A Bay Street venture capital firm hoping to establish itself as Canada's premier financier of early-stage fintech firms has surpassed its $100-million fundraising target thanks to an investment from Manulife Financial Corp.
With Manulife's backing, Information Venture Partners (IVP), which was spun out of Royal Bank of Canada two years ago, has now closed its first fund as an independent, raising $106-million (it's officially IVP's second fund, as it also manages the portfolio inherited from RBC). Other backers include RBC, Power Financial Corp., DH Corp., Export Development Canada, Business Development Bank of Canada, Northleaf Venture Catalyst Fund and Boston-based HarbourVest Partners and Permal Capital Management.
The question now facing IVP is: How many fintech-financing opportunities are there in Canada? IVP has invested just more than $10-million in three companies: eSentire Inc., a Cambridge, Ont-based cybersecurity monitoring service for financial firms; Toronto-based PostBeyond, a content-sharing platform for employees to use at work; and Q4 Inc., another Toronto company that offers a cloud software platform focused on investor relations activities by public company officials and institutional investors.
But IVP hasn't announced a new investment in four months, and general partner Robert Antoniades acknowledged the Canadian fintech market lags those in other hot spots such as the United States, London, Singapore and Hong Kong.
"We are tracking over 250 fintech companies in Canada alone," Mr. Antoniades said. "It's mostly younger startups" that are lacking maturity and scale. "Not enough of them are at a stage we'd like to invest in."
But in that sense, this might be the perfect time to be establishing IVP's market presence (the fund can also invest in U.S. firms), said Mr. Antoniades, who, like fellow general partner David Unsworth moved over from RBC to run the fund. Several Canadian fintechs, including Borrowell, Wealthsimple, FundThrough and Street Contxt, have collectively raised tens of millions of dollars in venture financing in the past two years. Some are drawing investment from or are collaborating with financial services giants such as RBC or Power. The giants don't only see them as threats, but also potential partners, and are investing considerable sums in the space. "There are investable fintech companies today," Mr. Antoniades said, predicting "we're at the beginning of the wave. What we want to see is that wave grow bigger. I think the next 12 to 24 months will be very interesting because we'll see [many emerging fintechs] hitting scale."
The two general partners are veteran investors in the financial-technology space. While managing money under the RBC Venture Partners banner, they invested in 19 companies, 12 of which were eventually sold, including Varicent Software, which was purchased by IBM in 2012. One of the most prominent names in IVP's earlier fund is a stake in St. John's-based fraud detection and anti-money laundering software firm Verafin, which landed a $60-million investment from U.S. growth-equity firm Spectrum Equity two years ago. RBC Venture led a $5.5-million investment in Verafin in 2009. IVP's legacy portfolio also owns a stake in Silicon Valley-based Adaptive Insights, a cloud-based corporate performance management software firm that raised $75-million (U.S.) in its most recent funding round last year.
IVP aims to invest in fintech and enterprise software startups with at least $1-million in annual recurring revenue. The fund aims to initially invest $2-million to $5-million as part of a startup's first financing round drawing from institutional investors.