Impak Finance Inc. aspires to join Canada's domestic banks alongside Royal Bank of Canada, Toronto-Dominion Bank and other heavyweights – but it is taking an unusual approach to getting there.
The Montreal-based company turned to crowdfunding for its financial backing this week, receiving pledges totalling $425,000 in just 24 hours through FrontFundr.
"It opens a new era of regulated equity funding," said Paul Allard, Impak's co-founder, president and CEO (that's "chief environmental officer," underlining the company's pro-environment approach to finance).
The upstart is part of a wave of companies – often called fintech – that are applying technology to traditional finance, usually with simpler, faster and more transparent approaches than those used by incumbent banks.
But Impak stands out from other fintech companies because of its ambition to become an official Schedule 1 bank, deposit-taking institutions regulated by the Office of the Superintendent of Financial Institutions (OSFI). The goal is to offer basic banking services within the next few years, and use the assets to give it additional firepower in its lending capabilities.
"The power of a bank is astonishing, in terms of the multiplier effect of leverage," Mr. Allard said. "When you are a fund, you take $1 and you invest $1. When you are a bank, you multiply that power by 10."
The model is largely based on Netherlands-based Triodos Bank, which has found a niche in Europe by investing in areas such as renewable energy and sustainable agriculture. In the first six months of 2016, Triodos reported assets under management totalling €12.6-billion ($18.2-billion) and a profit of €18.6-million.
Impak, of course, is just getting started. But it has continued to attract investors after the first day of crowdfunding on Wednesday. Mr. Allard said that it has exceeded its goal of raising a minimum of $500,000 with nearly eight weeks left in its crowdfunding effort, putting it well on its way to becoming a lender to the so-called impact economy – companies and entrepreneurs with business plans revolving around environmental sustainability.
Mr. Allard is an entrepreneur, most recently heading Engagement Labs, a social media analytics firm, before departing in 2014. Other co-founders of Impak include Philippe Gablain, who also came from Engagement Labs, and Andy Krupski, chairman of The Hive Strategic Marketing.
Early backers from the crowdfunding campaign become stakeholders – there are about 600 of them so far – receiving one share in Impak for every $1 they contribute (with a minimum of $100). In return, they'll get dividends somewhere down the road when the company becomes profitable and they'll be able to sell their shares over-the-counter if they want to exit.
The initial backing, believed to be flowing primarily from millennial investors, will be directed toward operational expenses. The company then hopes to get more than $30-million in funding over the next 18 months to back the loans it underwrites.
Mr. Allard is ambitious: "Look at what happened with Uber and Airbnb," he said. "We want to be in the financial framework, but we want to rethink it with a collaborative and transparent approach, and use technology for people who want to be more than just a silent client of a financial institution."
Editor's note: Impak is based in Montreal. An earlier online version of this story incorrectly said the company is based in Toronto.