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Fintech VC fund Luge Capital opens with $75-million backing from Caisse, other Quebec institutions

A new Canadian venture-capital fund focused on financial technology, and seeded by several top finance institutions operating in Quebec, has opened for business with $75-million in backing and two tech-sector veterans as partners.

Luge Capital, created last October, with a commitment of $25-million each from the Caisse de dépôt et placement du Québec and Desjardins Group, said Monday it has raised a further $25-million from Sun Life Financial, the FTQ Solidarity Fund and La Capitale, and may raise up to another $25-million in the coming months.

The independent fund will be led by two Canadians. One is Montreal-based David Nault, previously a principal with Montreal-based venture-capital firm iNovia Capital and, before that, president of information security compliance software provider Callio Technologies. He is joined by Karim Gillani, former head of corporate development for crossborder remittance company Xoom, which was acquired in 2015 by Paypal for US$890-million. Before that, he was a mergers and acquisitions executive with BlackBerry in Silicon Valley. He will be based out of Toronto.

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iNovia, one of Canada’s top venture financiers, is a key player as well. iNovia managing partner Chris Arsenault helped recruit Luge’s two partners and his firm will provide operations, back office, legal and reporting support to Luge in exchange for a portion of the investment returns its portfolio produces for investors.

Unlike many venture-capital firms that struggle to launch their first fund, Luge starts out with a couple of big advantages. Not only did its initial backers agree to bankroll the fund, they have also committed to provide access to their data to Luge-funded startups to help them develop artificial-intelligence solutions to address “pain points [and] remove complexity from the way [consumers] interact with financial services,” said Mr. Nault. “It’s unique in the sense our investors are also our collaborators. The financial institutions are sitting on a goldmine of data.”

Luge is the brainchild of Caisse executive vice-president and chief operations and IT officer Pierre Miron, who has chaired the organizing committee for the Canada FinTech Forum each of the past three years. He said in an interview that he didn’t want to see the effort and ideas generated by the gathering go to waste. That led to the idea of a fund bankrolled by the institutional members of local industry group Finance Montreal who would also be willing to share their data with startups. “All the financial institutions funding [Luge] said yes to this idea,” he said.

Luge is one of more than 20 venture-capital funds bankrolled by the Caisse, which has recently expanded its backing to early-stage tech firms. It has written some of the biggest cheques to startups among any Canadian institutions in recent years, funding such firms as Lightspeed POS Inc. and Hopper Inc. Unlike some funds backed by regional interests, Luge’s investments are not limited geographically, and it will look at opportunities across Canada and the U.S. “Some of the financial institutions would love [Luge] to do 100 per cent of investments in Quebec, but the market is not that big,” Mr. Miron said.

Luge will focus on investing between $250,000 and $2-million for its initial commitments to early stage fintechs. Mr. Nault described the fund as “opportunistic,” adding that the team would fund entrepreneurs “that have a big appetite, think big, can think globally and execute on large opportunities.”

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