In his hunt for promising startups, Joel Silver has something in his arsenal that other financiers can only envy.
Mr. Silver runs an investment fund with financial backing from Gerald Schwartz, Canada's premier leveraged buyout specialist, who heads giant Onex Corp. It's a departure for Mr. Schwartz, whose Onex is accustomed to acquiring control of large industrial companies.
Mr. Schwartz, one of Canada's wealthiest businessmen, is now betting on a different kind of model: Mr. Silver's TrilogyGrowth LP, set up last year, is investing roughly $20-million in taking minority stakes in fledgling consumer product or service outfits.
Mr. Silver says he appreciates feedback from Mr. Schwartz and his wife, Heather Reisman, founder of Indigo Books & Music and Mr. Silver's previous boss.
"He's there as an adviser and mentor to me and he's been amazing for that," Mr. Silver, 41, said. "She's a good sounding board as well."
The fund is looking for firms whose products can reinvent their fields with the use of technology. Mr. Silver takes an active role in helping the firms make key decisions. Already he has poured $10-million in three companies: an online real estate brokerage; a mobile accessories purveyor; and a firm that produces anti-aging cosmetics – a cream, for example, that touts itself as using an advanced form of optical-prism technology to make users look up to "10 years younger in 40 seconds."
Mr. Schwartz's gamble on Mr. Silver underscores how business connections coupled with an established track record and a focus on technology can pay off in launching into the crowded venture-capital world. The two men are linked through their ties to Indigo. Mr. Silver served as an Indigo executive for more than seven years, including the last two as president until April, 2011. He and Mr. Schwartz sit on the board of directors of Indigo, which is controlled by the couple's Trilogy Retail Enterprises. Now they're counting on Mr. Silver's savvy to generate a new kind of returns.
Mr. Silver is no stranger to having to reinvent businesses. At Indigo, he helped oversee the development of e-reader Kobo in the retailer's race to adapt to the digital age. This year, Indigo enjoyed a five-fold gain – $165-million – on its Kobo investment after selling it to a Japanese company.
He spearheaded the bookseller's push to pump up sales of products such as toys and other gifts to offset the sagging book business. Before Indigo, he co-founded a sales incentive startup, SalesDriver.com, which was bought by hospitality giant Carlson.
"Having a vote of confidence from Gerry Schwartz is quite significant," said George Hartman, an investment banker at Maison Placements who seeks investors for food, agriculture, and retailing companies. "He generally knows talent and recognizes results."
Robert Gibson, an analyst at Octagon Capital who tracks Indigo, said Mr. Silver "seemed to have a finger on all the new products coming in and the potential for the new products."
Mr. Silver performed well in a tough environment "although everyone who thinks of Indigo thinks of Heather," Mr. Gibson said. "Trilogy gives him a chance to be more of his own boss."
Mr. Silver said he was looking for a change when he approached Mr. Schwartz about being a key investor in a new firm. "As a retailer, you're seeing hundreds of products all the time, and how they perform. I've seen countless launches in other parts of my career."
Armed with a Harvard MBA, Mr. Silver landed his first job as a brand manager with titan Procter & Gamble's Cover Girl and other beauty lines. From there he co-founded SalesDriver.com and then moved on to Indigo.
Now at Trilogy, he's looking for companies that already are profitable with an established client, such as cosmetics specialist Indeed Laboratories Inc., whose affordable ($20 to $40 each) anti-aging creams were stocked at Shoppers Drug Mart Corp, Canada's largest drugstore chain. Today, it counts global retail health giant Boots Alliance as a customer and is working with U.S. retailers to carry its products next year.
Today, Indeed's business shows signs of taking off. "Indeed has been a success at Boots U.K." declared Boots spokeswoman Aviva Fernandes. For instance, it launched Indeed's Nanoblur cream – "10 years younger in 40 seconds" – last September and, following heavy media coverage in October, sold one product every 10 seconds that month, she said.
Trilogy's TheRedPin.com aims to redefine real estate brokering at a time when pressure from the federal Competition Bureau is forcing big changes in the sector.
Shayan Hamidi, chief executive officer of TheRedPin.com, said Mr. Schwartz has opened doors for him, helping him nab meetings with executives, including Paul Godfrey, CEO of Postmedia Network Inc. Added Mr. Silver about input from Mr. Schwartz and Ms. Reisman: "I'm lucky to have the best entrepreneurs at my disposal, who have built companies and have amazing networks."