Another artificial intelligence (AI) investor in Developer Capital (DevCap) has joined Canada, although this one differs slightly from other VC firms.

DevCap was founded as a full-stack software development consultancy called Monadical, based in Montréal. It was able to raise $2.5 million CAD in funding in just three months, and it was able to invest in pre-seed and seed-stage startups because of its investment corporation structure and lack of management fees.

In an exclusive interview with BetaKit, Steiner, the CEO of DevCap, stated, “We think the next mega tech companies are going to be born in 2024 and beyond, and we don’t want to miss the start.”

Developer Capital (DevCap) has added another artificial intelligence (AI) investor to Canada, but this one differs slightly from other traditional venture capital (VC) firms.

In just three months, DevCap, which was founded by the Montréal-based full-stack software development consultancy Monadical, closed $2.5 million CAD in funding and started investing in pre-seed and seed-stage startups thanks to its investment corporation structure and lack of management fees.

The CEO of DevCap, Steiner, stated in an exclusive interview with BetaKit, “We think the next mega tech companies are going to be born in 2024 and beyond, and we don’t want to miss the start.”

As chair and chief technology officer, Max McCrea, a co-founder of Monadical, leads DevCap. McCrea has a strong technological background and competence in artificial intelligence, while Steiner is a seasoned investor and long-time manager of public markets portfolios. McCrea told BetaKit, “Our skills together made for a really good partnership.”

The two lifelong friends agreed to collaborate in 2023 after recent advancements in AI, and Steiner quit his position at LionGuard Capital Management to take on the role of chief strategy officer of Monadical. At the end of last year, the two started DevCap.

The majority of VCs provide founders access to their networks and money. In addition to offering companies access to Monadical’s team of thirty-one developers for counsel and direction, Steiner claims that DevCap offers both. Monadical is a software development company that serves a diverse range of clients from large, established organizations to small startups in various industries. Over the previous nine months, Monadical has developed seven distinct AI products, according to Steiner.

DevCap intends to harness the internal knowledge of Monadical to source, evaluate, and assist pre-seed and seed-stage artificial intelligence firms. Steiner and McCrea are wagering that DevCap will benefit from this strategy more than the typical VC, both before and after investment.

McCrea and Steiner intend to use DevCap to fund 15 to 20 early-stage companies in North America and Europe. The initial checks will range from $100,000 to $400,000, with the option to increase investment in early winners. DevCap plans to invest in businesses using AI or developing AI from the ground up to solve problems that were previously unsolvable due to the development of huge language models, fusion models, or machine learning that “really took off.”

In order to support its operations, DevCap has raised $2.5 million thus far. This sum consists of $500,000 from “cornerstone investor” Urbana Corporation and $500,000 from directors and advisors such as McCrea, Steiner, and the other members of the firm. Steiner’s former clients, colleagues, and peers in the investing sector comprised part of the group that provided the remaining funds, along with friends and relatives who wished to remain anonymous. Steiner stated that the company intends to raise further money in approximately a year and predicted that DevCap will surpass $3 million by the end of this month.

Last summer, before establishing DevCap, Steiner and McCrea conferred with many investors and founders. “It’s a terrible time to try to do something like we’re doing, according to venture capitalists, because no one’s deploying and you’ll never get limited partners (LPs),” Steiner said, adding that many of those same VCs were finding it difficult to raise new money during the downturn and were sitting on their hands despite the low valuations and the emergence of exciting new AI startups.

Meanwhile, they discovered that Canadian innovators, many of whom were engaged in fascinating AI research but were having difficulty raising capital, connected with DevCap’s value proposition. DevCap made the decision to go ahead and pursue the investment corp. path despite sensing that the timing was favorable.

DevCap lacks a general partner and limited partner structure as well as management fees. Steiner claims that although DevCap has founder shares, the company’s executives still hold 50-1 voting power in Class A shares, which gives them control over the company.

According to Steiner, there are certain benefits to this strategy, such as the flexibility to move swiftly, no defined wind-up date, alignment with investors, and less pressure to spend quickly like VC funds. “The only driver for us is a higher share price, not raising more assets … We think AI is just now moving from the tinkering into production phase and we wanted to be ready to go.”

“Now is a really good time to be investing in early-stage companies,” added McCrea.

On the deal flow-sharing front, Steiner observed that the Canadian venture capital community has been receptive to the firm thus far. Since DevCap is still relatively new, he anticipated this to be more difficult. “I think one of the reasons is with [McCrea] and the [Monadical] team’s technical backgrounds, other VCs know that we have that ability to go deep on technical diligence,” he said.

VCs have previously employed Monadical to assist on this front, according to McCrea. DevCap can now use those abilities for its own investment endeavors.

DevCap is currently waiting to provide funds to Montréal’s Rithmik Solutions, which provides an AI-powered analytics solution for mobile mining equipment. Unified.to, a Toronto-based software firm, has already developed an AI-powered application programming interface development platform.

“We really liked DevCap’s experience with both AI and software development,” Unified.to co-founder and CEO Roy Pereira told BetaKit. “We were also impressed by their ideas for future growth and their due diligence process.”

Amanda Truscott, co-founder and CEO of Rithmik, had a similar experience. “We were super excited to bring DevCap on as an investor because of their deep expertise and strategic focus on AI technologies,” she told BetaKit. “That expertise not only allows them to profoundly ‘get’ us and what we do at Rithmik; it also positions them to help us in unique ways. We’re really looking forward to being able to bounce ideas off their team.”