Two Vancouver-based financial tech startups are showing there’s truth behind the old adage, “You’ve got to spend money to make money.”
Payfirma and Koho, companies specializing in handling other people’s money, have raised a collective $14 million from investors during their latest respective funding rounds.
Payfirma accounted for the bulk of that, after announcing May 27 it’s raised $13 million in financing led by Dundee Capital Markets. Its platform helps small and mid-size businesses process credit and debit card payments.
UPDATED: CEO Mike Gokturk told Business in Vancouver money raised would go toward funding “people, product and partnerships.”
Payfirma has a staff of 45 in Vancouver, which Gokturk expects to double in the next six months.
“The two biggest areas we’re spending on is sales and marketing,” he said, adding the company will also be investing in more data analysts, business analysts and developers to help create more functionality on its PayHQ platform.
Further down the road, Gokturk said he’d like to expand operations to either Toronto or New York due to the concentration of major clients in that region. But for the time being the place is to keep the company entrenched on the West Coast due to the tech talent already employed at its offices.
“I think the homebase will always stay in Vancouver,” he said.
“Never say never, of course.”
Gokturk said Payfirma is eying an initial public offering in the next year to help it raise even more money to help maintain its growth.
“There’s a lot of money on the sidelines but it’s money that’s available in the public markets,” he said, adding it’s typically more difficult for a Canadian tech company to raise private capital than U.S. counterparts.
“The mutual funds want to invest in tech and there’s so much money out there, their mandate only allows them to invest in public vehicles.”
Meanwhile, banking platform Koho announced May 28 it raised $1 million during its latest funding — nearly double the original target, according to CEO Daniel Eberhard.
The startup’s mandate is to partner with financial institutions to hold members’ money and then offer them a no-fee banking account.
Eberhard said the company’s original goal was to raise $550,000 during the funding round
“We’re using this (funding) to build our product. We’re using this to build Koho and get it in the hands of consumers,” he told Business in Vancouver.
Koho is expected to launch a beta version in the fall and Eberhard said the company is close to announcing which national financial institution it’s partnering with to offer its services to clients.
“This is a pain that is universal and…we’ve all sort of felt frustration at one point or another with the relationship that we’ve had with our bank,” he said, adding the plan — for now — is to focus on the Canadian market and getting the product right before expanding internationally.
Investors include Highline, Joe Canavan, Ferst Capital and Hedgewood.
In March, Koho added angel investor Gil Penchina and ex-Coast Capital CEO Lloyd Craig to its advisory board, who will serve along with Canavan.
“It adds legitimacy and credibility to what we’re doing,” Eberhard said.
“We’re taking a very consumer-focused approach. And at the end of the day, we’re trying to create value for people first and (for) guys like Joe and Gil, that resonates.”
