The Bank of Nova Scotia is deepening its ties to the tech sector with an investment in and formal partnership with Disruption Ventures – moving the 10-month-old startup fund closer to becoming the largest private, independent, women-focused venture fund in Canada.
Disruption will announce Wednesday that it has received commitments for $13-million of its $30-million fund target, led by Scotiabank with further commitments from wealth-management firm CI Financial Corp. and several high-net-worth investors. Launched by serial entrepreneur Elaine Kunda last May, the fund plans to focus largely on seed and early growth financing rounds for startups founded or run by women – still an underserved market in Canada’s otherwise maturing tech sector.
The investment, the first of its kind for the bank, is only part of what Scotiabank and Ms. Kunda hope will be a long-lasting partnership. It expands the Scotiabank Women Initiative, which launched last December to give female entrepreneurs greater access to mentorship and capital: Ms. Kunda will take on an advisory role to assist with the former, while her fund will be a key component of the latter.
The relationship will be reciprocal: While participants in the bank’s program could become candidates for investment from Disruption, Disruption’s future portfolio companies will have access to mentorship and other program benefits – and a connection to an established bank for when they need future financial services.
“In order for these companies to be successful, they’ll need capital throughout the life cycle of their business, and not just at the beginning,” Ms. Kunda said in an interview. The partnership, she said, “is much bigger than just the investment.”
“The challenge with any startup – not just women-led startups – is you don’t always fit in the box, fit the requirements for certain things,” she said, using the example of a startup applying for a credit card that might have trouble with a traditional bank. “When you have someone who doesn’t understand … a startup who just raised $2-million who doesn’t have revenue or financial statements, doesn’t meet the criteria, they’ll often get rejected."
Gillian Riley, president and chief executive of Tangerine – Scotiabank’s low-cost online bank – is also the “executive champion” of the Scotiabank Women Initiative and chair of Roynat Capital, the bank’s alternative financing arm. “The mission here is to strengthen and support women-led businesses in Canada,” she said.
“They’re an important part of the economy, and providing that access to capital, providing that mentorship, and that education, is really [the purpose of] the Scotiabank Women Initiative. And Disruption Ventures is a nice complement to that," Ms. Riley said.
Women are vastly underrepresented in Canada’s ranks of venture capitalists and tech executives. A report last July from Female Funders found that only 14 per cent of partners at Canada’s most active venture-capital funds were women. And the Move the Dial report on women in tech, released in late 2017, found that women accounted for just 5 per cent of chief-executive roles and 13 per cent of executive positions; 53 per cent of tech companies were found to have no female executives at all.
In Canada, there are few funds dedicated primarily to investing in women’s startups – and the highest-profile of them benefit from government investment. The Business Development Bank of Canada’s Women in Technology Fund was increased to $200-million after the previous federal budget, while MaRS’s Investment Accelerator Fund runs the $5-million StandUp Ventures Fund I, including an investment from BDC.
Doug Jamieson, CI’s chief financial officer, met Ms. Kunda through a banking acquaintance and soon found himself working through partnership details with her. The company had been trying to support more women in leadership positions, he said, including running a women’s mentorship program for the past seven years – and CI’s leadership felt that investing in Disruption would be a good extension of that.
“This advanced pretty quickly,” Mr. Jamieson said. He’s looking forward to meeting the clients Disruption adds to its portfolio. “We’d like to know if there’s any way we can become a client or supporter of these entrepreneurs as they grow their business,” he said.