Inovia’s first Discovery Fund backs the next generation of VC funds in their mission to identify and nurture high-potential startups at the pre-seed and seed stages. We sat down with these emerging managers to discuss their vision, their approach, and what they look for in a pitch.
Today, we’re happy to introduce you to David Nault and Karim Gillani, General Partners at Luge Capital.
When David and Karim joined forces to create Luge in 2018, their complementary skills and experiences gave them an edge to make a name for themselves in the Canadian fintech investment space, where early-stage capital was scarce.
Karim, a software developer and product manager who’d developed legal and financial expertise at large companies like BlackBerry (then RIM) and PayPal, had a solid U.S. network and an analytical mind. David was an extrovert who knew the trenches of sales from two decades of experience building early-stage startups as a founder, senior executive and investor, including at Nuvei (then Pivotal Payments) and Inovia.
The combination worked out well. After investing in 21 companies, including Flinks (acquired by National Bank in 2021) through its CA$85M debut fund, Luge announced the first closing of its second fund in September, with a target size of CA$100M.
The team is again seeking out fintech startups in Canada and the U.S. led by exceptional founders while expanding its scope to include companies at the intersection of financial services and other large industries.
WHY DID YOU CHOOSE TO FOCUS ON THE EARLY STAGES OF INVESTMENT?
We both come from a background as fintech operators. When we talk to founders, we understand the business they’re building quickly. That insight enables us to identify high-quality startups before others can see the potential and to deliver much higher returns than if we came in two stages later.
TELL US WHAT MAKES YOUR FUND UNIQUE
Our team is diverse, from gender to ethnicity and past career experiences. Almost everyone is a first or second generation immigrant. These factors give us different perspectives and make us stronger investors.
Another strength is the win-win-win culture of collaboration we’ve created between financial institutions, startups, and Luge. When we first met the anchor investors interested in backing us, they shared their innovation challenges and difficulties with replacing old legacy systems. Several partnerships have formed between our investors and portfolio companies, which helps us deliver more value.
WHAT HAVE YOU LEARNED THROUGH FAILURES OR TRIALS AND ERRORS?
In our first fund, we’ve had great winners and not-so-great winners. Every investment makes you a little bit smarter about making the next one. Mistakes were often related to cases where we misunderstood the ambitions of the founder or where we couldn’t add value when the company went astray.
We also learned what it took to run a successful fund, which requires much more than investing in companies. We kept a lean team to be capital-efficient, but we should have expanded our staff faster than we did.
WHAT GETS YOUR ATTENTION IN A PITCH?
It starts with being impressed by the founders, how well they communicate their solution and vision, how much they understand the market, and make us believe they will hit meaningful milestones.
It also hinges on their ability to execute everything they’ve described with quality and velocity. Between two founders that have built the exact same product, we will back the one with the best productivity track record. But temperament also matters. One of the hardest parts of our job is to accurately predict how these founders will behave when times get tough.
WHAT IS THE ADVICE YOU MOST OFTEN GIVE TO FOUNDERS?
From David (in no particular order):
1) VC money is not a business model. Customer revenue is.
2) Choose investor value over valuation.
3) Never run out of money.
Be so good they can’t ignore you. Don’t be obsessed with chasing VC money, focus on building a high-quality business, and the money will chase you.
Visit our website to learn more about the mission and leaders of other exceptional emerging managers in our portfolio: Boon, Front Row Ventures, Garage Capital, Maple, N49P, Northside Ventures, Roar Ventures, The51, and Two Small Fish Ventures.