Never heard of FinTech? You will soon.
Few sectors in Canada are as promising as financial technology — or ‘FinTech’. This emerging industry refers to the growing number of startups using technology to disrupt every corner of the financial world, from how we invest our savings to how we purchase insurance.
Anyway you slice it, the space is exploding. New data released by PitchBook says that venture capital funding of Canadian FinTech companies hit $137.7 million USD in 2016, up 35 per cent over the previous year. Thomson Reuters, on the other hand, reported a spike of 74 per cent from 2015 to 2016, reaching investment levels of nearly to $265 million.
And especially in Toronto, FinTech is big league. With over 100 companies challenging the old way of doing finance, the city is becoming a global hub of financial innovation. LowestRates.ca CEO, Justin Thouin, was invited to speak about his experiences launching a FinTech startup at last Tuesday’s bi-monthly FinTechTO meetup, so a few of us decided to tag along.
Here are five things we learned from the evening’s speakers:
Not everyone has to be Uber.
Cato Pastoll, CEO of Lending Loop
Sometimes startups need to learn the regulations they face — and play within them — instead of completely rewriting the rulebook. In the case of Lending Loop, legal restraints were the reason peer-to-peer lending had yet to make it to market in Canada. So they learned their space, studied the structural barriers, and a found a way to offer small businesses a new way to access affordable financing.
Bootstrapping is the unsexy road to profitability.
Justin Thouin, Co-Founder and CEO of LowestRates.ca
This is a story we obviously know well, but it was exciting to see a room of people hear it for the first time. Justin borrowed an idea from the UK — online comparison shopping for personal finance — and brought it to Canada. Why? Because Canadians simply don’t realize how much money they’re unnecessarily forking over to the big banks.
And how did he grow the company? By starting with a set amount of money and being forced to acquire customers profitably; otherwise known as bootstrapping. While working in a basement and not paying yourself for three years isn’t nearly as sexy as landing seed funding right out of the gate, it’s hard to deny the appeal of actually turning a profit (not to mention, retaining shares of your company).
Sometimes the strength of an idea is more valuable than how it looks online.
Toby Heaps, Corporate Knights
In a time when user experience and web design are vital elements of any online endeavour, it was refreshing to hear Corporate Knights laud substance over style. Despite starting out with a “ramshackle website that wasn’t intuitive or user friendly”, this company was still seeing traffic from over 100 countries.
Turns out ethical investing is a strong enough proposition to generate buzz on its own. Corporate Knights’s ‘personal values portfolios’ provide users the option of not supporting things such as weapons manufacturing, male-dominated leadership teams, animal cruelty, and human rights abuses. Hard to argue with a concept like that.
There’s a lot to learn from the 90s era internet.
Mat Cybula, CEO of Cryptiv
In the early 90s, the ‘information superhighway’ was all about getting information from Point A to Point B. As the saying goes, the early days of the internet was ‘never easy and never pretty’, but somehow we got to where we are. Now, instead of moving information, cryptocurrencies are all about moving value from Point A to Point B. Bitcoin being the most notable example.
Mat, from Cryptiv, made the case that blockchain technology will be the innovative next step beyond Bitcoin. A crypto-disruptor in the world of always-evolving digital currencies.
Small businesses in Canada need to borrow less than you think.
Gary Fearnall, Country Manager of OnDeck
Here’s a crazy stat: of the 1.17 million total businesses in Canada, 1.14 are small businesses — that’s a whopping 97.9%. And of those small businesses, what size of operating capital loan is most commonly needed? 30k - 50k. OnDeck — a U.S. company that has been operating in Canada since 2014 — aims to service the relatively small financial needs of Canada's small businesses with an alternative lending platform that offers a range of capital solutions.
But as large as their target market would appear to be, they face one major obstacle to engaging them: most small businesses still turn to their banks for financial support. In addition to that, there’s a reluctance to trust digital-first lenders and there are challenges to accessing the customer data needed to innovate.
So it’s a familiar story: the product is sound, the need is there, but Canada simply lags (way) behind in FinTech awareness and adoption. Hopefully the growth of Toronto’s FinTechTO meetup is a sign that things are finally starting to change.