A new venture capital fund has launched, and with it comes a big focus on fintech and AI.
Luge Capital has completed a $75 million round of financing to begin their operations as a VC fund. $50 million of that capital was raised in October 2017, and there’s a possibility the total fund may grow to $100 million. Participants in the fund include the Caisse de dépôt et placement du Québec (CDPQ), Desjardins Group, Sun Life Financial, the Fonds de Solidarité FTQ and La Capitale.
The new fund will have a distinct focus on fintech companies looking to improve efficiencies and customer experiences. These solutions often come with AI components, so Luge will also be looking for startups and businesses with an AI focus. The investments from the fund will range between $250,000 to $2 million, which means Luge will finance early-stage startups with seed and Series A rounds.
David Nault and Karim Gillani are the two leaders behind Luge. Nault was an investor with iNovia Capital and also served as president of Callio Technologies. Gillani led corporate development for Xoom, which was acquired by Paypal for $890 million USD in 2015. Together the two have a deep experience in both investing and scaling businesses.
Luge will have two offices in Canada: Nault will run the Montreal location, while Gillani will oversee the Toronto outpost.
“We have partnered with world-renowned institutions that bring considerable industry knowledge and resources to enable us to help entrepreneurs build their businesses,” said Nault. “In addition, our AI and data-driven companies will have the opportunity to partner with our investors to access key insights in order to build best-of-breed solutions.”
“We are looking for young mission-driven companies that challenge how the world interacts with financial services,” said Gillani. “We invest in bold teams that demonstrate passion, manage risk and optimize for performance.”
Noted entrepreneur and investor (and Angel Investor of the Year winner at this year’s Canadian Innovation Awards) Michele Romanow will act as an advisor to the fund. Romanow met with Luge’s founders when they served as angel investors for her current company, Clearbanc. As someone with experience in fintech and as an investor, Romanow brings a unique approach to the fund.
“Something that’s tough when it comes to financial services is that there are things that make it difficult to export your product internationally, so it’s really important we’re building companies here in Canada that can scale globally—especially on the fintech side,” says Romanow. “Nault and Gillani understand it from the entrepreneurial side as well as the scaling a company side of things.”
The fintech world is ripe for disruption, as Michele points out companies like Wealthsimple that have managed to take a small portion of business away from big banks (wealth management) and turn it into a company with over $2 billion under management.
“If you think of the last 10 years and the mass disruption of media, the big shift of next 10 years will be how we bank and think about financial services,” says Romanow. “Banks haven’t been delivering because every part of their business is being chipped away by a new developer.”
This reality, especially in the Canadian fintech world, leaves many opportunities for smaller companies to come in and steal away portions of the big five banks’ client base. These small-stage companies can be much more agile and react to change based off of what a customer may want—and that’s what Luge needs to find.
In addition to the main team, Nault will work with his former iNovia colleagues to collaborate on co-investments and operations.