Teachers’ Innovation Platform plans to rebrand as Teachers’ Venture Growth (TVG) and pursue a growth plan to more than double the size of its portfolio investments.
The venture capital and growth equity arm of the $242 billion CAD Ontario Teachers’ Pension Plan Board (Ontario Teachers’), TVG said it will increase its portfolio to comprise seven to 10 percent of Ontario Teachers’ net assets over the next five to 10 years, up from approximately three percent today.
An earlier version of a news release shared with BetaKit showed that TVG had a target to triple its portfolio up to $25 billion by 2026, but the published release only noted the seven to 10 percent target. Following publishing, TVG confirmed to BetaKit that its target is between $21 billion and $30 billion between 2025 and 2030, based on Ontario Teachers’ ambition to reach $300 billion in assets under management by 2030.
“We believe there are attractive investment opportunities available and the challenge becomes in gaining access to those investments.”
– Rick Prostko,
TVG managing director
TVG said the new name will provide a clearer definition of the group’s offering as it moves ahead.
Olivia Steedman, the senior managing director of Teachers’ Innovation Platform who launched the investment arm in 2019, will continue to guide TVG as it expands over the next year.
TVG intends to hire 12 new positions over the next year as it increases its investments across global sectors. TVG also announced that it plans to open a new San Francisco office in 2022 that will work closely with its offices in Toronto, London, and Hong Kong.
Rick Prostko, TVG’s managing director for North America, told BetaKit that as the firm scales its investment efforts, TVG wants individuals with experience underwriting growth stage technology companies in sectors such as cleantech, medtech, enterprise software, digital assets and FinTech.
“We’ve built a strong and growing investment group by rolling up our sleeves and helping mission-driven founders and entrepreneurs scale their business, expand their offerings, and become leaders in their markets,” Steedman said.
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With a focus on late-stage venture and growth equity investments in technology companies, TVG currently holds a $7.1 billion portfolio made up of 20 direct investments and several partnerships with other global venture funds. TVG does not disclose its venture fund partners.
TVG invests in Series B rounds and beyond, with a minimum initial cheque size of $50 million up to $250 million. However, TVG said it doesn’t have a cap on how much it will invest or the length of time it will devote to an investment.
TVG frequently leads rounds, but also participates as a co-investor with partners. The investment firm looks for founders with “bold missions,” who wish to expand their product offering, scale geographically, and become leaders in their markets. TVG invests across North America, Europe and Asia.
Steedman said the TVG team will have access to the global network and resources of one of the world’s largest pension plans. The Thinking Ahead Institute, a non-profit investment research and innovation group, issued a report on the largest pension funds in the world ranked by assets under management in 2021, placing Ontario Teachers’ 20th on the list. The fund has a target of reaching $300 billion in net assets by 2030.
Prostko noted that investing in the venture growth asset class has come to represent an increasingly common alpha-generation strategy for institutional investors, particularly in today’s lower-yield environment, where strong fund returns – driven by public markets, SPACs and M&A interest – are hard to ignore.
While pension funds by their nature take the long view, it is an open question as to whether or not Prostko’s read of the venture growth market currently holds true.
“Nonetheless, we believe there are attractive investment opportunities available and the challenge becomes in gaining access to those investments,” he said. “Both our portfolio entrepreneurs and fund partners value the deep sector expertise and decades-long relationships that we bring to the table from our team’s experience managing a $240 billion global portfolio.”
While pension funds by their nature take the long view, it is an open question as to whether or not Prostko’s read of the venture growth market currently holds true.
Publicly-traded tech companies have been hammered in the markets for the last six months, resulting in the CEO of one Canadian tech company stepping down, with another proposing governance changes to protect their voting power. Many predict the public market sellof will eventually impact private market valuations.
One of those prognosticators is Maverix Private Equity managing partner John Ruffolo, who has been talking about the impact of inflation and rising interest rates on investments and valuations since October. In a new piece co-authored with Maverix associate Helen Zhang, Ruffolo has analyzed the performance of Canadian tech companies that went public between 2019 and 2021. The article notes that while valuations are reverting to the long-term mean, overall shareholder under-performance was particularly striking.
“Early shareholders such as founders, angels, and venture capitalists likely achieved their investment return expectations, but later-stage shareholders and in particular, public shareholders likely faired quite badly,” the article reads.
As Ontario Teachers’ looks to increase its late-stage venture activity over the next decade, potential deal competitors like Tiger Global Management have been humbled by poor tech performance – the firm’s hedge fund has fallen 34 percent since the start of the year, with the damage extending to private holdings.
Among TVG’s investments are EdTech software startup, ApplyBoard, and Attabotics, a Calgary-based startup that has created a robotic warehousing and fulfillment system. TVG formed an investment partnership with Fleet Complete, an AutoTech startup, in 2019.
“We’re inspired by entrepreneurs leveraging technology to solve meaningful problems,” Prostko said. “That might mean teams involved with the development of transformational technologies to create new markets, or teams focused on novel applications of existing technologies.”
With files from Douglas Soltys. Featured image courtesy of Teachers’ Venture Growth.