Desmarais progeny to head fintech fund
New venture aims to create ‘hands off, entrepreneur-friendly model’
A 34-year-old scion of Quebec’s powerful Desmarais family, which built a nearly $7 billion fortune anchored in the staid world of insurance, is spearheading a new family-backed venture capital fund that will bankroll startup fintech players aiming to take a bite out of Canada’s lucrative financial services, insurance and health-care industries.
Paul Desmarais III will serve as chairman of the new fund, Diagram, in addition to his roles as vice-president at Power Financial Corp. and holding company Power Corp. The fund has raised $25 million, a substantial chunk from Portag3 Ventures LP, which is sponsored by the Desmarais family’s Power Financial and subsidiaries IGM Financial Inc. and Great-West Lifeco Inc. In an interview with the Financial Post, Desmarais said the separate fund, which is also backed by 50 individual “angel” investors, was formed to create “a very hands off, entrepreneur-friendly model” of fintech development outside the financial services conglomerate.
“The goal is to create Canadian fintechs that become global financial services leaders from a strong Canadian base,” Desmarais said. “Whether they’re complementary, disruptive, a little bit of both, I think we will see how the business models emerge.”
The Desmarais family is no stranger to disruptive, tech-driven ventures: Some of Power Corp.’s affiliated companies have already made investments in Canadian fintech startups through the investment vehicle Portag3, such as roboadviser Wealthsimple and online lender Borrowell. Desmarais says the family’s willingness to embrace tech dates back to at least 2009, when his younger brother Nicolas, now 31, co-founded AppDirect, a cloud-based marketplace based in San Francisco’s Silicon Valley. Six years later, it was valued at $1-billion and counted PayPal founder Peter Thiel among its investors.
“My brother founding AppDirect and my father kind of being very involved with that, clearly got him convinced that this is the future,” Desmarais told the Financial Post.
He says his father Paul and uncle André, co-chief executives of Power Corp., are among the “greatest champions” of the new fund.
Francois Lafortune, who made the original pitch for Diagram and now serves as the fund’s CEO, connected with the Desmarais family through Nicolas when both twentysomethings were in California and Lafortune was earning his MBA at Stanford University. Now 34, Lafortune has an entrepreneurial background in Quebec and spent eight years as a consultant at McKinsey & Co., where he advised large banks and insurance companies on technology projects.
In an interview, Lafortune said the Desmarais family’s commitment to leave ultimate control of the startups with the entrepreneurs is crucial, because his experience as a consultant to large players in the financial industry taught him that it is difficult, if not impossible, to truly disrupt from within.
“You have to have nothing to lose to want to do this, and there’s too much to lose in a big organization,” he said. Lafortune said his experience also suggests Power Corp. and its affiliates are a better fit for the venture fund than a financial services firm run by professional managers.
“Building a company is not a oneyear project,” he said. “So in a place like Power where we have people who are family members, who will be there for the … next 30 years, I can trust that the long-term capital commitment is there.”
Unlike traditional venture capital funds, which provide earlystage funding to dozens of startups in hopes that a few will take off, Diagram plans to make larger capital commitment to just five or six companies over a few years. They will also have access to expertise — and potentially distribution and clients — through Power Financial and its affiliates, as well as connections to angel investors including former Rogers Communications CEO Nadir Mohamed and Facebook’s former chief technology officer Adam D’Angelo.
In addition to funding, Diagram will provide active support to the entrepreneur-driven startups as they scale up.
The first two companies have already been selected: Collage, a Toronto-based company that is building a cloud platform that automates human resources and benefits for Canadian businesses, and Montreal-based Dialogue, which is developing a virtual health and wellness platform for employees.
The goal is to create Canadian fintechs that become global financial services leaders ...