Financial technology (fintech) companies are enjoying a golden age in Vancouver as news of acquisitions by major financial institutions and national expansion become commonplace.
Earlier this year, Business in Vancouver reported on fintech giant PayPal (Nasdaq:PYPL) acquiring Vancouver-based Hyperwallet Systems Inc. for US$400 million, on top of its $302 million acquisition of TIO Networks Corp. in 2017. In total, PayPal has spent over $800 million acquiring Vancouver startups in the last two years. Many industry professionals agree that several factors are contributing to local fintech success.
Hyperwallet and TIO, at the time of acquisition, had one thing in common – both had been operating for seven years. That time span, according to Natalie Cartwright, co-founder and chief operating officer of Finn.ai, is proving to be a lucky number for fintech startups.
“You look at the cycle of companies and … seven years gets you through a few financing rounds and gets you to a strong business model. It is quite difficult to scale beyond that, so I think typically around the seven-year mark is when investors are looking for their exit of some kind or some kind of return.”
Founded in 2011, Finn.ai is a virtual banking assistant that specializes in applying artificial intelligence to banking and finance management.
Cartwright, a graduate of IE Business School in Madrid, also credits investment in Canada’s startup visa program with helping companies find talent and allowing entrepreneurs to get established in the city.
Another factor helping the Vancouver fintech sector is that the city, traditionally focused on resource extraction, has given imaginative technology talent room to stretch its wings, because headquarters to major financial institutions are located elsewhere.
“There are fewer higher-level or executive job opportunities in Vancouver as opposed to somewhere like Toronto, which creates opportunity for people to go and create their own things,” Cartwright said.
The creation culture, driven by the possibilities of tech and the passionate mission of entrepreneurs, has fostered an environment seldom found in other Canadian – or even North American – cities.
“Companies in Vancouver want to overturn the established order,” said Bench CEO Ian Crosby.
Crosby started Bench, a digital bookkeeping service, in Toronto but moved it west in its infancy because he liked Vancouver’s unorthodox business culture. The company now employs more than 250 people at its Vancouver office.
According to Crosby, conditions are ripe for growth and change in today’s market but it will take a year or two to see how things play out.
“If anything, the challenge right now is that everything is getting bid up and getting expensive, as tends to happen in an overheated economy,” he said. “I think it was Warren Buffett that said it’s not till the tide goes out that you see who was swimming without trunks.… In 18 months from now, we will see who was swimming without trunks.” •
Business in Vancouver will host a Business Excellence Series event on financial technology on September 13 at the Vancouver Club. For more information and tickets, go to biv.com and its Events page.
