Next 36 founders take their advice to the bank

As a co-founder of the Next 36, an entrepreneurial leadership program for over-achieving university students from across Canada, Toronto entrepreneur Reza Satchu has dedicated himself to helping young people become highimpact leaders.

He comes by that calling honestly: In 1999, the 30-yearold Harvard Business School grad and his brother sold their B2B startup, SupplierMarket. com, for $925-million.

But that was an era ago, when even sophisticated investors threw money at companies with sock puppets for mascots. A skeptic might ask: Are the messages Satchu is giving impressionable undergrads in the Next 36 — pursue new opportunities, don’t let limited resources hold you back, collaborate with the best, and bet on massive disruption — still relevant in today’s more cynical markets? Can driven, visionary individuals really make a difference?

Satchu is out to prove they can. He and fellow Next 36 co-founder Tim Hodgson, former head of Goldman Sachs Canada and former special adviser to Bank of Canada governor Mark Carney, are building a financial startup, Alignvest Capital, to challenge Bay Street with a model that directly aligns the firm’s interests with those of its investors. By identifying the most promising financial niches — such as Asian funds, private equity, distress lending — and raiding established firms for the top talent to build those portfolios as full equity partners, Alignvest aims to prove that pay-forperformance and entrepreneurial innovation can both win big.

“We wanted to build a team of people with talent and tremendous integrity,” Satchu says. “This is something that is going to be very substantial,” Hodgson predicts. While the two are still putting together the pieces at Alignvest, early indications are promising.

Last year, the company’s Asian hedge fund was up 34%. Its Opportunities Fund, launched Nov. 1, has already raised $40-million in outside capital (in addition to $30-million contributed by Alignvest partners). And last month you could hear the heads turn when the firm announced its new chief investment officer: Daniel Raymond, senior vice-president and chief investment strategist of the Canada Pension Plan Investment Board. Raymond said he liked the people and philosophy at Alignvest, and “the opportunity to do something entrepreneurial with the next phase of my career.”

His appointment caps an ambitious recruiting program that signed up an all-star side of financial moguls, including Sam Fleiser, founder and former president of Callidus Capital and an experienced funder of troubled mid-market businesses; hedge-fund manager Hugh Kim, formerly with Tiger Asia Management; Joe Manget, former head of Boston Consulting Group’s Canadian and global practices, who now manages Alignvest’s venture into mental-health treatment centres; and a team of portfoliomanagement prodigies from Gluskin Sheff.

Alignvest’s growth is really “a series of startups,” Satchu says. “We give people who want to be entrepreneurs the capital, conviction and confidence to come under this umbrella.”

Alignvest’s strategy is capitalism at its simplest: give great people incentive to outperform by letting them keep more of the value they create. While few financial professionals are underpaid, their employers usually reserve most of the value for themselves; Satchu and Hodgson grant their specialists significant ownership in their investment “platforms.”

Of course, risk is part of the deal. Satchu and Hodgson say Alignvest’s recruits take major salary cuts to join the firm, and invest sizable sums in their operations.

The pension funds and high-net-worth family offices that have put more than $500-million into Alignvest’s funds can sleep more soundly knowing the company’s partners all invest significant dollars. Satchu and Hodgson and their teams have committed to leaving their capital in the company for 12 years. So how does Alignvest’s strategy fit the concepts Satchu teaches the Next 36? “Hmm,” he muses. “Think out of the box, do something different.”

Then he warms to the subject. “You have to surround yourself with excellent people whom you can learn from. If they have complementary skills, they are going to push you.”

Hodgson and Satchu may seem like an odd couple: a composed Wall Street leader with regulatory chops teaming up with an impulsive, street-smart entrepreneur. But in the end, their goals are the same. “I’ve always liked new challenges,” Hodgson says.

After years of building a major brokerage, and then advising the Bank of Canada, he felt the urge to do his own thing, and prove he could beat the Street by investing his own money. He jumped at the chance to do it with Satchu, whom he met at a mastermind group where entrepreneurs candidly shared all their plans and their problems. “I know all of his strengths, and I’m comfortable with all of his foibles.”