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Luge Capital Secures $71M in Second Fund’s First Close
Capital | Sep 26, 2023
Image: Luge Capital GPs, Karim Gillani and David Nault
Luge Capital, a trailblazer in fintech-focused venture capital, has unveiled a significant milestone: the first close of its second fund, Luge Capital Fund II, amassing CA$71 million.
MONTRÉAL – September 26, 2023 – With an ambitious target of $100 million for the fund, this announcement is set to reverberate across the fintech investment landscape.
Since its launch in 2018, Luge Capital has been synonymous with innovation, backing early-stage startups in Canada and the U.S. that are led by transformative founders. Their inaugural fund of roughly $85 million saw investments in 21 pioneering companies, including standout names like Flinks, Plooto, and Owl.
The second fund promises to be even more impactful. Not only will it continue the legacy of its predecessor, but it's also broadening its investment horizons. Luge is setting its sights on verticalized fintech startups that intersect with major industries and is also venturing into the realm of ESG-focused fintech startups.
See: Browse AI Secures US$2.8M Seed Funding: Vancouver Tech Startup’s Success
Several prominent investors have returned, such as CDPQ, Desjardins, BDC Capital, and Sun Life, showing their continued trust in Luge's vision, while simultaneously attracting new investors such as Inovia Discovery Fund I, further solidifying the fund's promising trajectory.
Karim Gillani, General Partner at Luge Capital:
“Financial services impact the lives of every person, from opening a bank account and making payments to buying insurance and making investments. Yet large institutions are finding it challenging to modernize their legacy technology. By investing in high-calibre fintech founders who are solving the industry’s biggest problems, Luge is helping to drive innovation across the financial services that are the lifeblood of the economy and account for 20 percent of the GDP in the U.S. and in Canada.”
Luge Capital's team (2023)
To delve deeper into Luge's vision and strategy, NCFA Canada sat down with David Nault, General Partner at Luge Capital, for an interview.
Expanding the Investment Horizon
NCFA: With the expansion of the investment scope to include verticalized fintech startups and ESG startups, what specific areas or challenges within these sectors are you most excited about?
David: "In terms of vertical fintech, we're keen on industries like construction, agriculture, healthcare, and transportation that intersect with fintech. Traditional industries often lag in innovation. Embedding fintech solutions, such as financing and payments, can unlock new opportunities. For instance, fintech can assist farmers in accessing new markets or using AI to decide on selling their harvests. As for ESG, we're looking at efficient data gathering and reporting to help companies fulfill their ESG commitments."
Investment Strategy and Criteria
NCFA: Are there specific criteria or milestones that startups need to meet to qualify for larger initial investments?
David: "The size of our initial investment hinges on the business's unique attributes. For larger commitments, we typically seek early signs of traction and a clear demonstration of product-market fit."
NCFA: How do you decide on the size of the initial investments for startups from Fund II, especially since they're expected to be larger than those from the first fund?
David: "The hardest question you can ask a VC is how they decide when to invest. The second hardest question is “how much?” It all starts with the founders and whether we have conviction on their ability to execute. Once we are convinced of that, we analyze a 2-year financial model of the business to understand how much capital is required to deliver on the key growth milestones that we believe will deliver strong value to the company. In short, how much do they need and will it bring them to the right milestones?"
Partnerships with Large Financial Institutions and Future Vision
NCFA: From the investments made from Luge Fund I, what have been some key learnings influencing Fund II?
David: "Our top results come from our strongest founders. We're now more focused on partnering with ambitious founders. For Fund II, we're planning to onboard team members earlier, and we've already begun recruiting for both investment and operations roles."
NCFA: How do partnerships with large financial institutions, especially LPs, enhance the value proposition for the startups you invest in?
David: "Our strategic LPs, being large financial institutions, offer brand reputation, vast distribution, and strong financial backing. We bridge our portfolio companies with these LPs for potential partnerships. While partnering isn't a strict criterion, we aim for win-win scenarios. Our LPs often view our portfolio companies as potential investment opportunities."
Final Thoughts and Recommendations
NCFA: What advice would you offer to fintech founders?
David: "Raising VC money isn't a business model. Focus on product and revenue. When raising capital, prioritize investor value over valuation. And never run out of money!"
NCFA: What’s your favourite book that you suggest all founders/investors should read?
David Nault: The Power Law by Sebastian Mallaby, which really puts into perspective what it takes to make a venture fund successful.
Obviously Awesome! by Canadian author April Dunford
Zero to One by Peter Thiel
* * *
Fintech's Bright Future
With the announcement of Luge Capital Fund II and the insights from David Nault, it's evident that Luge Capital is poised to make significant waves in the fintech sector. Their commitment to innovation, combined with the support of their esteemed investors, promises a bright future for fintech startups in North America, and here at NCFA we wish everyone at Luge Capital continued success.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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