As an active investor, CPP Investments is leveraging its influence in the venture capital space to ensure it finds the right companies to invest in.
“I think founders know [what] they’re getting into with us,” said Jinzi Zheng, managing director of portfolio value creation at CPP Investments, during a panel discussion at the University of Toronto’s Rotman School of Management last week. “We have a set of non-negotiables or guidelines [and] we’re upfront about that. . . . We do invest based on how much we believe in the founder.”
The investment organization invests in VC through a combination of funds and direct investments, but it doesn’t participate in early-stage VC investing as part of its deployment in the private sector, she said, noting companies that don’t meet comprehensive reporting requirements won’t get a deal.
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These reporting measurements aren’t designed to slow down the investment process, said Zheng, but to increase the maturity of the potential investee companies. It’s very rare that CPP Investments exercises the option to appoint a chief executive officer or remove a founder, she added, because the intention is to back the founder or management team from the start.
“We assess the founder or the CEO that’s in place to make sure we understand the aspects of the job they’re good at and where the weaknesses are. We typically enhance that with other members of the executive team so we can protect what they’re really good at and then we can have that ability of still getting what we need.”
Also speaking during the event, Alexander Dyck, professor of finance and economic analysis and policy at Rotman, shared his own research, which found an increase in fraud in the VC space alongside its valuation reaching $22 trillion in 2024. Indeed, he said there’s been a rise in cases where a venture-backed company was found to misrepresent itself to investors.
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Zheng’s team at CPP Investments oversees a centre of excellence for private company governance to establish a set of director corporate standards and manage the board director appointment process. The investment organization regularly appoints employee directors and external board members to represent its interests across its portfolio of 80 to 100 private companies.
It also appoints independent directors with a fiduciary duty to the investee company and its goals. “We specifically look for directors that have expansive private board experience because . . . they have to understand that private companies, depending on the stage [they’re in], will have a lot fewer resources than publicly listed companies.”
During the event, Jamie Rosenblatt, a partner at Golden Ventures, noted he isn’t a fan of a culture of unchecked founder friendliness that enables companies to run rampant with no investor guidance. Instead, he said he values a thoughtful approach where investors establish a template from the start that offers broader accountability for the progress of the investee company.
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