CPPIB and PSP Dip Into Radical Ventures

Radical Ventures, a Canadian venture capital firm focused on artificial intelligence (AI), has launched a new fund with a target of about $470 million (US$350 million). Cornerstone LPs include Canada Pension Plan Investment Board (CPPIB), the Public Sector Pension Investment Board (PSP Investments), TD Bank Group and Wittington Investments, Limited:

“AI is perhaps the most disruptive technology since electricity. It will transform the world, impacting everyone, and we are just at the beginning of its application,” said Jordan Jacobs, Managing Partner, Radical Ventures. “Toronto and Canada have led the world in developing AI that is disrupting industries from healthcare to finance to smart cities and everything in between. We are now seeing an explosion of AI startups in Toronto, across Canada and globally. Radical aims to back the most ambitious founders seeking to make a positive impact on the world.”

Jacobs previously co-founded and was co-CEO of Layer 6, a world-leading AI company that deployed a proprietary deep learning prediction engine for banks. Layer 6 was acquired 15 months after launch in January 2018 by TD Bank Group where Jacobs became SVP and Chief AI Officer (Business & Strategy). Benji Sucher, former COO of Layer 6, is also a co-founder at Radical and a GP of the new fund.

In 2017 Jacobs and Layer 6 co-founder Tomi Poutanen co-founded the Vector Institute for Artificial Intelligence along with 2019 Turing Award winner Geoffrey Hinton (often called the godfather of AI), a core group of machine learning professors at The University of Toronto, and former TD Bank CEO Ed Clark (now Chairman of the Vector Institute). Vector has quickly grown to become one of the world’s top AI research institutions, and helps educate the next generation of AI leaders.

Clark is joining Radical as a Partner. Long-time McKinsey & Company Global Managing Director Dominic Barton also joins Radical as Senior Advisor. Clark and Barton will help portfolio companies by providing mentoring and advice and access to their extensive global networks. Poutanen and Layer 6 co-founder and Head of AI, Maks Volkovs, are also Advisors to Radical Fund II.

Salim Teja, former President, Venture Services of MaRS Discovery District in Toronto, also joins Radical as Partner and General Manager. Teja’s responsibilities will include overseeing Radical’s Impact Team, designed to help portfolio companies accelerate their global growth.

So, Jordan Jacobs, the former co-founder of the Vector Institute and Layer 6 is leaving his position at TD Bank to focus on managing his venture capital firm, Radical Ventures.

In another article, Jacobs summed it up well, stating this:

“What’s amazing is that if you go to Silicon Valley, NYC, or even China, the first thing they talk about is Canada being a world leader in AI. We’re still not as good at promoting ourselves outside the tech community to the rest of the country as we should be,” Jacobs told BetaKit in an interview last year. “It’s rare that time and place coincide to let you build the future, but that’s exactly what’s happening right now in Canada with AI.”

And this:

“Part of the mission for Vector was to get Canadian companies more attuned to the opportunities AI provides them, and attract more companies to build AI labs and have more companies started by grads stay here,” Jacobs said at the time. “We see this as another way to do that, and it’s putting a world-leading suite of technology we built and a world-leading team inside a global company that happens to be Canadian. It’ll provide a lot of opportunities to hire people graduating out of those programs.”

Now, I don't know how much PSP and CPPIB are each investing in Radical Ventures but I assume it's at least $100 million each and perhaps more since they are the big funds of the four cornerstone LPs taking part in this new fund.

AI is an important theme at CPPIB and PSP. In April 2017, D-Wave, a developer of quantum computing systems and software, secured $50 million bridge financing of convertible notes with $30 million disbursed at closing and a conditional commitment for $20 million from PSP Investments. It raised that additional $20 million from PSP in February 2018.

In 2017, CPPIB signed a $1.1-billion deal to acquire a 30-per-cent stake in BGL Group, a digital distributor of insurance and financial services.

In December, The Logic reported CPPIB planned to invest up to $1 billion in North American and European venture capital funds.

Both CPPIB and PSP are investing in AI through public and private markets and this new venture fits perfectly into what Mark Machin calls the age of disruption.

Disruption is everywhere, in every field, and it's better to stay on top of it, leveraging off these strategic relationships, than risk being left behind.

A couple of weeks ago, I interviewed OTPP's CIO Ziad Hindo on Teachers' Innovation Platform.  Ziad told me "disruptive technology is everywhere" and OTPP built this innovation platform for three main reasons:

1. Defensive: OTPP has over 100 portfolio companies and they want to understand how disruptive technology will impact them. This is part of Teachers' rigorous risk management approach.
2. Offensive: OTPP is seeking high risk-adjusted returns and this platform will allow them to capitalize on new opportunities in disruptive technologies that will shape the world for years to come.
3. Access to innovative partnerships: The platform will alow OTPP to build on its existing partnerhips but also to build new partnerships with technology leaders.

On that third point, he mentioned OTPP's deal with Verily, an Alphabet (Google) company, on a $1 billion investment round led by Silver Lake, one of the best private equity firms in the world focusing on technology.

This tells me Canada's large pension funds are very much aware of how disruptive technology poses risks and opportunities for their portfolios and they want to manage these risks as best as possible, leveraging off internal and external expertise, and by investing in emerging technologies.

The founders of Radical Ventures are world-class experts in AI and they will seek to invest in early-stage and growth investments in mostly Canadian companies developing AI products or applying AI to create a competitive advantage in large markets.

Ed Clark is a partner, which tells me he has the utmost confidence in this new venture and he likely played a role in bringing PSP and CPPIB to the table (Mr. Clark is the father of IMCO's CEO Bert Clark and pretty much knows the who's who on Bay Street and across Canada).

Lastly, I note that Ontario's government slashed the funding to startup and innovation programs so this new venture couldn't come at a better time. Canada needs to invest in innovation or we risk exacerbating the existing productivity gap with the US and other countries.

Below, Jordan Jacobs, co-founder and CEO at Radical Ventures, joins BNN Bloomberg to talk about the new US$350-million AI-focused venture fund he just launched. The purpose of the fund is to provide AI-focused startups in Canada with capital and it has received support from major institutions including CPPIB, TD and the Weston family.

And Mark Machin, President and CEO of CPPIB, talks about disruptive innovation at the Canadian Club (November 2018). Great speech, he really delves into the major trends disrupting our economies and how CPPIB is investing to capitalize on these changing trends.