Ontario Municipal Employees Retirement System is ending its four-year-old foray into venture capital investing in Europe and drawing back to North America, where the Canadian pension giant sees better opportunities for early-stage technology investing as the sector elsewhere continues to struggle.
OMERS is shutting its London office, where its European investing team was based, and letting go of one of its two managing partners, Harry Briggs, and an associate. The other managing partner, Henry Gladwyn, and another associate will be relocating to New York, where they will continue to oversee OMERS Ventures’ 18 investments in Europe.
A third London-based OMERS Ventures managing partner, Jambu Palaniappan, announced last week he would be leaving to become the next chief executive officer of Vetted Ltd., which operates Britain’s Checkatrade online marketplace for home improvement tradespeople.
“We can confirm that we’ve decided to focus our team and global service model in North America,” OMERS spokesperson Lori McLeod said in an e-mail Tuesday, after Bloomberg News first reported news of the pension fund’s European retreat. “Decisions to say goodbye to valued colleagues and friends are difficult, but we prioritize all our investment decisions to deliver on our pension promise, and doing what we believe to be in the best interest of our plan members.”
The technology-sector downturn is now 21 months old, with no signs of ending. In response, OMERS decided to retreat to North America for VC investments based on the belief the macroeconomic climate here will be stronger than in Europe for the next three to five years, a source familiar with the matter said. The Globe is not identifying the source as they are not authorized to discuss the matter.
A slump in venture capital (VC) investing globally has followed the start of the tech downturn. Technology companies globally have laid off more than 390,000 people, according to Layoffs.fyi. Valuations have crashed across the sector, and tech companies have tried to shift quickly from growing at all costs to preserving cash and aiming for profitability.
Many early-stage tech companies have been unable to make the turn and have either already become insolvent or are at risk of running out of cash. Only the strongest companies have been able to raise funds at decent terms, though they are well off inflated valuations during the pandemic.
The Information reported this week that U.S. VC firms are sitting on about US$271-billion in “dry powder,” or as-yet uninvested capital at their disposal. Meanwhile, many VC firms have slashed the proposed sizes of their latest funds in the face of soft investor demand, and others in Canada are struggling to raise their latest funds.
OMERS entered Europe in 2019 by launching a new €300-million ($455-million) fund, its fourth since becoming the first Canadian institutional investors eight years earlier to bet on a rebound in the technology market after the credit crisis by starting up a VC practice. OMERS Ventures became a key early investor in Canada’s tech renaissance last decade, backing such companies as Shopify, Hopper, Hootsuite, Jobber and Wave Financial.
With its foray across the Atlantic, OMERS advertised itself on its website as “the biggest European Tech VC you’ve never heard of,” attempting to overcome its lack of name recognition by recruiting familiar faces from the local tech sector. Mr. Palaniappan, for example, had led international expansion efforts in Europe, the Middle East and Asia for Uber Technologies. Mr. Briggs previously led his own British-focused VC fund and had been named one of Europe’s 25 best venture capitalists by Midas List Europe in 2017.
Despite OMERS’s withdrawal from Europe, Ms. McLeod said in the e-mail statement that the pension giant’s “commitment to early-stage venture investing remains strong. We were the first pension plan to do direct early stage investing, and we remain committed, with CAD$2.5B invested in the space.”
Sean Silcoff