A Toronto startup that uses artificial intelligence to help banks personalize offerings to their customers has landed US$35-million in venture financing from several global financial institutions, thanks in part to its early endorsement by hometown Toronto-Dominion Bank.
Flybits Inc. said the funding was led by Point72 Ventures – a personal investment vehicle of U.S. billionaire hedge fund manager Steven Cohen – and backed by Mastercard Inc., Citigroup’s Citi Ventures, Australian venture capital firm Reinventure and past investors TD, Power Corp. of Canada-backed Portag3 Ventures and Toronto’s Information Venture Partners.
The deal is the latest in a string of $30-million-plus venture financings for Canadian startups in recent weeks. It’s also a relatively rare example of a Canadian startup that has leveraged a key customer relationship at home to generate global interest. Many Canadian startup entrepreneurs complain they have little luck selling domestically early on because Canada’s corporate giants are hesitant to adopt cutting-edge technology, preferring to follow their foreign peers.
“This is a great example that when you bring Corporate Canada and partner them with Canadian startups … you can really build global impact,” said Flybits founder and chief executive Hossein Rahnama.
“Working with Flybits has been part of our digital innovation strategy where we’ve been focused on creating more intuitive, personalized experiences that make customers’ lives simpler," said Rizwan Khalfan, TD’s chief digital and payments officer. "It’s been great to see the company’s momentum as they continue to build their business.”
The six-year-old company, based on Dr. Rahnama’s computer science PhD work at Ryerson University in Toronto, offers a software platform that allows banks and other customers to collect data from myriad sources and provide targeted offerings based on a “contextualized” read of the information by machines.
For example, if a bank’s Flybits-enabled smartphone app detects a customer is visiting several car dealerships, it can generate a preapproved car loan offer based on his or her financial profile and send it by instant message. The platform can also predict shopping patterns of customers based on transactions from credit card receipts, enabling them to offer targeted discount offerings from retailers to customers.
Flybits’ platform is built to be easy enough for non-technical people to use and for banks to position as a middle layer on top of their existing systems so they don’t have to make expensive overhauls to their own technology to better serve customers. It is also designed to protect consumer privacy, with individuals opting in to have their data used. Flybits never sees personal customer information domiciled at the banks.
It’s a solution investors say addresses a chronic weakness of financial services firms. Banks and insurers know they need to keep up with consumer expectations in an era of more personalized offerings from data-savvy internet giants such as Alphabet Inc.'s Google and Amazon.com Inc., but have struggled to come up with their own solutions.
“That was the dream state we kept hearing from different financial services companies, that contextual personalization was the direction they wanted to go in their businesses,” said Peter Casella, a partner with Point72. When his firm learned TD was achieving that with Flybits, “we socialized Flybits with a number of other banks to see if this fit with their vision of how they wanted to address the problem. The feedback we got was overwhelmingly positive.”
Citi managing director Ramneek Gupta said TD’s early adoption “was one of the critical signals we all look for as potential investors in companies. … I was looking for actual proof [that what Flybits was offering] was possible and happening in a bank with the same level of complexity and legacy” as Citigroup.
Dr. Rahnama founded Flybits in 2013 when he was a newly minted Ryerson professor, and three years after he helped co-found Ryerson’s Digital Media Zone incubator. His company entered the DMZ and is now one of its most successful graduates. It has 16 customers including Mastercard and HSBC, who in turn embed the technology in products used by more than five million consumers. Annualized revenues have grown by 300 per cent a year since 2016 and exceed US$10-million. “I think this will be the first billion-dollar company to come out of the DMZ,” said former Ryerson president Sheldon Levy, now an adviser to the CEO.
The company started out selling to customers ranging from Paris Metro to Fulham Football Club. It took a meeting with TD board director Nadir Mohamed and a booster of the local startup scene, to land an introduction to the bank after he asked why the startup was doing business with customers on other continents but not with big corporations at home. The company launched its partnership with TD in 2015.