Six months after a near-fatal accident, OMERS Ventures founder and former CEO John Ruffolo has unveiled a new growth equity firm wagering big bets on legacy companies retooling for the new economy.

The firm, called Maverix, is just about to close its first fund, a US$500-million pool backed by LPs including BMO, CIBC and Mattamy Asset Management, as well as two large pension funds that have yet to be disclosed. The fund is planning to invest up to US$100 million per deal.

Rather than back tech firms encroaching on traditional sectors, Maverix is looking to invest in legacy companies themselves. The firm aims to take large minority stakes in private companies in transportation and logistics, retail, health care and financial services, and that have never received outside investment. Ruffolo told The Logic last week the firm already has three prospects in its pipeline—including a company in the travel space, one in supply chain management and one in transportation and logistics—though no deals have been officially made. 

Maverix has been more than three years in the making and has faced several major setbacks along the way. The firm was most recently set to launch in fall 2020. On September 7, however, Ruffolo was struck by a transport truck while cycling north of Toronto. He suffered life-threatening injuries that left him paralyzed from the waist down. About a month after the accident and the multiple surgeries that followed, Ruffolo—while still in the hospital—turned his mind once again to Maverix. 

He had conceived the investment thesis while still at OMERS, intending to apply it to the pension fund’s growth-equity strategy. “I realized that the thesis would be better executed as an independent organization, where we have the maximum flexibility to truly build it in the image that we wanted to build it,” Ruffolo said in an interview with The Logic.  

Immediately after leaving OMERS in late 2018, he clinched a lead partner who was planning to kick in up to half of the fund’s LP dollars. But about four months later, that firm—which, according to The Globe and Mail, was the Ontario Teachers’ Pension Plan—backed out. A month or so after that, Ruffolo and his team—whose partners include Mark Maybank, executive chairman of financial-services firm Kirchner Group, and Layth Ashoo, managing partner at Golden Spruce Capital—resumed fundraising. They had secured a new lead LP and were gearing up to launch in the first quarter of 2020, when COVID-19 hit. The team paused fundraising once again, before regrouping later in the spring. 

While Maverix was designed for a pre-pandemic economy, Ruffolo knew the firm would serve a world that looked vastly different from the one in which he was living at the time. “The origination of this was [that] in 2020, the world is going into a massive global recession,” he said. “I had all these reasons why I thought it was going to happen, I just didn’t know what would be the trigger event. I thought there would be a crisis of confidence in the market. And if the world goes into a recession, then there’s going to be upheaval and massive discombobulation in the marketplace. There’s going to be a lot of companies under pressure and going bankrupt and what have you, and we wanted to be in the middle of this crisis, because that’s where the opportunity is,” said Ruffolo. “We believe that it is those that embrace technology in traditional businesses that will become the winners.”

Ruffolo said Maverix is looking to fill a gap in the Canadian investment space that sits between venture capital and buyout private equity. “We determined that the real demand was in those growth companies that are not technology companies that are seeking substantive capital. They don’t want to go public and they don’t want a controlled buyout transaction,” he said. “There’s nobody on the private equity side that will do minority investing.” 

Rebecca Springer, a private equity analyst at PitchBook, said it makes sense for a Canadian fund to wade into the space. “Canada is underserved in terms of capital based in the country relative to the investment opportunities there,” said Springer. “Growth equity in the U.S. has become a really prevalent strategy. It’s not just growth-specific funds who are making the investments, but all of the big players are heavily involved in this space now.” Springer said the pandemic has accelerated that trend. “There’s a ‘winners and losers’ bifurcation, where we’re now starting to see those companies in distress, and those are good targets for buyout funds who want to do turnaround,” she said, and on the other hand there are companies that have really been able to pivot and modernize or use technology to get ahead in the pandemic environment. For [them], a minority investment could be exactly what they need in order to make that transition.” 

Ruffolo pointed to U.S. players like Bain Capital, Insight, Madison Dearborn and Warburg Pincus as references for the market Maverix is trying to serve in Canada. “Those firms come hunting north of the border; they’re very good and they’re fierce competition,” said Ruffolo. “But most of the entrepreneurs that we’ve spoken with have an affinity to work with a Canadian-based player, and where there’s not one, they’ll have no choice but to go to the U.S. So we’re taking that spot that might otherwise go to a foreign private equity firm.”

Joining Ruffolo in the new endeavour is a cast of high-profile investors, founders and experts in a range of industries. Advisory board members include former BlackBerry co-CEO Jim Balsillie; District Ventures Capital founder and managing general partner Arlene Dickinson; Mattamy Homes founder and CEO Peter Gilgan; and Canada Goose founder and CEO Dani Reis. The performance team—which will work closely with portfolio firms—includes Nagar Rahmani, a principal at Kensington Venture Partners, as well as Health Canada advisor Dr. Eric Hoskins.

Ruffolo said the team had to encompass skills typically seen at both VC and private equity firms. “We had to carefully construct a team that understands technology and how it can be levered to be innovative. At the same time, these companies expect you to have a deep understanding of the varied interests that we’re in, which is more like private equity,” he said. “Our team has both and bolting both together is not an easy task.” 

Ruffolo has a track record of charting new courses in Canada’s investment landscape. He founded OMERS Ventures in 2011, at a time when Canada’s venture capital industry and startup sector were floundering. It was considered avant garde for a public pension fund to invest in tech and startup ventures. But then-OMERS CEO Michael Nobrega believed the fund could fix what he considered Canada’s broken funding structure for tech firms by applying similar investment strategies used in areas like real estate and infrastructure. Other Canadian pension funds have since followed suit, helping to fuel steady growth in the country’s venture capital ecosystem over the past decade.