Has 2018 been the best year ever for FinTech in Montreal? The answer depends on who you ask, but everyone agrees that Montreal has come a long way in closing the gap with some of the big boys in FinTech. A number of events made the calendar this year, and several other grew significantly.
One significant development was the launch of a new FinTech specific fund here in Montreal. David Nault, Co-Founder and General Partner at Luge Capital believes he and his backers picked the right time to dive into FinTech. “We saw many new FinTechs created this year in Montreal and with the tech talent here and the involvement of financial institutions, we do not see this slowing down anytime soon. This is one of the most promising sectors for startups and venture capital as financial institutions have a goldmine of data, customers and industry insights as well as a motivation to collaborate with early stage innovation. 20% of all investment in AI is now done by financial institutions”.
No less than 10 significant events with a FinTech component took place in Quebec this year, and some, notably Startupfest and Fintech Forum, had record breaking years when it comes to their attendance numbers. Here’s the list:
- FormFintech – Ascension program (Feb – April)
- InsurTech QC (April)
- FormFintech – Formathon 2018 (May)
- FinTeQC (June 20-21)
- Desjardins Data Cup (July)
- Startupfest (July 10-14), which also for the first time included CryptoFest,
- Cooperathon (Sept 26 to Nov 1)
- FinTech Forum (Oct 29-31)
- Desjardins Entrepreneur in residence program (May – November)
Relative to just two years ago, FinTech in Montreal is growing at an exponential rate. On top of Luge Capital setting up shop in Montreal and being backed by some major players in the financial industry, a second new player emerged onto the city’s FinTech scene later in the year. Led by well known FinTech evangelist Jan Arp, and backed by the Holdun Family Office, the Holt FinTech Accelerator welcomed its inaugural cohort this fall. This, after an exhaustive global search for the best FinTechs available.
“I think we’re helping put Montreal on the global map as far as Fintech” says Arp, who’s team selected 13 startups for their first cohort, many from far away places. “We reached out and brought in teams from all over the world. Of the 13 we worked with, several companies we’re working with now have local partners as well”.
When looking at how the FinTech ecosystem in Montreal has evolved over the last 18-24 months, there’s no doubt that catalysts like Nault and Arp have been a driving force behind much of the progress that has been made. That being said, different groups have played their part. VCs are finding interesting FinTechs to invest in, entrepreneurs are stepping up with talent and ideas, financial institutions are collaborating and investing large sums, and academia has come to the table as well. Arp also believes that it also took some time for some stakeholders in the industry to embrace the term FinTech. “Paysafe, Pivotal, Lightspeed, Thinking Capital, Evolocity… Oceanwide and Equisoft on the insurance side… Maybe we didn’t have that FinTech branding yet a couple of years ago?” said Arp, who added that he was speaking to the founder of one of those companies a year ago and was told “I didn’t know I was in fintech until someone told me”.
Arp is also the Founder of FormFintech, which released a study on the FinTech ecosystem this fall. That study indicated that the number of new FinTechs in Quebec has hit peak level in the 2015-2017 period (2018 numbers are not yet available). Whereas the number of new FinTechs in Ontario peaked in 2014 and 2015, and has actually declined since then.
As for what lies ahead in 2019 and beyond, Nault believes that financial institutions are in it for the long haul when it comes to FinTech innovation “We do not see them slowing down on innovation, they can’t”. He explains that there are large tech giants who are putting pressure on the banks to improve their customer experience by making it more affordable, reducing redundancies and so on. For these reasons, he believes FIs will continue to seek innovation and partnerships with early stage FinTech companies.
When asked about the impact of a possible recession on the advancement of FinTech, Nault remains bullish. “Typically, VC funds have a minimum of a 10-year horizon and Luge Capital being at the beginning of capital deployment means there is and will continue to be funding available. There are also new funds that will have FinTech as part of their investment thesis, which will be announced in 2019. These funds will want to deploy capital in promising companies. Even if the market tightens up, it will only mean that entrepreneurs will need to be more prepared with metrics when raising capital as valuations could swing to the benefit of investors”.
For his part, Arp believes that these things work in cycles “I’m curious to see what 2019 will bring. If you look at funding, it may slow from an angel perspective as some budgets tighten up. But that’s not just going to be in FinTech, that’s for everyone. But most of these institutional VCs already have their funds. The question becomes when they need to raise additional funds, what will the impact be at that point? Right now, I think there’s enough critical mass for Montreal to keep going at this rate”.
And with the continued involvement of FIs like National Bank and Desjardins, the AMF’s role in adapting regulations for the digital age, along with other actors including, iNovia Capital, Impressions ventures, Ferst Capital and others, Nault and Arp may just be right… Montreal Fintech may be poised for another record breaking year in 2019.