John Ruffolo isn’t as well-known as some buyers, however he’s very well-known in Canadian enterprise circles. The longtime head of Arthur Andersen’s tech, media, and telecommunications apply, he joined OMERS roughly a decade in the past when a former colleague grew to become CEO and introduced him aboard the pension large to create a enterprise fund.
The concept was to again probably the most promising Canadian corporations, and Ruffolo steered the unit into investments just like the social media administration Hootsuite, the lately acquired storytelling platform Wattpad, and the e-commerce platform Shopify, amongst different offers. The final was significantly significant, provided that OMERS owned round 6% of the corporate crusing right into a 2015 IPO that valued it at roughly $1.three billion on the time. Alas, owing to the pension fund’s guidelines, it additionally started steadily promoting that whole stake, whilst Shopify’s valued ticked upward. (Its market cap is presently $130 billion.)
Certainly, after serving to OMERS subsequently get a progress fairness unit off the bottom, an antsy Ruffolo left to launch his personal fund. Then got here COVID, and as if the pandemic weren’t making an attempt sufficient, Ruffolo additional underwent a harrowing ordeal final September. An avid bike owner, he got down to experience 60 miles one sunny morning on a rustic street, and was knocked far off his bike by a Mack truck in an accident that shattered most of his bones and left him paralyzed from the waist down.
That form of one-two punch may drive somebody to the brink. As an alternative, six months and a number of surgical procedures later, Ruffolo, is present process coaching and remedy and intends to bike sometime once more. He’s additionally very a lot again to work and simply taking the wraps off his new Toronto-based agency, Maverix Private Equity, which has $500 million to put money into “conventional companies” that already produce no less than $100 million income and are utilizing tech to develop however may use an out of doors investor for the primary time to actually hit the fuel.
We talked with Ruffolo concerning the accident and his new fund this morning. You may hear that dialog here (it begins across the seven-minute mark, and it’s value a pay attention). Within the meantime, following are excerpts from that interview, edited calmly for size.
TC: You’re certainly bored with answering the query, however how are you doing?
JR: Effectively, when anyone says it’s nice to be alive, it is. I truly by no means knew how shut I used to be to dying, to be sincere, till about eight days after the accident. Once I requested for my cellphone, simply to form of see what’s occurring on the earth, there was 1000’s of messages coming by way of. And I’m like, ‘What the hell?’
Individuals had been copying numerous articles. I picked off the primary one, and it mentioned, ‘John suffered a life threatening harm.’ And I’m form of pondering, ‘Life threatening? Why are they saying that? And the docs got here in and mentioned, ‘As a result of it was. We thought that you just had been going to die within the first 48 hours.’ I subsequently spoke to among the prime physicians [in Canada], and so they don’t perceive why I didn’t die on affect. That form of scared me a bit bit, however I’m so glad to be alive. And my restoration is way forward of schedule. It was solely inside a few weeks the place I began feeling my legs once more.
TC: You had been mainly pulverized, but a recent piece about your restoration in The Globe & Mail notes that inside a month or so, you had been again to fascinated about your new fund. Do you assume you is perhaps . . . a workaholic?
JR: Some folks name it silly. [Laughs.] However for the 2 months, my first reminiscence was worrying about my household and stuff [but] I’ve group of biking associates — we’re referred to as Les Domestiques — who’ve dedicated to biking, and it’s quite a lot of people who’re buyers, CEOs of huge banks in Canada, we’re all shut associates, [and] all of them got here to cocoon the household to be sure that nothing went mistaken. So in a short time, all of those people take over each component of the household, and the youngsters had been nice, everyone was nice. I then had quite a lot of this time in hospital, and I do get antsy, and I began inserting the calls to the buyers who had been committing to this fund pre COVID . . . I simply actually wished to inform them, ‘Hey, I’m not lifeless. All my schools are there. Are you continue to gonna be there once I get out of hospital?’
TC: As a result of they’re actually investing in you and your observe document.
JR: That’s precisely proper. And I gotta let you know, it’s an attention-grabbing comparability. I’ve had American buyers, and Canadian buyers. American buyers are very transactional. They’re very quick to come back in in the event that they see a terrific worth proposition. Canada will not be the identical factor. In Canada, I’m extraordinarily well-known as an investor and there, it’s truly relationship-driven, which is each good and dangerous. It’s robust in Canada as a result of they’re extra conservative, nevertheless, they stick to you in dangerous occasions. In my case, each single investor, everybody that had dedicated on pre- COVID, got here in. Then one specifically doubled the scale of the funding. They only felt dangerous for me, and I used to be like, ‘Hey, dude, I’ll take that sympathy card. Anytime.’
TC: You additionally see an actual marketplace for a Canadian-led agency to put money into Canadian corporations versus taking cash from American counterparts.
JR: So now that is going a bit bit to the thesis, which isn’t a brand new thesis from a US perspective however is new from a Canadian perspective: the good companies within the U.S., like an Perception [Partners], like a Madison Dearborn, Bain Capital, Basic Atlantic, Summit — we don’t have any of these in Canada. We now have nice enterprise capital companies, and we now have nice buyout non-public fairness companies. However what was actually occurring right here is the entrepreneurs who’re constructing nice companies will not be actually tech entrepreneurs; they’re simply conventional trade entrepreneurs. And actually, all I’m doing is planting a Canadian flag and saying, Hey, we now have a Canadian agency that may lead or extremely take part in these offers [to help you scale that business].
TC: You’re drawing a distinction between old-line industries and growth-stage tech corporations, in different phrases, and also you’re going after the previous?
JR: [To me] a real know-how firm is one that truly builds the instrument units which are utilized by different companies to make them greater, quicker, and stronger and I’ve been investing in these corporations for 10 years with nice success, however there’s an enormous oversupply of capital in these areas, significantly within the SaaS software program area. It’s simply not making mathematical sense on in the case of quite a lot of these valuations. In the meantime, in the case of monetary providers, well being care, journey, no matter, these will not be tech entrepreneurs however they’re enlightened. We’re not introducing know-how into the enterprise, they have already got it. However in a single case, with a journey firm we’re carefully, they need anyone who understands the journey area and likewise who understands know-how and the affect as you scale globally.
The profile of the businesses that I’m speaking about have, on common, $100 million of prime line [growth], with flattish EBITDA, and that haven’t carried out any exterior financing with establishments. They’re rising at 20% to 50% a yr, however they actually wish to change into the following billion-dollar firm.
TC: How a lot of those corporations do you assume you possibly can personal and for what dimension checks?
JR: We’re 20% to 40% stakes within the enterprise, so I’d say a major minority, and we’re reducing checks of $50 to $75 million (U.S.)
TC: There aren’t quite a lot of huge corporations in Canada, Shopify however. How do you get the businesses you propose to work with pondering on a special scale?
JR: Canadians is perhaps a bit bit extra conservative, however the irony is, take a survey and [you’ll see] what number of Canadians are operating large companies in the US or within the Valley. It’s not inherent in Canadians [that they are risk averse].
A part of why I received into enterprise capital was I used to be so annoyed within the variety of corporations that had been constructing merchandise however couldn’t even generate revenues. Since then, I believe we solved in Canada the zero to $10 million drawback, then the $10 million to $100 million [challenge]. However beginning round 2016 or so, I began to see corporations that had $50 million, $60 million, $70 million in income beginning to plateau, and the problem was world scalability.
Within the U.S., so many corporations is usually a home firm and be a billion-dollar firm. In Canada, our market is simply too small; you’re pressured to promote on a worldwide scale, and plenty of Canadian corporations wrestle with that. So my focus now’s that final a part of the piece. How will we get these corporations from $100 million companies into $1 billion-plus?