Private Capital | Q2 2015

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Exploring FinTech in Canada How Canada can build trophies instead of tombstones in FinTech By David Unsworth, Information Venture Partners


hile we’ve been bombarded by developments in technology that have changed the way we work and play since the turn of the millennium – from the consumerization of enterprise IT, cloud computing and SaaS delivery models, the growth of mobile/ tablet adoption and the near “appification” of everything – it seems one of the last bastions of a more traditional way of life has remained unchanged: financial services. However, technology’s tentacles are now reaching into this sector, too, and the coming wave of financial technology (FinTech) solutions will forever alter how we transact in the financial world. Great opportunities for investors and entrepreneurs exist in an environment readily embracing innovations that will change the consumer experience through the modernization of current processes, or a disintermediation of traditional institutions. The driving force behind much of this opportunity is a generation of “digerati” that are now demanding new approaches that will supplant existing paradigms with a more modern approach to paying, investing, securing loans and mortgages and buying insurance. This demographic reinvented legacy financial services. “What you’re seeing is a bunch of young entrepreneurs that are particularly dissatisfied with traditional banking, looking to disrupt the traditional approach,” said Graham McBride, co-founder of FundThrough. “The only reason


Private Capital § Quarter 2 § 2015

we need the banks at all is for the movement of cash and even that will change with the use of technology.” FundThrough, which recently raised $2.2 million in funding led by Real Ventures, is an alternative source of credit for the SMB market that provides working capital to start-ups in real time. All it takes is a tap on a mobile device and FundThrough’s vetting process begins. Its model is unique compared to the traditional banking system as FundThrough reviews a company’s customer contracts and how much money those customers have been invoiced for, as opposed to the bank’s typical process of reviewing a company’s credit history and assets. This forward looking approach enables SMBs to focus on getting sales, knowing they can always get capital regardless of their business’ financial history. FundThrough’s other advantage is the speed at which it can review applications, and technology helps them achieve that. There are other examples, too. St. John’s-based Verafin has become a dominant provider of software for fraud detection and anti-money laundering in North America, and Ottawa’s Shopify is a category leader in eCommerce platforms. These successes are generating a palpable buzz, which will draw in additional entrepreneurs as well as the investors who are eager to fund breakthroughs, driving more innovation and growth in this sector. Verafin and Shopify have raised substantial capital from Canadian and U.S.-based VCs.

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