Roger Martin may be one of the few Canadians not wincing at his investment portfolio right now.
That's because the business strategist and former dean of the University of Toronto's Rotman School of Management isn't invested in the stock markets. He doesn't own equities – and he never has.
Mr. Martin, who is also an author and institute director at Rotman's Martin Prosperity Institute, plows most of his money into early-stage private startups, a strategy that has paid off handsomely over the years.
His faith in private companies comes partly from watching his entrepreneurial father, Lloyd Martin, start and run a successful business, Wallenstein Feed & Supply, which is the largest animal-feed company in Ontario.
The Globe recently spoke with Mr. Martin about his investing philosophy, and why he believes being a good strategist doesn't necessarily make you a good investor.
What were some of your first investments?
Investing in a startup in the early nineties, started by a friend of friend. It was in the business of weaving emblems and decals on sports jerseys. It wasn't a very good investment. My next major investment was in Workbrain Corp. [a Toronto-based work force management software company]. It did well. I was the chair when it went public in 2003. We ended up selling to a U.S. software company [Infor Global Solutions] in 2007 and made a bunch of money off of that. One of the founders, Dan Debow, asked me to invest in his next [software] venture, Rypple, which I did. We sold that to Salesforce.com in 2011.
Where is most of your money today?
I have 15 live investments [in private startups] that add up to just under $1-million. Some of the top holdings include companies such as Wealthsimple, Kira Talent, BuildDirect and Borrowell. The rest is in cash, including some money market instruments. They are interest bearing, not equities. I don't invest in public equities.
Why don't you buy stocks?
People say to me, "Oh, Roger, you're a strategy guru, so you must be a great investor, too. What are your favourite stocks?' What I tell them is that there's a world of difference between somebody who knows something about the competitiveness of a company, and somebody who knows whether it's a good stock to buy. The minute you show you're competitively strong as a company, your stock gets bid up. A stock price is nothing but an accumulation of expectations of investors as to what will happen in the future. It's a very ethereal thing. It's all about peoples' imaginations. Essentially, to be good at investing, it's not about being good at understanding if the company has good customers or product, but the ability to figure out if the sentiment in the market is excessive or not. Some people are great at that, like Prem Watsa in Canada. It takes a lifetime of watching the difference between expectations versus reality.
What other investments do you own?
I believe in spending a sensible amount on real estate to enjoy life. I have a place in Toronto and a place in south Florida. I used to have a place near Georgian Bay [in Ontario] but have now gone with a place in the southern U.S. instead because I am utterly tired of Toronto winters. I also have some very good wines. Even though they have been a very good investment, I don't think of them that way.
What was your worst investment to date?
A 3-D holographic storage company called InPhase Technologies. I put a bunch of money into that and lost it all. That played out from about 1995 to 2010.
What was the best one?
Rypple was very satisfying because I was in that from the start. That was both remunerative and fun.
This interview has been edited and condensed. For this series, a high-net-worth investor has investable assets of more than $750,000.