A huge Canadian pension fund is plotting to expand into Silicon Valley, seeking to place bets on hot US tech startups.
OMERS, which manages more than C$95 billion ($72 billion) on behalf of municipal workers in the province of Ontario, hired Michael Yang as a managing partner of OMERS Ventures to open the venture arm’s first US offices in San Francisco and Palo Alto.
OMERS Ventures oversees about C$880 million invested in 35 companies, mainly in Canada. The goal of expanding to the Bay Area is to gain better access to investment opportunities in innovative startups, Yang said in an interview. OMERS itself has been opening offices outside Canada to broaden its investment opportunities.
“Just look at where the deals are, the dollars are, where the innovation is,” he said. “As they look to deploy more dollars, invest in more and more interesting projects, they need to expand their geographic horizons.”
Yang, 47, was previously a managing director at Comcast Ventures based in the Bay Area. Michelle Killoran of OMERS Ventures will also move to the Bay Area to help with the expansion, and the group plans to make additional hires over time, Yang said.
Venture capital investment in the US is soaring, increasing valuations and raising questions about whether another bubble is emerging. About $99.5 billion in VC funds were invested last year in the US, the highest total since 2000, according to the PwC/CB Insights MoneyTree report. That helped boost the valuations of 53 startups to over $1 billion, making 2018 a record year for unicorn creation.
Yang said he’s hoping that if funding becomes more scarce as other VCs pull back or market turbulence increases, that could create better opportunities for him to invest.
“There’s been a lot of high burn rate companies that had access to easy capital that benefited from that and developed bad operating habits,” he said. “A lot of people are hoping for a little bit of a pause in valuations and pricing.”
Over time, Yang’s group plans to focus its investments in five main areas: healthcare, transportation, the future of work, retail innovation, and new forms of media. The group has the flexibility to make investments ranging from seed stage (less than $1 million) to later-stage rounds where checks could be $40 million.
At Comcast Ventures, Yang invested in and served on the board of the healthcare startup Accolade, and more recently helped found financial wellness firm Brightside. Other investments included virtual reality firm Felix & Paul Studios, autonomous vehicle company Pony.ai, and Precision Hawk, which helps businesses use drones.
Yang said he may bring the strategy of helping founders start companies — rather than simply investing in startups — to OMERS Ventures. OMERS Ventures already offers its startups services to help them grow.
Yang said he’s mindful of the responsibility he’s taking on to the roughly half-million people who rely on the OMERS plan to fund their retirements.
“We want to be good stewards of their future, of their capital,” he said. “We want to make the right bets.”
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