One man’s wild ride from broker to investment banker to VC investor to tech startup
In his book Titans: How the Canadian Establishment Seized Power, Peter Newman dedicated an entire chapter to G. Scott Paterson, an investment banking superstar who would later become a venture capitalist and is now a technology entrepreneur. Newman variously refers to Paterson as a “one-man paradigm,” a “new Titan,” a “phenomenally successful” personification of the financial services industry’s vanguard and “a role model for the twenty-first-century moneymovers who are taking command of Bay Street,” the center of Toronto's financial district.
High praise indeed. At the time the book was published, Paterson was the 35-year-old chairman and CEO of Canada’s eighth-largest financial services firm, Yorkton Securities, and vice chairman of the Toronto Stock Exchange (TSE). He was on top of the world. But how did he get there?
Paterson started out in the investment industry as a retail stockbroker at Dominion Securities, outpacing all of his peers in sales commissions and earning the nickname “Cold-call Cowboy.”
“I started out as a stockbroker right after college, and I didn’t have a long trial period – they threw the phone book at you,” Paterson said. “When I heard about an upcoming IPO I’d called all of the company’s competitors, and I was fortunate to open up a ton of accounts with high-ranking executives.
“I called them at night too – I figured they had a vodka tonic in hand, and my hit rate was incredible,” he said. “I was only 21 when I became the number-one broker at Dominion Securities, which was bought by RBC – it was a very competitive culture, and I loved it.
“I wanted to be the CEO of a brokerage firm someday, but my grandmother wanted me to go back to get my MBA – I didn’t understand what investment banking meant.”
He never pursued an MBA, and he didn’t stay in the brokerage sector. Instead, he went into investment banking.
His performance caught the attention of Richardson Greenshields, which recruited him to join as an associate. He worked his way up the ranks of its investment banking division before jumping to Midland Walwyn.
Paterson’s first investment deal was for Kevin O’Leary of ABC’s Shark Tank fame: Softkey's $12.5m convertible divesture on a $25m valuation – the stock price doubled soon after the IPO. Eight years later, after being renamed the Learning Company, Mattel bought it for $3.6bn.
Paterson claims to have generated the most fees of anyone in the IBD during his four-year tenure working at Midland Walwyn, which Merrill Lynch eventually bought for $855m.
“I certainly had a streak of luck, but it helped that I sold everything myself and I called on institutional money managers directly – I didn’t have to go through the institutional sales desk, because I had the relationships, which created a lot of power,” he said. “My philosophy was ‘Let’s just get the guys on the phone or see them directly.’ That gave me my personal competitive distinction.”
In fact, he said that he was considered for the firm’s head of investment banking role, but after getting passed over he decided to join Yorkton Securities as executive vice president. Two years later, he was appointed president, and eventually he rose to come chairman and CEO.
Paterson successfully transformed Yorkton from a small independent firm specializing in mining clients to a multi-dimensional financial services firm with a wide range of underwriting clientele across technology, biotech, film and entertainment.
“We hit the Internet boom right on – Netscape had just gone public,” Paterson said. “Our profitability grew by leaps and bounds, and it was a hell of a ride.”
All good things must come to an end
Paterson was soon faced with the greatest professional setback of his life: The Ontario Securities Commission fined him $1.1m and barred him from securities trading for six months. He was unable to act as an officer or director of a securities firm for two years. The regulator alleged that Paterson and colleagues had been early investors in start-up companies, served in various executive roles at them and then worked as analysts, underwriters and traders as Yorkton was working to bring those same companies to market.
Forced to step down from Yorkton and the TSE, Paterson went from the highest of highs to the lowest of lows.
“I’ve had some great successes,” Paterson said. “I’ve been kicked around too and have scars on my back.”
That said, he would bounce-back quickly, focusing his efforts on finding success in the venture-capital space.
Don’t call it a comeback
Paterson shifted his focus to make early-stage investments in various companies, serving as a board member and taking on other leadership roles at Symbility Solutions, NeuLion Inc. (formerly JumpTV Inc.), Engagement Labs, The QYOU, Versa Systems and Lionsgate Entertainment. He is still the chairman of the audit and risk committee and a director on the board of the latter, whose film division brought in the seventh-highest gross revenue in North America last year – its television division produced series like Weeds and the Emmy Award-winning Mad Men. He also invested in Authentic Web and Giftagram.
Paterson’s next pet project was founding technology incubator SB2 in 2014, from which three startups have sprung: Videopoint, Spacefy and FutureVault. While the first two launched as live products last year, it is the latter that has been making the most noise this year.
Paterson’s goal for FutureVault is for it to be recognized as the most comprehensive digital filing cabinet and safety deposit box ever built. He describes it as a digital collaborative vault to which advisers, brokers and service providers can upload documents after receiving the accountholder’s permission.
“Within five years every financial services organization in the world will send documents via some FutureVault-type platform,” Paterson said. “It will be the standard for banks, mutual funds, wealth management firms, law firms and insurers to keep the customer relationship sticky and gain invaluable data and analytics.”
Paterson opened his sizeable rolodex and tactically attracted investments from approximately 25 heavy-hitting financial services professionals, the majority based in London, New York, Los Angeles or Toronto. Each of them invested somewhere between $100k and $200k in FutureVault.
“The goal is to help them understand what we’re doing, and they give us feedback,” Paterson said. “They are also potential customers, and they can open up doors with introductions and helping us to establish other relationships.”
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