My view on why John Ruffolo was named Canada’s Businessperson of the Year


I loved hearing how John Ruffolo of OMERS VC, my former boss at Deloitte, was named Canada’s Most Powerful Business person by Canadian Business magazine. I agree, and an article from Cantech Letter does a partial job (in my view) of answering the question: “Why would CB pick John Ruffolo, who manages a $200 million fund, over Mark Wiseman of Canada Pension Plan, who manages over $200 BILLION, and was in the #1 spot last year?”

Cantech Letter says that “What the Canadian Business designation signals is a shift in momentum from one sector of the Canadian economy to another, from the historically larger and more significant mining and resource sectors to the technology sector…”

There is certainly some truth to that, and tech has been on an upswing of late, and resources have not. However, I was a tech manager in the 1990s, when a similar sector rotation was underway. For a while, tech was more important than ‘rocks and trees’ and it was great, and it felt like we were seeing a permanent ascendancy of technology over resources for the Canadian economy. As you can see from the picture below, they even put me in Canadian Business! (I know – I look better with less hair.)

Duncan (2) Cdn Business

But after the bubble collapsed in 2000/2001, the pendulum swung the other way, and resources were back to their usual dominance, while technology fell to under 5% of Canadian market cap. Put not your faith in sector rotations being durable! That’s why they are called ‘rotations’…

But there is another reason why John’s role at OMERS may justify a #1 ranking. If you are selling a multi-billion dollar private equity deal in a global auction, CPP and Mark are definitely on your list of who to call! They are even high on the list. But it is a big list, with probably over a thousand potential buyers of what you want to sell. And (by and large) Mark’s money isn’t all that different than anyone else’s.

On the other hand, if you are a Canadian tech company, with huge potential and already establishing a big user base (HootSuite would be a great example) then John and OMERS are almost the only game in town. There are other Canadian VCs, but they have been significantly less aggressive, usually had less money to invest, and often didn’t want to play in the spaces that John is targeting.

Let me be more explicit about how OMERS is acting differently.

Historically (20 years ago, and in both US and Canada) VCs had a very basic game plan. I will exaggerate a bit for comic effect, but their model was roughly as follows:

“We will give you as little money as possible. In return, we want as much of your company as possible, along with some onerous Terms and Conditions. We want you to go public as soon as possible, so we can claim a success and raise our next fund. Even if you are not ready to be public. And we will sell our shares as soon as we legally can after the IPO, because that is how we get paid on our 2 and 20 compensation.” Not surprisingly, a lot of early stage tech companies said that VC stood for Vulture Capital! Most VCs aren’t exactly like that these days, but there are some structural reasons why my description still has elements of truth to it.

As I understand it, the OMERS VC model is trying as hard as possible to be the opposite.

“We want to give you more money than you want, or even know how to spend. Since we are forcing you to take that much, we can’t be as pushy on price, valuation or Ts and Cs. Next, we not only are not asking you to go public, but we are advising you not to go public until you pretty much have to. We don’t really need to raise a next round, so exits are much less important for us.”

We don’t really know how they will act after IPOs, but I guess we will find out fairly soon.

But the very different model has dovetailed very well with the current feelings (on both sides of the border) about too many tech companies being in the public market too soon.

Not to put too fine a point on it, but John has already transformed the Canadian tech VC ecosystem by being a unique source of capital for certain kinds of companies. And therefore likely deserves that #1 ranking.

Looking forward, if his investments end up producing fantastic returns, other investors and VCs will adopt the OMERS style and the OMERS scale. That’s how the capital markets work and John will no longer be the only game in town. And since I know him to be first and foremost a booster of Canadian innovation and technology, I am sure that nothing would make him happier.




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