Diagram, a new venture launchpad backed by Montreal-based Power Financial Corp.’s Paul Desmarais III, is looking to build up Canada’s financial technology (fintech) space now that it has closed a $25-million venture capital (VC) fund.
“Given the amount of investment that’s going into this field in the U.S. and around the world and given how important the financial services sector is for the economy of Canada, the only thing that we should be doing is to try and build our own champion,” says François Lafortune, Diagram’s CEO, “and we can only build our own champion if [we] build from the ground up with real Canadian talent and keep them from going south.”
Diagram, led by Lafortune and Desmarais III, its chairman, will focus on financial, insurance and health-care technology startups. Its first two investments include Dialogue, a Montreal-based virtual health and wellness platform, and Collage, a Toronto-based cloud platform that automates human resources and benefits for Canadian businesses.
Diagram is different from the typical VC fund in that it can initiate and help to develop ideas rather than simply investing in a business that’s already up and running. For example, Diagram may invest in a team in the early stages of an idea or it may put together a team themselves.
“Because we start with an investment thesis of where we think the market is going, we’re really looking for very specific interesting disruption or changes to the market that we think will happen,” says Lafortune, “and then we look to back themes that will push those things forward.”
To do that, Diagram focuses on two early stage business at a time and will invest money, potentially in the millions of dollars, over a period of 18 to 36 months. This is meant to give the founders time to build their businesses and get them to a point at which they are bringing on clients and looking for other investors or partners.
Once a business graduates from Diagram, the incubator will look to start another company with a different idea. Indeed, Lafortune hints that 2017 or early 2018 could see Diagram invest in a technology tool useful to financial advisors.
Says Lafortune: “[Advisors] have been quite underserved from a technology standpoint.”
Lafortune’s interest in the wealth-management space is perhaps not surprising given that he’s a managing partner of one of the fund’s backers, Portag3 Ventures LP. The VC fund has made investments in several fintech companies, such as Wealthsimple Financial Inc., Borrowell Inc., and League Inc. (all companies are based in Toronto). Desmarais III is also executive chairman of Portag3.
It ‘ through Portag3 that Diagram-backed start-ups will have access to the advice, capital and expertise of Power Financial Corp., of which Desmarais III is vice president, and which is also an investor in Portag3.
To further help the fledgling companies find their feet, Diagram’s startups will also receive mentorship from a group of 50 angel investors. “We want to give [these startups] the best access in the world in terms in support in network and expertise,” says Lafortune.
The limited partners include Adam D’Angelo, CEO, of Quora and former CTO of Facebook; Ryan Holmes, CEO of Hootsuite, Anthony Lacavera, founder and former CEO of WIND Mobile, Joe Lonsdale, founder of Palantir, Addepar and 8VC, Nadir Mohammad, former CEO of Rogers Communications, Dan Robichaud, CEO of Password Box, and Razor Suleman, founder and former CEO of Achievers.
“The opportunities for the fintech and insurance sectors in Canada are enormous. We have incredible depth and talent here but do not always provide the means and resources necessary to build large businesses,” says Desmarais III in a statement. “Diagram’s purpose is to fix that by bringing not just capital but the right infrastructure and people together to create the next Canadian-based global leaders of the future in the fintech sector.”
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