Growth Company Investing with a Difference
May 2013
2
This presentation is not, and under no circumstances is to be construed as, a prospectus, offering memorandum, or
advertisement or a public offering of securities. This presentation is for information purposes only and does not
constitute an offer to sell or a solicitation to buy the securities described herein, but is solely for purposes of
providing information regarding Difference Capital Funding Inc. (“Difference Capital”).
This presentation is for the confidential use of only those persons to whom it is provided. By their acceptance of this
presentation, recipients agree that they will not transmit, reproduce or make available to any person, this
presentation or any of the information contained herein.
Certain information included in this presentation, including any information as to future financial or operating
performance and other statements that express expectations or estimates of future performance, constitute
'forward-looking statements' within the meaning of applicable securities laws. Forward-looking statements are
necessarily based upon a number of estimates and assumptions that, while considered reasonable by management,
are inherently subject to significant business, economic and competitive uncertainties and contingencies. Forward-
looking statements involve known and unknown risks, uncertainties and other factors that may cause actual financial
results, performance or achievements to be materially different from the estimated future results, performance or
achievements expressed or implied by those forward-looking statements and that the forward-looking statements are
not guarantees of future performance. Difference Capital disclaims any obligation to update or revise any forward-
looking statements, whether as a result of new information, events or otherwise. Readers are cautioned not to put
undue reliance on these forward-looking statements.
Disclaimer
3
Why Difference Capital Funding?
Opportunity
Tax efficient structure,
transparency and liquidity
of a publicly listed entity
Structure
Focused on diversified investing
in non-resource, high-growth
sectors
Attractive cash flow to
shareholders through
investment structures and
advisory services
Strategy Cash Flow
Proprietary
Executing a unique strategy
with experienced
management with specialty
finance and advisory
solutions
Exposure to investments, deal structures
and valuations not readily available to public
A publicly listed merchant bank focused on creating shareholder value through strategic
investment and advisory services in growth companies
4
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$0
$50
$100
$150
$200
$250
$300
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Opportunity to profit from supply/demand
of growth investments TEN YEARS FROM PEAK OF BULL MARKET PRESENTS OPPORTUNITIES
Investment
Capital
Growth
company
funding
plummeting
Venture Capital Funding Raised in Canada N.A. Retail E-Commerce
Internet
economy
North
American
retail
e-commerce
UP
675
%
In $ billions
DOWN up to
80%
Source: Statcan Source: CVCA
OPPORTUNITY
5
Canadian Public Markets are Underweight
Non-Resource Stocks
Growth Companies28%
Resources 28%
Financial Services22%
Real Estate & Other22%
Growth Companies
3%
Resources 49%
Financial Services
34%
Real Estate & Other 14%
TSE 300 Composite Weighting
December 31, 2000
S&P/TSX Composite Index
April 12, 2013
Sector rotation to Growth would result in a capital influx of $200 billion
Growth Companies 31%
Resources 24%
Real Estate & Other 30%
Financial Services 16%
S&P 500 Index
April 12, 2013
Growth Companies
Technology, Media, Healthcare
Resources
Mining, Oil &Gas
OPPORTUNITY
6
Now is the time to capitalize
0
50
100
150
200
250
NASDAQ Index S&P/TSX Capped Information Technology Index
Canada lags the U.S. but we believe Canada will increase weightings in the
technology and other non-resource sectors
OPPORTUNITY
Heavy weight RIM-T
drops 89%
7
FO
CU
S
The only Canadian public company focused
on non-resource, mid-market opportunities
Small- and
mid-cap
companies
Large-cap
companies
Early stage
micro- and
small-cap
companies
Natural
resources
Non-resource
sectors
INDUSTRY
OPPORTUNITY
8
We are investing internationally in companies with the following:
• IP (Intellectual Property) rich companies
• Clear competitive advantages in large and growing markets
• Proven Business Models with visibility to $10 million+ of revenue and positive EBITDA
• Companies with solid credible customer traction
We take an active role in the major positions we have and derive fees from our
broad based advice
Current portfolio has exposure to major trends such as:
• Next generation media technologies, content and gaming
• Social commerce tools and analytics
• IP-rich sustainable technologies
• Advanced medical technologies
• Recovering U.S. real estate market
Executing a unique strategy STRATEGY
9
Head of European Investment Banking and
Head of Technology, Canaccord Genuity
“#3 – 50 most important people in the
growth company sector” - Growth Company Investor Magazine, UK
Director and Vice President Enforcement at IIROC
Department of Justice, Counsel
“Top Enforcement official at Canada’s investment industry regulator”
- Financial Post
A senior team built on extensive experience
PAUL SPARKES
MICHAEL WEKERLE NEIL JOHNSON
Capital Markets
Media/
Government
Investment
Banking
Europe
Legal/
Compliance
EVP, CTVglobemedia, Director of
Operations PMO
“One of Canada’s top 100 lobbyists” - Hill Times
Co-founder & Vice Chairman, GMP
“One of Bay Street’s legendary
investment traders.”
- The Globe and Mail
TOM ASTLE
Research Analyst at Merrill Lynch
and National Bank Financial
“Top analyst in technology sector”
- Brendan Woods
Sector
Expertise
JAMIE BROWN
President of Canaccord
Genuity U.S., Head of
Investment Banking U.S.
“Top 40 under 40 Investment
Banker”
- Investment Dealers’ Digest
2007
CEO, Abria Financial Group & Maple Securities
Ltd. (Aggregate assets $3 billion)
“Best Fund of Hedge Funds” – CIA 2004
Fund
Management
HENRY KNEIS
JEFF KEHOE
Investment
Banking
North
America
STRATEGY
10
Our approach to creating value
IDENTIFY
OPPORTUNITIES
Find attractively
priced growth
companies - public
or private - looking
for capital
STRUCTURE
INVESTMENT
Preserve downside and
capture upside via
convertible debt structures
Take “influential” stake
Board seat (or observer
status) for significant
investments
Earn interest through
convertible debt structures
+
ADVISORY &
STRATEGIC
DEVELOPMENT
Provide long-term
growth planning and
strategic development
Transactional financing
support
Communications,
government and regulatory
advice
Leverage into our networks
40% of investee advisory
services earned are
remitted back to DCF
+
+
+
MONETIZATION
Provide multiple
liquidation and exit
strategies
Prepare private portfolio
companies for IPO or sale
Assist management teams
to evaluate proposals to
maximize shareholder
value
Work with investment
banks for efficient
transaction completion
Monetization in 2 -3 years
ideally
+
+
+ +
+
+
+
STRATEGY
11
ADVISORY &
STRATEGIC
DEVELOPMENT
Virgin Gaming now
de-facto standard in
the industry
Exclusive partnership
with Xbox Live
Tournaments app and
Electronic Arts
Virgin Gaming is
exclusive partners
with:
Virgin Gaming The world’s largest destination for competitive console tournaments
IDENTIFY
OPPORTUNITIES
A company with IP, a
large database of
players and the Virgin
brand.
But needed capital for
marketing and
continued roll out
STRUCTURE
INVESTMENT
Raised $58 million
in five separate
financings over
past 3.5 years
Every deal was lead
by principals of
DCF for either DCF
or prior firms
MONETIZATION
Rise in valuation
from $25 million
to $150 million in
36 months
DCF is largest
shareholder with
16% ownership
Latest $10 million
investor is a global
institution who
paid a 20%
premium 7 months
after DCF’s
investment
CASE
STUDY
STRATEGY
12
Technology and IP based companies are underserved by traditional lending
sources
In Canada specifically, a wide gap exists between angel/VC funding and
institutional financing sources
Convertible debentures provide additional funding for growth companies
without suffering unnecessary dilution
DCF provides this specialty financial product which accelerates the growth of
our companies, while protecting our capital by having security over assets
Convertible debt structures STRATEGY
DCF expects to receive approximately $3.0 million in interest payments
over the next 12 months
13
Investment portfolio, Fair Value $89.8 million
Marketable Securities (incl. Cash), Fair Value $25.0 million
Real Estate Holdings, Fair Value $10.4 million
Total Convertible Debt Investments, Fair Value $36.3 million
Total Equity Investments, Fair Value $12.6 million
Total Straight Debt Investments, Fair Value $5.1 million
Total Warrant Positions, Fair Value $385,000
Number of Investments 19
Average Investment Size $3.4 million
Overview of Investment Portfolio
(December 31, 2012)
Diversification
(% of fair value)
Equity, 23%
Convertible Debentures, 67%
Straight Debt, 9%Warrants, 1%
Asset Allocation
(% of fair value)
Cleantech, 18% Education, 6%
Gaming, 40%Healthcare,
10%
Online Marketing, 4%
Online Media, 8%
Remote Monitoring, 1%
Traditional Media, 7%
Transaction Processing, 6%
STRATEGY
14
Investments are considered Core if:
• DCF holds a significant interest of approximately over 3% of fund NAV
• DCF takes active ownership role
• DCF invests and works with trusted partners
Core investments
U.S. Real Estate
PROPRIETARY
15
Smaller investments in the portfolio are considered strategic because:
• Adhere to our investment principles and investable themes
• Investments can be made at very attractive valuations
• They are unique situations that are presented to us on a proprietary basis
• DCF can make a larger investment at our option in the future
Strategic investments PROPRIETARY
Example:
• Brainscope (DCF: 6.2% ownership) - $1 million at $16 million post-money valuation.
Company in FDA trials for patented concussion detection technology. We are only
Canadian investor, others include senior executives of America Online
16
Company Location DCF
Ownership Co-investors
New York, NY 15.4% Larry Levy (Semagix, bought by Warburg Pincus),
Dennis Bennie (Delrina, bought by Symantec)
Founded in Toronto, Ontario
2.4
Madison Dearborn Partners
Multibillion dollar PE firm based in Chicago
Bethesda, Maryland 6.2% Revolution LLC (created by AOL co-founder Steve
Case), ZG Ventures
Burlington, Massachusetts Variable
Conversion
Sanderling Ventures
Dr. James E. Muller, founder and Nobel Peace Prize
Winner
Much of the value creation in our focus sectors occurs in take-outs or before an IPO – i.e.
Radian6 and Facebook
DCF has deep relationships with VC investors in the U.S. and Canada for mid-late stage
companies to co-invest with
Access to the U.S. private company universe PROPRIETARY
17
Selected investments
Company %
Shareholding $ Invested Sector Description
14% $16,881,660 Technology
World's largest destination for competitive console
gamers to meet, challenge and play in tournament
challenges for cash, points and prizes
15% $4,000,000 Media Multiplatform media production, distribution and
rights management company
26% $7,800,000 Biofuel
A leading technology company in the advanced
biofuels and renewable chemicals sector
6.2% $986,200 Healthcare
Developing a new generation of portable and simple-
to-use tools to rapidly and objectively assess brain
function at the initial point of care
15.4% $2,805,000 Technology Innovative provider of influencer information for
brands, agencies and online publishers
Variable
Conversion
$2,000,000 Healthcare
Medical device company dedicated to helping provide
practitioners with the information needed for
enhanced clinical decision making in treating
coronary artery disease
2.5% $2,400,000 Technology
Provider of cloud-based infrastructure for premium
media services that is used by the world's largest
communication companies
12% $500,000 Media
World leader in ‘Participation TV’, deals with ESPN,
Fox, CBC, Australian Channel 7. Over $8 million
invested over 7 years, now Canadian private company
10% $600,000 Technology Online video production company with $13 million
invested over 8 years.
PROPRIETARY
18
Group structure and money flows
Difference Capital
Management Inc.
(Private)
Difference Capital
Funding Inc.
(DCF:TSXV) Management Agreement
Dividend during 2013
● 2% of NAV
● 20% of yearly increase
over hurdle rate of 2
year bond rate
● 40% of Advisory Fees
● 100% of Board Member
fees
● Merchant Banking
operations
● Portfolio manager and
Exempt Market Dealer
● Investment vehicle with
capital tax losses
Public Shareholders of DCF
CASH FLOW
Our structure allows transparency and certainty and cash out flows to the manager, while
participating in growth of business through non-capped cash inflows
19
Broad spectrum of advisory services
Regulatory &
Government
Relations Advice
• Regulatory/Financial
/securities advice
• Strategic
government
relations advice
• Transaction
structuring and
financing support
• Institutional relations
and targeting
• Market intelligence
Capital Markets
Advice
• Strategic acquisition and
growth advice
• Investment banking
relations
• IPO listing advice in North
America and European
markets
• Strategic communications
advice
• Stakeholder engagement
strategies
• Media relations strategies
Strategic
Advice
Media &
Communications
Advice
Our senior team provides a broad spectrum of advisory services demanded by growth companies
CASH FLOW
20
Capital structure – DCF:TSXV
Symbol DCF-TSXV
Market Cap $106 million
Share Price (April 4, 2013) $0.39
Shares Outstanding 273 million
Insider Ownership 24.73%
Warrants Outstanding 77 million
Manager Difference Capital Management Inc.
Management Agreement 2% of NAV + Annual Performance Fee equal to 20% of NAV increase per year over 2 year bond Hurdle Rate
Management Company Fee Sharing Agreement
100% of Board related fees 40% of all other fees paid by investee companies
DCF has over $150 million of capital tax losses, a liquid stock, and
significant insider ownership aligning interests
Capital Tax Losses $153 million
Operating Tax Losses $13 million
Average Daily Volume 230,000
STRUCTURE
21
Align interests between
management company and public
shareholders through stock
ownership and sharing of all fees
from investee companies
Build shareholder value through
growth in Net Asset Value and
stock price
Targeting 2013 to start regular
dividend to shareholders and apply
for full TSX listing
Our commitment to public shareholders STRUCTURE
22
Virgin Gaming
Effective ownership
14%
Cumulative investment
$19 million
Acquisition Date
June 2012 / January
2013 / February 2013
Terms 5.0% convertible
debentures and
common shares
Realized return 35% IRR on $3 million
World’s largest destination for competitive
console gamers to play in tournament
challenges for cash, points and prizes
DCF’s management has been involved with
the company since 2010
Recently launched Xbox Tournaments by
Virgin Gaming, an app built-into the Xbox
LIVE system.
Official and exclusive provider of tournaments
for EA Sports
As of January 2013 had over two million
registered users
23
Thunderbird Films
Effective ownership 15%
Cumulative investment
$4 million
Acquisition Date December 2012
Terms Common Shares
Other investors Frank Giustra
and Francesco
Aquilini
Multiplatform media production, distribution
and rights management company with over
500 hours of television content airing globally
Recently launched a joint TV partnership with
Lionsgate (Sea to Sky Entertainment)
Owns a 50% stake in the Blade Runner
franchise and developing a sequel
New Chairman - Ivan Fecan (former CEO of
CTVglobemedia and VP Creative Affairs of
NBC)
Recent acquisition of Reunion Pictures
(Continuum, Butterfly Effect, Final
Destination)
24
Lignol Energy Corporation
(LEC:TSXV)
Effective ownership
26%
Cumulative investment
$4 million equity plus
$3.8 million in line of
credit
Acquisition Date August 2012, December
2012 and March 2013
Terms Common Shares and
Warrants – line of credit
at 8% p.a.
Other Investors Wasabi Energy
A leading technology company in the
advanced biofuels and renewable chemicals
sector
Difference Capital’s principals identified the
opportunity for Lignol to undertake a
recapitalization and pursue consolidation in
the sector
Implementing a cash-flow positive strategy by
investing in Biodiesel assets and using those
cashflows to fund plant development
Have completed the majority of pre-
commercial development work with full plant
launch in progress
25
US Real Estate
Effective ownership
50%
Cumulative investment
$13 million
Acquisition Date Ongoing
Terms Joint-venture
Investments in undervalued/opportunistic
land and residential housing assets in urban
areas of South Eastern U.S.
Working with established, knowledgeable
partners to extract value and benefit from
the housing market recovery
Due to current market inefficiencies, we are
able to purchase properties at significant
discounts to both replacement cost and
current market value, with an interim
strategy of renovating and leasing the
properties to qualified tenants
Capitalize on housing market recovery and
economies of scale