Montréal-based venture builder and investor Diagram Ventures has fuelled up to expand beyond its FinTech roots with the final close of its first ClimateTech Fund.
Diagram reached its hard cap for the fund after securing $80 million CAD in commitments. With this final close, Diagram has surpassed its $60-million target despite a particularly tough venture capital (VC) fundraising market.
It helps to have the backing of the Desmarais family-connected Sagard. The global asset management firm anchored the fund alongside the Québec government through Investissement Québec. Diagram’s ClimateTech Fund’s limited partners (LPs) also include Export Development Canada, Fondaction, BDC Capital, Teralys Capital, Québec businessman Mark Pathy’s family office Mavrik, Desjardins Capital, BoxOne Ventures, and undisclosed family offices and high-net-worth individuals.
“When we look at the climate space, it’s very clear that there’s an abundance of problems to be solved.”
Amélie Foz-Couture, Diagram
This marks Diagram’s first investment vehicle dedicated to launching and backing early-stage cleantech companies after building a reputation for creating FinTech startups. The venture capital (VC) fund will target startups developing solutions to help tackle climate change and reduce emissions, with an eye toward companies building “capital-efficient digital solutions that accelerate the global transition to a more sustainable future.”
“We’re very grateful to our LPs for supporting this kind of extension in our strategy, because we’re building on the track record of Diagram, but … it’s a new vertical for us in the climate space,” Diagram partner and ClimateTech Fund co-head, Amélie Foz-Couture, told BetaKit in an exclusive interview.
Since 2016, Diagram has launched more than 25 companies in FinTech, Web3, and other related verticals, including Breathe Life, Conduit, ClearEstate, Dialogue, Helika, Nesto, Novisto, Synctera, and Walnut Insurance.
Diagram’s total assets under management now count beyond $400 million across its five funds, which include an Opportunity Fund and three FinTech funds, the latest of which Diagram launched in May 2023 with a $100-million first close. Diagram ultimately secured $115 million for that fund in a previously unannounced final close held last year.
Foz-Couture, who has led Diagram’s venture creation activities for the past five years, will co-lead the ClimateTech Fund alongside fellow Diagram partner Paul Manias, who brings deep experience investing in cleantech.
A cleantech expert who joined Diagram from Climate Innovation Capital, a fund he co-founded that came out of ScaleUp Ventures, Manias previously focused on later-stage decarbonization investments. Before that, Manias worked with the Ontario Municipal Employees Retirement System as a managing director of its infrastructure and private equity groups.
“I think we have a very complementary set of backgrounds,” Foz-Couture said.
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Diagram announced its ClimateTech Fund with a $50-million first close last December. The VC firm held a final close this September, ultimately beating its $60-million target and landing at $80 million. Foz-Couture said Diagram saw particularly strong support from institutional LPs for its climate tech strategy and plans to apply its venture studio model to the sector. Foz-Couture declined to disclose the firm’s past returns.
“What you can see from the support that we got is that there’s certainly a lot of excitement around investing in climate and investing to make Canada and Québec a leading geography in terms of climate innovation,” she said.
Teralys was attracted to Diagram’s plan to deploy its existing model in the cleantech space. “Diagram, through their FinTech strategy, developed a unique and systematic approach to venture creation and built a strong team,” Teralys principal Beatrice Couture told BetaKit. “We believe that applying this approach to climate tech will create promising investment opportunities in the cleantech sector.
The ClimateTech Fund will leverage Diagram’s existing venture creation model to identify cleantech market opportunities, construct founding teams, and mitigate risks through strategic partnerships, she explained. Like Diagram’s latest FinTech fund, it will also invest in early-stage Canadian cleantech companies it has not created.
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“[We were] looking for areas where we can have an impact,” Foz-Couture said. “And when we look at the climate space, it’s very clear that there’s an abundance of problems to be solved.”
The fund has established two ventures to date: ReliON and Lyteflo. ReliON, which sells maintenance and operations software for electric vehicle (EV) charging infrastructure, announced a $3-million, Diagram-led seed round this summer, while Lyteflo, which offers an EV sales enablement solution, is currently raising a seed round.
Diagram’s ClimateTech Fund is among a slew of new cleantech-focused Canadian VC funds launched over the past year by firms like Active Impact Investments, ArcTern Ventures, Idealist Capital, Mackinnon, Bennett & Company, Pangaea Ventures, and Spring Impact Capital.
According to Crunchbase, Canada has been moving up the global cleantech funding ranks lately. While cleantech tax incentives from the Government of Canada and the United States continue to bode well for the ecosystem, startups in the space have not been immune from current market conditions, and issues at Sustainable Development Technology Canada have made things tougher for many of the country’s early-stage cleantech companies.
Diagram plans to deploy its ClimateTech Fund over the next couple of years, creating “a handful” of companies annually, Foz-Couture said.
“That’s really what Diagram has been known for from the beginning, and that’s the strategy that we want to continue to really focus on for this fund, so it’ll be majority created companies,” she added. “But we’re excited to also support entrepreneurs that might already be up and running and benefit from having us as backers and integrating into our ecosystem.”
Diagram plans to invest in 15 to 20 companies through this fund, deploying between $2 million and $5 million per startup across the pre-seed through Series A stages. The venture builder and investor typically writes the first cheque at the pre-seed stage, and either leads or helps assemble seed round syndicates. Diagram intends to invest in existing early-stage businesses through its ClimateTech Fund, with an eye towards Québec companies given its headquarters and LP base, but the capacity to invest across Canada.
“There’s a lot of entrepreneurs that are really talented, that might come from areas outside of climate, but that are really keen to build here, and I think we can be a good sort of springboard or launchpad for those types of folks to really match them with a validated problem and enable them to apply their talents to the climate space,” Foz-Couture said.
Feature image courtesy Diagram Ventures.