Olivia Steedman, Executive Managing Director of Teachers' Venture Growth, Ontario Teachers’ Pension Plan. Ms. Steedman’s team has investments in 36 companies that make up more than $7.5-billion of Teachers’ overall portfolio.Christopher Katsarov/The Globe and Mail
Olivia Steedman sometimes thinks of herself as the captain of a patrol boat, scouting the horizon for treasure and perils just ahead of its much larger ship – the $256-billion Ontario Teachers’ Pension Plan.
As global head of Teachers’ Venture Growth (TVG), Ms. Steedman’s first job is to find late-stage venture investments in leading-edge technology companies that can produce outsized returns for 340,000 Ontario teachers whose pensions depend on the plan’s success. At the same time, her team is expected to be a source of advance intelligence on emerging trends to ensure some of Teachers’ big, long-term investments don’t come under threat from disruptive startups.
“We’re looking and we’re calling back and we’re saying, ... be careful of that, and check this out,” Ms. Steedman said in an interview. “There was a desire to bring some of the insights from the world of technology to the mothership, if you will, and make sure that we wouldn’t find ourselves in a situation where one of our portfolio companies in our infrastructure book or our private capital book was about to be disrupted.”
The TVG patrol boat – a unit of one of Canada’s largest pension plans – has been in the water for five years and, after a fast launch, things got choppy. TVG had early wins in 2019 when, as Ms. Steedman says, “it was the heyday of tech and everything was running really hot.” Then came the COVID-19 pandemic and a mass shift to online communications and commerce, sparking a bubble in technology valuations, and driving up the cost of entry for funds such as TVG that wanted in. Almost as quickly, a spike in inflation and interest rates caused prices for up-and-coming companies to plummet.
TVG and other venture investors that bet heavily during the early 2020s were caught up in that reckoning. Ms. Steedman’s team has investments in 36 companies that make up about 3 per cent of Teachers’ overall portfolio, or more than $7.5-billion. The venture arm targets annual returns of roughly 30 per cent, seeking to significantly outperform a benchmark of publicly-traded stocks and help grow the Shopifys of tomorrow. There have been highs and lows: TVG earned a 39-per-cent return in 2021 but significantly underperformed in 2023, suffering a 1-per-cent loss. Over its first four years, TVG had a high-single-digit average annual return, a spokesperson said.
CPP report sides with experts who say Alberta is owed smaller share of assets if it pulls out
Recent turmoil also hit other similarly focused investors, and Ms. Steedman’s team used the time to refocus, not to beat a retreat. After starting out as a generalist investor, TVG has narrowed its lens to a handful of sectors such as health care, cybersecurity, software and climate tech. Its leaders met with more than 2,000 companies in 2023, going into data rooms and building a pipeline of prospects to pursue when conditions improved. And as interest rates came down and company valuations started to settle, TVG’s investment activity picked up in 2024.
In July, TVG and KKR & Co. Inc. jointly led a US$140-million fundraising round for labour management software provider SmartHR. A month later, TVG led a US$150-million fundraising round for loyalty program Bilt Rewards. And in mid-December, TVG participated as an existing investor when data and artificial intelligence company Databricks Inc. raised US$10-billion in a fundraising round led by Thrive Capital Management LLC. In total, TVG made eight direct investments in 2024, compared with two in 2023.
Over time, Ms. Steedman expects TVG to grow along with the broader Teachers’ fund, and for her group to account for 3 to 5 per cent of the pension manager’s assets. She foresees TVG owning stakes in as many as 60 companies in a few years, typically making investments of $50-million to $250-million. The venture market is starting to open up as interest rates fall.
“I’ve been asked to be out there hunting, deliver on our pipelines, do good deals, make a good return,” she said. “We don’t want this to be a flash in the pan. We’re committed to the asset class. The very reasons that we stood up in 2019 still exist.”
A trend toward tech companies staying private for longer, and creating huge wealth for private investors, was a central reason that Teachers’ set up TVG five years ago. The pension fund plucked Ms. Steedman, a civil engineer and chartered accountant, from a previous role in its infrastructure group, where she worked on early-stage investments in construction and development. “I got a good flavour for the challenges of young companies and trying to do hard things,” she said.
TVG’s first investment was in Elon Musk’s Musk’s Space Explorations Technologies Corp. (SpaceX), which so far looks like a home run, as SpaceX’s paper value has soared to more than US$350-billion. But Ms. Steedman’s team has also accumulated some scars from the black swan events that keep venture investors up at night. Teachers’ had a US$95-million investment in cryptocurrency exchange FTX wiped out after its chief executive officer, Sam Bankman-Fried, was convicted of fraud – though a continuing bankruptcy process will soon repay funds to some creditors. TVG took another hit on an investment in a Chinese education tech platform, Zuoyebang, after China’s government summarily converted all ed-tech providers into non-profits, “literally overnight with no consultation,” Ms. Steedman said.
Other companies in TVG’s portfolio had to go through “an exercise in belt tightening,” she said, urgently shifting their focus to achieving profitability rather than pursuing growth at all costs in order to survive in a tougher environment for startups. “We have had to roll up our sleeves and work closely with some of them.”
All of that has tested TVG’s resolve, prompted it to do post-mortems on what went wrong in some cases “and think clinically about what happened,” Ms. Steedman said.
“This is risky and there’s going to be some uncomfortable things happen,” she said. “Obviously we undertake to never repeat them. And that’s why [we do] the lessons learned exercise. But it is hard.”
Prices to buy into fast-growing tech businesses haven’t been cheap and the market for initial public offerings has been moribund, though there are glimmers of hope it could soon come back to life. As companies look for alternatives, that has created opportunities for Teachers’, CEO Jo Taylor said in an interview. “We can provide that long-term growth capital to that business.”
Now, with deal activity picking up, on terms that are still favourable to investors, “our pipelines are ready and we know what we’re watching for,” Ms. Steedman said.