Venture Studio Raises $80 Million for Climate Fund
Montreal-based venture studio, Diagram, is expanding its startup incubator model into climate technology. The firm has raised $80 million CAD ($58 million) for its fourth studio fund, the Diagram Climate Tech Fund. This new vehicle surpasses its initial target of $60 million CAD ($43 million) and marks the studio’s first dedicated focus on climate.
Incubator Model
Diagram’s incubator model is built around a deep-dive process into various industries, lasting several months at a time. The firm identifies pain points and a core set of customers for potential solutions before bringing in founding teams to validate opportunities. This rigorous process ensures that only the best ideas make it into a company.
"The work we do is meant to give our hand-selected founding teams a head start," said Amélie Foz-Couture, a Diagram partner and co-head of the Climate Tech Fund. "We invest in the best ideas that come out of this process."
Climate Focus
Diagram’s climate fund will focus on building capital-lean digital solutions across various climate categories, including electric vehicles, biodiversity, and food and agriculture. Paul Manias, a Diagram partner and co-head of the firm’s climate fund, believes that the timing is right to launch a climate-focused fund.
"The reality is we need both hardware and software climate solutions," said Manias. "Software solutions are implementable and help address many day-to-day challenges companies face."
LP Interest
Despite overall fundraising headwinds, LP interest in climate remains strong. Climate-focused VCs set a new fundraising record for the sector in 2022, raising $18.7 billion across 64 funds. While 2023 saw a decline, 2024 is on track to surpass last year with climate VCs raising $3.4 billion in the first half of 2024 alone.
Existing Companies
Diagram has already started building two startups under its climate thesis. Relion offers a platform for operation and maintenance solutions for EV charging infrastructure, while Lyteflo provides electric vehicles sales enablement solutions focused on battery life.
Founding Story
Diagram was founded in 2016 as an early-stage venture arm of global asset manager Sagard. The firm has more than $400 million in assets under management and has built 25 companies in-house across sectors like fintech and web3.
The firm has seen four exits, including a sale to Visa for one of its portfolio companies.
Investors
Diagram’s climate fund has attracted investors from various backgrounds, including its parent company Sagard, Investissement Québec (a Quebec government-backed investment vehicle), BDC Capital, and Teralys Capital, among others.
Conclusion
Diagram’s expansion into climate technology is a significant development in the venture capital landscape. The firm’s proven incubator model, combined with growing LP interest in climate, positions it well for success in this sector.
As the world grapples with the existential challenges of climate change, innovative solutions are needed now more than ever. Diagram’s focus on building digital solutions across various climate categories offers a promising approach to addressing these challenges.
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