Canadian fintech companies shine as VC investment nears record

Venture capital-backed investment in Canadian financial-technology companies hit its highest level in almost two decades last year, even as the flow of funds into major fintech markets such as the United States declined, according to sector data.

Fintechs, or companies that use innovative technology to revamp everything from banking to fraud security, globally draw billions in investment annually.

In Canada, fintech is revitalizing the startup scene and has attracted a new crop of Canadian venture-capital funds looking to invest specifically in young fintech companies.

According to PitchBook, used by the U.S.-based National Venture Capital Association, venture-capital financing in Canadian fintech was $137.7-million (U.S.) in 2016, up more than 35 per cent on the year. Five years ago, it was $21.8-million and in 2000, it was $7.3-million.

Figures compiled by Thomson Reuters show a rise of nearly 74 per cent from 2015 to 2016, to $264.8-million (Canadian), its highest level since 2000, when venture-capital investment in Canadian financial-technology firms reached $317.9-million.

The data vary as some investors do not disclose full information, while methodologies can differ on how the information is collected, how many companies are tracked, what is considered fintech and what constitutes a venture deal.

The figures pale in comparison to the United States, where investments reached $4.27-billion (U.S.) in 2016. But the trend in Canada is on the rise, compared with a decline in the United States and Britain.

Investments declined at least 30 per cent in the United States in 2016, while in Britain they fell nearly 25 per cent and Singaporean fintech investment sank 65 per cent.

Weaker activity in the United States and Britain was partly due to market uncertainty around the U.S. election and the Brexit vote to leave the European Union, as well as smaller deal sizes, according to data provider CBInsights and KPMG.

“From a global stage, Canada is a relatively small market,” said Adam Nanjee, who heads the fintech group in Toronto’s MaRS research hub.

“But it’s one of the best markets to build a company around innovation because we have a great test market, great infrastructure for financial services.”

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Source: Canadian fintech companies shine as VC investment nears record – The Globe and Mail