When Wekerle finishes his meeting with the banker at Difference Capital, he immediately has to jet off to another one, and sets me up with Kneis. Standing side by side, Wekerle in his suit and Kneis in rumpled khakis and a short-sleeved shirt, they seem nothing alike. But they complement each another. Wekerle is the visionary with big ideas, and Kneis is the details man. The two met at First Marathon and reconnected in 2011 after Wekerle left GMP. At the time, Wekerle planned to join with Paul Sparkes, a friend and former CTVglobemedia executive, to purchase a stake in a buy-side shop called Galileo Global Equity Advisors. He asked Kneis to come along.

Kneis had doubts about the little-known Galileo, but he enjoyed working with Wekerle and decided to take a chance. On his first day at Galileo, he knew it wasn’t going to work out. “This was the sleepiest organization I’d ever seen,” he says. The founder of Galileo, Michael Waring, was the polar opposite of Wekerle. Waring wanted to keep running things the same way he had for more than 10 years, says Kneis, whereas Wekerle was a hurricane, crackling with energy and new ideas. Wekerle also didn’t seem to tell anyone he’d hired Kneis (there was nowhere for him to sit), and he got the impression that nearly everyone at the small shop resented his presence. At one point, Kneis was chastised for talking to the firm’s auditor without first running it by another executive. On his ninth day, he was fired. Kneis called Wekerle and learned that he, Sparkes and Waring hadn’t yet finalized the terms of their partnership. The whole idea flamed out.

Looking back, Kneis suspects Wekerle wanted to partner with Galileo partly because it was already up and running, and he wouldn’t have to go through the hassle of setting up a new business from scratch. As for the differences between him and Waring, Wekerle tends to be optimistic about relationships and to believe they will work out for the best. “I can imagine he made the decision on the spot and thought they’d work out the details later,” Kneis says. (Waring declined to comment.)

Wekerle, Kneis and Sparkes decided to launch their own investment company, later taking over a publicly traded shell and renaming it Difference Capital. The investment principle behind the company stems from one of Wekerle’s macro calls, that investors are abandoning resource stocks and need new places to put their money. Wekerle is betting that money will flow to technology companies. While that may not sound revolutionary, Wekerle has zeroed in on an overlooked sweet spot: privately held, late-stage companies in which Difference will take significant minority stakes. Wekerle, with his deal-making prowess and connections, can help these companies raise more money, go public or eventually find buyers. Difference also maintains an advisory arm for growth companies, and since launching in 2012, it’s raised $185 million. One of its biggest investors is Dundee Corp., run by Ned Goodman, a longtime associate.

But the market hasn’t been receptive. Shares started trading at $4.50 in May 2012 and have steadily dropped by roughly 70%. Despite stakes in promising names like Vision Critical Communications and BuildDirect, Difference Capital has two troubled holdings that overshadow everything else. The first, WorldGaming, operates a platform that allows Xbox and PlayStation users to compete against one another for cash and prizes. Difference typically invests no more than $5 million per company, but it sunk $19 million in WorldGaming. The problem is the company hasn’t been able to nail down a revenue model. The other is Lignol Energy Corp., a Canadian renewable fuels company with a biodiesel plant in Australia that ran into trouble when a new government started dismantling clean-energy subsidies. In the last quarter alone, Difference wrote down its assets by nearly $14 million, largely because of WorldGaming and Lignol.

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Internally, the partners couldn’t agree on how to handle the files. Some wanted to invest more funds, but Wekerle disagreed. “You can’t throw good money after bad,” he says. “Longer term, the other group would have been potentially correct, but in the near term, we can’t afford the risk.” At the end of August, Difference put Lignol into receivership.

When Kneis looks at how Difference initially went about investing, he says, “there could have been more cohesiveness.” He adds that the company has brought “more rigour to the investment analysis process” and hired two experienced tech investment analysts. A difference of opinion among the partners emerged, too, with one wanting to include more early-stage companies in the investment mix. Another advocated for a venture capital approach, wherein the company would back 10 firms, knowing many would fail but hoping a couple of winners would emerge. Wekerle, the largest shareholder in Difference with a 36.7% stake, felt he had to make personnel changes to maintain the original vision. In August, Sparkes and another founding partner, Neil Johnson, left the company. (Both declined to comment.) Three board members also departed.

Kris Thompson at National Bank Financial is the one analyst who follows the stock. Although he downgraded it to market perform in August, Thompson still likes the company’s longer-term prospects. “The recent on-boarding of seasoned technology investment professionals has resulted in a more structured investment process with early signs of some promising investments,” he wrote in an e-mail.

Still, the share price performance has been disappointing, particularly for Wekerle. “He might have seen it as a vote of non-confidence by the market in him personally,” Kneis says. “I’ve tried to tell him not to treat it as a personal measurement.” Wekerle brushes aside such concerns, preferring to talk about where Difference is headed. Winnowing down the portfolio from 39 to 20 companies will allow Difference to devote more time to the highest-quality holdings, and improve the company’s finances and prospects. Wekerle’s thesis that the next era belongs to tech companies remains unchanged. “Look what’s going on in the world, man!” he says.

Wekerle’s reputation is as a trader, a high-octane role where millions can be won or lost in a fraction of a second. Operating a merchant bank and investing in tech companies with a longer time horizon is a different beast, and it requires patience and discipline. Wekerle understands that—even if the market doesn’t. “It really takes five years to build a business, and the unfortunate part of being a public company is that people look for instantaneous results,” he says. But he makes one thing clear: “I don’t like losing.”

Maybe that’s why Wekfest had the feeling of a victory party for its namesake. It’s unlikely that anyone enjoyed themselves as much as Wekerle, even if this year’s event was a smaller-profile affair than the one before, when Snoop Dogg headlined. Wekerle, in his flaming red Wekfest 2014 tank top, was tailed by a CBC camera crew for much of the event. But for the throngs of friends and colleagues in attendance, he simply appeared almost at random throughout the day: at the front of the stage, fist-pumping to whatever band was playing; onstage, peacocking like Mick Jagger; or jumping offstage and crowd-surfing. At one point, he tore through the audience and tackled 54-40 singer Neil Osborne (who had just finished performing) to the ground, where they tussled like man-children. Catching a high-five or a glimpse of Wekerle became a popular topic of conversation. “I saw Mike drive by in a golf cart,” one coworker told me in the food tent. “I think that’s all the Wek you’re going to get today.”

This article is from the Fall 2014 issue of Canadian Business. Subscribe now!

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