Ask a VC: Maor Amar on the state of Canadian fintech
- The Canadian startup ecosystem is growing through increased support and mentorship from the country's big banks.
- If Canada's financial institutions are to maintain a leadership position globally, they will have to absorb technology at a faster pace through continued support of startup innovators.
This is Ask a VC, where we quiz venture capitalists on the latest trends in the finance space.
Canada is experiencing a boom in the financial technology sector, with venture-capital backed investments in the area reaching their highest level in almost two decades last year at $137.7 million. Maor Amar, a former banker who previously worked on the equity desks of UBS and the Bank of Montreal, is managing partner of Impression Ventures, a Canadian venture capital firm with offices in Toronto and Montreal that focuses on early-stage financial technology companies.
Canada’s digital economy is growing. A recent report from the nonprofit Canadian Information and Communications Technology Council of Canada projected that the country will need to fill 216,000 skilled technology jobs by 2021. Many of the job categories identified in its report relate to technologies that are changing financial services including virtual and augmented reality, blockchain, artificial intelligence and 5G mobile technology.
Impression Ventures was founded in 2013, and has a portfolio of six companies, including investment platform WealthSimple, digital receipt technology solution Sensibill, and Honk Mobile, a service that lets drivers find and pay for parking spots within an app. Tearsheet caught up with Amar to get his views on the state of the industry in Canada and areas for future growth.
With such a tech skills shortage looming in Canada and the allure of higher salaries for software engineers in the U.S., how do you keep fintech talent in Canada?
It’s a challenge, but what’s changed over the last five years is that the startup environment and tech community in Canada have strengthened, and they have more resources available to them. We’re doing a better job of keeping Canadian talent in Canada by providing exciting opportunities, and we’re building an ecosystem to retain more of it. And entrepreneurs need software engineers, and the engineers need to be rewarded financially for their support. The Canadian government has also been very supportive, and entrepreneurs now have the ability to offer opportunities to U.S. and European engineers and others who want to spend part of their careers in Canada through work visas and relationships.
Your firm has connections to the Canadian banking sector, including two former senior bankers who have joined as advisers. What’s the role of the Canadian banking community in supporting fintech startups?
Post-2008 crisis, Canada has stood out as having a robust financial services industry and that’s been recognized globally. But if Canada is to maintain that leadership position on a global basis, our large legacy financial institutions have to become more fintech, they have to absorb technology at a faster pace and they have to continue to do what they’re doing now, and that’s support through funding for the [financial technology] ecosystem in Canada.
What consumer-facing trend is most exciting to you right now?
While robo-advisers [once only] used ETFs as the building blocks for their portfolios, we’re now seeing a whole group of robo-advisers that use artificial intelligence and start to dig deeper and have building blocks that are more granular, like stocks, bonds or other asset classes. We’re also spending quite a bit of time on insurance technology, especially ways to meaningfully improve the distribution of insurance products.
But isn’t the robo-advisory space too crowded already?
The problem we’ve had with traditional asset managers is that the performance has not justified the fees that we are paying for them. There is room for a lot of players in the robo-advisory space. As the sector matures, you’re going to see a consolidation, and the ones that have the stronger platform, the widest reach and best results [for the customer] are going to win.
What’s the biggest mistakes entrepreneurs make when pitching you?
The part that we are often frustrated by is entrepreneurs who believe that all they have to do is build it and customers will flock to them. So what we love to see from entrepreneurs is a very clear and defined customer acquisition strategy. Some of the investments that we pass on don’t do enough work on that. It’s about being realistic about the cost of acquiring customers.