Diagram eyes billion-dollar businesses in Canada
Venture capital firm’s approach different in that most ideas developed in-house
François Lafortune said his company’s two newest employees were so successful as entrepreneurs, they could choose to never work again.
Lafortune is the founder and CEO of Diagram, a Montreal investment firm that’s taking a new approach to venture capital — one it believes will help it create billion-dollar companies more effectively than traditional investment models.
Earlier this week, Diagram announced that it had hired Daniel Robichaud as its managing partner and Marc-Antoine Ross as its chief innovation officer.
Robichaud and Ross were the cofounders of Password-Box, a Montreal company acquired by Intel in late 2014. It was the sixth time that a company founded or co-founded by Robichaud was acquired. For Ross, it was the second. Both are also investors in early-stage companies.
For Lafortune, their arrival at Diagram is vote of confidence in his vision.
Diagram takes a different approach than most venture capital investors — it starts by developing its own ideas in-house.
“We build prototypes, and if it works, we work to assemble a team and we launch a company,” he said. “No other VC funds do this in Canada, they look for pre-form teams, pre-formed ideas. We say no, we’re able to find amazing talent if we have a great idea.”
That’s what happened with one of the two companies it’s currently backing, Montreal-based telemedicine startup Dialogue.
Sometimes, Lafortune said, as Diagram is developing an idea, it will identify a very early-stage company that’s working on something similar, if it likes what it sees, it will make an investment. It did that with Collage, a Toronto-based startup that makes an HR platform for small and medium-sized businesses.
“We always take a position extremely early on and we always work with founders that feel that we can be co-founders with them, that will see us as not only an investor but a core piece of their company,” Lafortune said
While Collage and Dialogue are independent companies with their own executives, they share space with Diagram (it also has an office in Toronto), and can access support and expertise from the firm. By sharing resources across multiple startups, it can give those companies access to a CFO, HR professionals and the skills of people like Ross, a data specialist.
“I think we’re putting the odds in our favour, that we’re bringing quality of talent and infrastructure that is generally only accessible to startups that are later in their life,” Lafortune said.
The idea is the support will increase those companies’ chances of success and allow them to move faster, Lafortune said.
Diagram only makes investments in companies working in the financial services, insurance and health sectors.
That’s partially because of their size, but also because those industries are just starting to attract the interest of tech companies. That creates an opportunity for a new generation of disruptive Canadian startups to establish themselves, Lafortune said.
His fear — and what he wants to avoid — is that those sectors will be dominated by businesses based in the United States.
“I want Canada to create leaders in that space and we still have a shot,” he said.
It’s particularly important, he said, because of the impact those sectors have on Canada’s GDP and employment.
Diagram is backed by Portag3, the venture capital arm of three of Power Corp.’s (TSX: POW) operating companies. It has also raised money from a group of more than 50 angel investors and has $30 million in committed capital.
That backing means Diagram could help startups that might have otherwise been acquired by U.S. companies go public and stay based in Canada while expanding internationally.
“I think we have enough fuel in the gas tank to go for a long run, and a long run can mean until IPO,” Robichaud said.
“My personal goal is to create real, meaningful, billion-dollar businesses based in Canada with global reach that create jobs here,” Lafortune said. “That’s what Diagram is trying to do.”