.
Soon, Dawe was in the pulsating middle of what became one of the biggest staking rushes in Canadian resource history. Working with a couple of geology students, “I started staking and selling mineral claims.” Over a six-month period from late 1994 to mid-1995, “I was selling claims for 10 and 15 times what I paid for them—for cash and shares in public companies under the Vancouver Stock Exchange, the Alberta Stock Exchange and the over-the-counter Canadian market.”
For someone who knew very little about the resource sector when he began and whose knowledge of the financial markets didn’t extend beyond owning “a stock or two” while at ACOA, Dawe, quickly and profitably, earned his deal-doer’s PhD.
“I made seven digits in about seven months,” he recalls, after which—still only 25—he decided to move west to Vancouver to continue building his fortune in its much bigger business pool.
Unfortunately, his move coincided with the now-infamous Bre-X gold mining scandal, a massive fraud “that took the air out of the room in terms of the potential to raise money and explore and develop mineral properties anywhere around the world. The pendulum had swung completely back in the other direction from Goldilocks conditions to the worst conditions you could possibly imagine.”
These days, Dawe is philosophical about the often-unpredictable turns investing can take. “You learn a lot from those experiences, and I learned so much,” he notes. “You’ve got to experience both sides of the pendulum to really understand the market.” After a while, however, he says you can begin to anticipate change. “And you can take precautions and prepare and use it as an opportunity to make money and benefit from it versus solely becoming victimized.”
After his unhappy experience in Vancouver, Dawe decided he had to “reinvent my approach and myself while I still had a few bucks left.”
He returned back east, settling in Halifax where he’s been based ever since. Initially, he established his one-man shop in a shared office facility on the 22nd floor of the Purdy’s II office tower in downtown Halifax. Denis Ryan, a fellow Newfoundlander, the popular Irish musician turned successful stockbroker and now established as an investment advisor, had his own office three doors down.
“This young fellow comes striding through the hall,” Ryan remembers. “I heard this Newfoundland accent and that was it for me. We bonded. And then we did a lot of stuff together.”
They did. Starting with Salter Street Films, the struggling Halifax production company that was then in desperate need of investment. Ryan introduced Dawe to the Donovan brothers, the company’s founders. Discovering that Salter Street’s book value was significantly higher than its stock price, “our antenna went up and we started looking for [Salter Street] stock for sale.” They found more than they expected or could reasonably afford but kept buying anyway. “The only thing I had left in my RSP was Salter Street,” Ryan jokes. But it all paid off. Eleven months later, Salter Street sold to Toronto-based Alliance Atlantis Films, and the two walked off with a huge profit.
Later, Dawe, with his background in resource development, brought Major Drilling—a New Brunswick based drilling and mine services company eager to expand globally—to their shared deal-making table. “We took them to Toronto to get them financed,” Ryan says, adding Dawe “did a great job of structuring it.” Today, Major bills itself as “one of the world’s largest drilling services companies.”
The happy result, says Dawe was that “after a period of losing money over two or three years, I basically started doing very well again.”
Now circle back to 1995, back to that Labrador mineral staking rush, to a company called Maple Mark International. Dawe had sold some mining claims to Maple Mark in exchange for shares in the company. While that hadn’t worked out as imagined—the mineral claims themselves “really didn’t amount to anything,” Dawe explains, and he ended up the largest shareholder of a company with no saleable assets—the company eventually rebranded itself as Linear Resources and was being run by a Newfoundland geologist named Peter Dimmell.
“Peter and I talked,” Dawe recalls. Dawe joined the board and became Linear Resources new CEO. In the beginning, their corporate resuscitation plan imagined exploring in northern Canada for rare earth minerals that could be used in high tech devices. But then in the early 2000s, “the gold market started to perk up,” so Dawe began looking for gold properties instead. In late 2002, Linear acquired a number of operating gold mining and exploration companies in Central America and Mexico. Over the next decade, Linear, which raised more than $75 million to fund its exploration, discovered more than 1.7 million ounces of gold in Mexico as well as another commercial deposit in Saskatchewan. The once-worthless stock topped out at $12 a share.
In 2010, Dawe sold Linear to Apollo Gold, which asked him to stay on and keep running the company anyway. “So I sold Linear,” he explains of what became a follow-the-bouncing-business path. “Apollo acquired Linear; I went in as CEO. I changed the name to Brigus Gold after the town in Newfoundland.” Brigus traded on both the Toronto and New York stock exchanges. “I ran that company until the end of 2013,” Dawe continues, after which he sold Brigus to a company called Primero. Enterprise value: $351 million; equity value $220 million.
That sale might have seemed like Dawe’s Midas topper to a golden decade. But wait. There’s more. Dawe had negotiated a deal with Primero that allowed him to start a new publicly traded company by spinning out Linear’s original assets—the Mexican and Saskatchewan gold deposits, along with $10 million in cash—into a new vehicle, which he called Fortune Bay.
Think about this for a minute. Those assets had been sold twice already, first by Linear to Brigus, and then Brigus to Primero. “But not by me,” Dawe notes.
We’ll come back to that too.
Of course, when everything seemed to be going so well, it all went wrong. The gold market went south. “Gold equities got clobbered. It was not a good time in that sector.”
What to do? Well, at about that time, Denis Ryan—Ryan again—returned from a trip to Ireland bullish on a “little technology company” called Kneat, whose engineer-founders had developed a productivity-enhancing, database-driven, data-integrity software platform that “eliminates paper and gives users an unprecedented capability to create, manage, access and mine validation data for pharmaceutical, biotech and medical device manufacturers worldwide.”
“I think I’ve found a gem,” Ryan told his friend. The two put up $50,000 to hire a California analyst who understood the rarified software air the engineers lived and breathed. The analyst became so excited he asked to join the company. Dawe and Ryan demurred, but took that as a positive sign and decided to invest themselves.
Then Dawe did what he does so well. On June 27, 2016, he merged water-treading Fortune Bay with Kneat and changed its name to kneat.com, not only giving the software company access to Fortune Bay’s cash treasury but also achieving a public listing through the Fortune shell.
“That’s our model,” Dawe explains simply.
OK, time to answer our earlier why-a-public-shell question. The short answer: it allows you to sew a sow’s ear of a company, into the silk purse of a publicly- traded start up.
Dawe’s more fulsome explanation. “If you look at a start-up, the traditional model is you fund it; you bring in venture capital funds; it stays private and generally only lists as a public company when it becomes worth in the billions of dollars.”
For most micro and small-cap companies, the cost of entry to public stock markets is prohibitive. “But we’re unique in that we [in Canada] have an alternative in that we can take a private company, support it, fund it, bring in the capital market expertise, and list it in Canada” sooner and cheaper than would otherwise be possible elsewhere. While not for every company, Dawe says the model can be “an excellent way to raise capital, to achieve a larger shareholder base, to increase your profile as a company, and to essentially fuel the growth that’s needed to take the company to the next stage.”
Before we disappear too far down that rabbit hole, however, let’s circle back once again. When Dawe merged Fortune Bay to create Kneat, he also spun off a “Fortune Bay II,” which actually kept the Fortune Bay name, to hold its gold assets. Given the state of gold prices, the company was “basically on care and maintenance” for the next few years. But now “we’re back into a gold bull market, we brought in a CEO to run it and it’s moving forward.”
Are you dizzy yet?
“It’s a bit of a complicated web,” Dawe is the first to admit, “but all of those companies and vehicles that were created over a 25-year period are a result of my foray into Labrador and selling claims to a company called Maple Mark International back in 1995.”
As is Sona. Still another strand in the web. Back in 2005 when Dawe was running Linear Gold, he spun out yet another public company called Linear Metals to look for other metals. It didn’t have much success, was rebranded as Stockport Exploration, went into Kenya to explore there “and that didn’t work out” either.
But then along came Sona Nanotech. “After two or three rounds of financing, we reversed Sona into a public shell, which was previously Stockport.”
If all of that sounds impossibly complicated, let’s cut to the Cliff’s Notes version. During his career so far, Wade Dawe has completed more than $1-billion worth of deals for both private and public companies.
And then too there is this, which is also worth noting. From his beginnings in the early 1990s as a neophyte investor scrambling to understand “moving dirt, crushing rock,” Wade Dawe not only mastered the intricacies of the resource sector, but he also began slowly, stealthily diversifying, hedging those bets, looking for the next big thing.
“Why did we pivot from doing exploration and mining into technology?” he asks rhetorically. “You look at the nature of mining and exploration. It’s cyclical. It’s volatile. It’s sort of an old industry…” More significantly, its relative value within global equity markets has long been in decline. “So, over the last 25 years, I’ve also been investing in technology companies and different things.”
He has. Sona, IMV, Kneat…
In 2016, he won a boardroom battle with former Apple CEO John Sculley, who was trying to take foundering Pivot Technologies—another technology company, a computer reseller and service provider for Fortune 500 companies—private “for no monetary consideration to shareholders.”
Shareholder Dawe challenged the plan, won, joined the board, “went into turnaround mode, brought in a new team,” pivoting Pivot from a product-based model to become more services oriented. The company did well enough that, in September, Pivot’s board agreed to a $106-million takeover offer from UK-based multinational Computacenter.
Ka-ching. When the deal is finally done in November, Dawe, the company’s largest shareholder, will walk away with another $3.5 million.
So… what’s the next big thing for Wade Dawe? He is quick to admit “it’s difficult to say what investors are going to be interested in in 10 years’ time, but my gut tells me it will be renewable energy. There’s a number of reasons for that,” he explains. “The cost curves for solar and wind have come down to the point where they’re almost the same as hydrocarbons. Twenty years ago, it made no sense. Ten years ago, it made no sense, although companies were trying. But the economics are crossing over to where it’s becoming economically advantageous to invest in these sectors.” He pauses, considers. “So, I personally believe that’s the next wave, and I think it’s going to be substantial. I think it’s going to go on for years and years. We’re just at the very early stages…”
Wade Dawe, who’s still in his fifties, intends to be part of that next big wave.
“I’m a workaholic,” he acknowledges, “but I love what I do. I really don’t consider it work.” Although he allows he will slow down “at some point,” Dawe says the investing world is too exciting to even consider that now. “The investing environment is changing all the time. The plates are moving under our feet. The world is changing very quickly. The rate of innovation is exponential. And the lifecycle of any particular company is shorter than it’s ever been. It seems that it’s just a very dynamic, changing environment, and it’s just interesting and fun to be part of it.”
There are deals still to be done. Wade Dawe wants to make them. •
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