Six Toronto VCs discuss COVID-19 and the post-pandemic era

Published August 13, 2020

As North America’s fourth-largest city, Toronto is one of the world’s top startup ecosystems.

After spawning companies like Eventbrite and Crowdmark, Ontario’s capital has attracted international talent that complements its homegrown population of entrepreneurs and technical talent.

Six investors we surveyed who work and live in the area said they believe Toronto will continue to thrive after the COVID-19 storm passes. Some of them focus exclusively on the region, while others invest elsewhere as well. As they explained, the city has a lot going for it: It’s diverse, has access to locally trained engineering and business workers, and the area has already fostered many companies that are doing very well.

Investors expect Toronto to remain a fintech hub

Fintech is one of the city’s top industries, and the investors in this survey expect this to continue. Stephanie Choo, head of investments at Portag3 Ventures, said “fintech continues to see massive tailwinds from the fallout from COVID-19 as incumbents struggle to fully digitize their offerings.”

Ameet Shah of Golden Ventures listed fintech as one of Toronto’s key industries. Eva Lau of Two Small Fish Ventures agreed, adding that “blockchain has also been doing well because many blockchain-related technologies or companies were started in Toronto.”

Other investors point to fintech business leaders in Toronto like CEOs Mike Katchen of Wealthsimple, Daniel Eberhard of Koho, Andrew D’Souza and Michele Romanow of Clearbanc and Kirk Simpson of Wave Financial.

Diversity is one of Toronto’s strengths

Nearly all of the surveyed investors cited diversity as a key reason to live and work in Toronto. Probal Lala, chairman of Maple Leaf Angels, says, “Beyond having a vibrant technology ecosystem, Toronto has one of the most diverse communities in North America and is not only a great place to find the intellectual horsepower and funding to build a great global startup, but also the mosaic of social communities that makes it a great place to live and raise a family.”

Choo said the United States’ current battles over immigration could benefit Canada. “Small, nimble teams that need to move fast may still choose to co-locate in person — and many will still want access to amenities that only a large, vibrant and diverse city like Toronto can offer.”

She also pointed to Toronto’s claim of being one of the most diverse cities in the world. “[This] not only makes the city interesting but also very welcoming for those who relocate from elsewhere; a strong startup and tech scene, and, lastly, a vibrant cultural and food scene, especially through the lens of cost-of-living compared to comparable major cities.”

Shopify’s executives are key players in Toronto’s ecosystem

Several VCs listed Shopify executives as local leaders, while others acknowledged the growing unicorn’s impact. Ameet Shah of Golden Ventures says, “Toronto has traditionally been strong in fintech, B2B SaaS, crypto and AI. The explosion of Shopify should also benefit companies focused on e-commerce and supply chain solutions.”

Adam McNamara and Ameet Shah, when asked about local business leaders, both listed Satish Kanwar. Kanwar is GM and VP of Product at Shopify after the company purchased Jet Cooper, a startup co-founded by Kanwar. McNamara also points to Farhan Thawar, Shopify’s VP of Engineering, as a local leader.

Who we spoke to:

Probal Lala, chairman, Maple Leaf Angels Capital Corporation
Stephanie Choo, head of investments, Portag3 Ventures
Adam McNamara, founding partner, Ramen VC
Ameet Shah, partner, Golden Ventures
Matt Golden, founder and managing partner, mGolden Ventures
Eva Lau, founding partner, Two Small Fish Ventures

Probal Lala, Maple Leaf Angels Capital Corporation

How much is local investing even a focus for you now? If you are investing remotely in general now, are you filtering for local founders?

Prior to COVID-19 hitting, a requirement for the majority of my investments was a face-to-face visit with the founding team. For the most part, this meant founders spending time in Toronto. As we primarily invest in seed and pre-seed, this usually meant local founders.

When the pandemic hit, we shifted our process to primarily Zoom meetings (including due diligence) and as a result the mix of founding teams has expanded beyond our typical catchment area (two-hour drive from the city) to a broader base. Investment cycles appear to have slowed a bit due to the remote approach but our reach to founding teams has expanded to a broader base of geographically distributed founding teams (Mostly Canadian although we have recently seen a number of international opportunities).

Flybits nabs $35M to build consumer recommendation engines for the financial sector

Published July 16, 2019

Financial service companies like banks have seen some of their business cannibalised over the years with the rise of digital-based alternatives — often in the form of apps — that provide lower fees, faster responsiveness and more flexibility to consumers. Today, Toronto-based startup Flybits is announcing $35 million in funding for a platform that it believes can offer these banks a way of continuing to capture their users’ attention and help them pivot into the next generation of services, financial or otherwise.

Today, a typical end product for a customer of Flybits’ services will use insights to upsell a customer by offering financial services; for example, a bank providing an offer of a specific kind of loan or credit card that you are more likely to take; or to offer a loyalty program or rewards for usage. But the longer-term goal, said CEO and co-founder Hossein Rahnama, is to help its customers take on a bigger role as repositories that can be used for more than just money, and used beyond the walls of the bank.

“We don’t think banks will go away, as some do, but we think that they could have a role not just as money vaults, but as data vaults: a place where you can deposit data, which you trust,” he said in an interview. Indeed, some of the funding will be used to put into action some of the AI and machine learning patents the startup has amassed, with the building of a “data” marketplace for banks, fintechs and other data providers to partner and build more services together.

The Series C comes from an interesting group of investors that includes both strategic backers using Flybits’ services, as well as backers of the more non-strategic, financial kind. Led by Point72 Ventures (hedge fund supremo Steve Cohen’s VC fund), the list also includes Mastercard, Citi Ventures and Reinventure (the fund backed by Australia’s Westpac Banking Corporation), Portag3 Ventures, TD Bank and Information Venture Partners. Valuation is not being disclosed, and prior to this the company had raised around $15 million.

Much like another marketing tech company, Near — which today announced $100 million in funding — the premise that underpins Flybits’ technology is that there is a lot of disparate data out there that, if it’s treated correctly, can uncover a lot more insights about consumer behavior, and that by and large many companies are missing this opportunity because they haven’t found the right way of merging the data to unlock insights.

While Near is applying this to location-based data and a range of different verticals, Flybits’ primary target has been banks and the data that they and other financial services providers already possess.

Many smaller startups in the world of financial services have stolen a march on bigger incumbents by building personalization into their products from the ground up. (Indeed, some like Step, aimed at teens, are so personalised that they will actually change their service mix as their customer base grows up and needs new products.) This is something that incumbents might have been more readily able to do in the old days, when people knew their bank managers and tellers and made daily trips into branches to transact. In the digital age they have fallen behind and are now catching up.

Flybits’ investors have spotted that and this in part is why they are banking on technologies like this to help bigger companies catch up, not just in financial services (although with banking alone estimated to be a €6.9 trillion industry, this is clearly a good start).

“Personalization is mission-critical for all D2C businesses in the digital age. Flybits’ integrated platform allows financial services firms to offer contextualized experiences, driving product awareness and adding significant value to the lives of their customers,” said Ramneek Gupta, managing director and co-head of Venture Investing at Citi Ventures, in a statement. “We look forward to partnering with Flybits in its next phase of growth as it continues to set the bar for hyper-personalized customer experiences.”

Indeed, it’s not just banks that are working on upselling, or that have large repositories of data that are not used as well as they could be.

“Mastercard and Flybits share a vision on using data driven insights to enrich consumers’ experiences,” said Francis Hondal, president, Loyalty & Engagement at Mastercard, in a statement. “Our ultimate goal is to develop products and services that engage consumers in a highly contextual manner. Through this collaboration with Flybits, we’ll be able to offer rich, personalized experiences for them throughout their journeys.”