A venture-capital firm controlled by Power Corp. of Canada has raised Canada’s largest fund devoted to backing financial-technology startups.
Portag3 Ventures, managed by Power’s alternative-asset management arm, Sagard Holdings, has raised $427-million for its second fintech fund from more than 20 North American, European and Israeli insurers, banks, credit unions, investment managers and pension funds. In addition, Power-controlled public companies Power Financial Corp., Great-West Lifeco Inc. and IGM Financial Inc. provided a combined $100-million.
“When we started [investing in fintech startups] in 2014 we never would have imagined how hot the sector would become,” said Paul Desmarais III, chairman and CEO of Sagard and son of Power chairman and co-CEO Paul Desmarais Jr. “This has resulted in ... a lot of capital flowing into our own portfolio. That’s been kind of a huge upside surprise. It’s a great example of Canada setting itself up to win on a global stage."
Portag3 has backed some of Canada’s most prominent startups including online e-commerce merchant financier Clear Finance Technology Corp. (known as Clearbanc), robo-adviser Wealthsimple Inc., artificial-intelligence firm Integrate.ai Inc., online lender Borrowell Inc., benefits provider League Inc. and telemedicine firm Dialogue Technologies Inc.
Many have gone on to raise larger sums from subsequent investors including mobile banking service provider Koho Financial Inc., which last week said it had raised $25-million led by U.S. venture capital firm Drive Capital, just six months after Portag3 led a $42-million financing.
“There’s been a lot of thought leadership in the creation of the fund about … how the consumer is changing, how the financial services landscape is changing” due to digital disruption, said Jim Vance, senior vice-president and treasurer with Western & Southern Financial Group, who oversees the Cincinnati-based life insurance giant’s investments in the fintech space and invested in the new Portag3 new fund.
“We were quite impressed at all levels,” including by Portag3’s roster of senior advisers, which includes Rockefeller Capital Management CEO Gregory Fleming and Peter Hancock, the former CEO of American International Group Inc., Mr. Vance said. “This pretty much checked the box of what we looked for in a fund investment.”
Other backers from Canada include: Co-operators Group Ltd., Intact Financial Corp., National Bank of Canada, Green Shield Canada, iA Financial Group, Laurentian Bank, Public Sector Pension Investment Board, BDC Capital and Caisse de dépôt et placement du Québec. French institutions CNP Assurances and Aviva France and Israel’s Harel Insurance and Finance also invested.
The breadth of backers “validates what we’ve built as a first-class professional platform and speaks to the opportunity that our portfolio companies could have as it relates to future co-investment from these types of firms,” said Portag3 CEO Adam Felesky. Close to one-third have not invested in the fintech space before and none of the foreign backers have previously invested in Canada’s thriving venture capital space, he said.
The Portag3 fund has a global mandate, with a goal of investing half of its funds across the U.S. and Canada, another 40 per cent in Europe and 10 per cent elsewhere. The firm had already deployed $115-million of the fund proceeds in 17 companies, including French digital health insurance provider Alan and Los Angeles-based robo-adviser Albert Corp.
Sagard now manages $1.6-billion including funds dedicated to private equity and royalties from intellectual property.
Sagard’s “ultimate goal is to raise significant amounts of outside capital around strategies where we have an unfair advantage to win," Mr. Desmarais said. It also gives Power a chance to drive returns from new areas after years of middling stock market performance by its four affiliated public companies.