Impression Ventures has raised a $36-million fund to invest in early-stage fintechs that are thriving despite COVID-19.
“We’re very actively looking for deals. This environment will—whether it lasts another few weeks, months or years—create a lot of opportunity for firms that can reduce unnecessary face-to-face interactions and we’re in a position to help those companies grow,” said Christian Lassonde, the firm’s founder and a managing partner.
This is the third fund for the Toronto-based venture capital firm, which is looking to invest between $1 million and $2 million per company. Impression Ventures has already backed a number of prominent Canadian fintechs including Wealthsimple; Finaeo, a firm that reduces in-person interactions for insurance companies; and Brim, a credit-card issuer.
Talking Point
Impression Ventures has raised a new $36-million fintech fund, but faces an increasingly crowded Canadian VC space. Fintechs attracted US$776 million in funding in 2019, more than double the year prior, and Power Corporation, Luge Capital and Desjardins have all raised new fintech-focused funds. Impression Ventures argues its strong track record—it exited Wealthsimple and made enough to pay back more than its first fund—and founder-friendly terms will help it compete in the space.
The COVID-19 pandemic is accelerating the shift online for many legacy financial institutions. Canada’s Big Six banks, for example, now count technology as their second-largest and fastest-growing expense, and are increasingly reliant on technology like cheque-image capture and e-transfers to serve customers.
“A lot of our portfolio businesses are indicating that even if their business is down in the near term, expectations are even higher that demand will pick up strongly post-COVID-19,” said Maor Amar, the firm’s other managing partner.
Canada’s fintech venture capital space is increasingly crowded. Fintechs attracted US$776 million in funding in 2019, more than double the year prior. In addition, a number of fintech-focused VCs raised funds, including Portag3 Ventures, a $427-million fund from Power Corporation, an $85-million fund from Luge Capital and a $45-million one from Desjardins.
Amar argues one of the ways Impression Ventures is different from other VCs investing in fintech is in the terms it offers founders. “We ask for no special terms. Our preference shares, which is what we normally take, are shares that just offer us liquidation rights, which basically every VC or every institutional investor coming in at that early stage requests.”
The firm, which was founded in 2013 and currently has 14 portfolio businesses, had its first successful exit last year. “We sold our position in Wealthsimple and returned more than the fund back to our investors,” said Lassonde. Impression participated in Wealthsimple’s 2014 seed round, which saw the online investment management service raise $1.9 million. In May 2019, Wealthsimple was managing over $4.5 billion in assets for over 150,000 clients and raised $100 million.
Impression Ventures’ $36-million fund is backed by a number of prominent individual investors as well as multiple institutional investors that the VC has agreed not to name so as not to draw attention from those firms’ COVID-19 efforts.
“It’s a mix of tier-one institutions and individuals who are very much involved in the financial-services sector,” said Lassonde, adding that there was enough interest from investors that he turned some away.
James Estey, the former CEO of UBS Securities Canada, is investing in the fund, as is Claudia Hepburn, CEO of Windmill Microlending. Both are also advisers to the firm. Pierre Lassonde, Christian’s father and an accomplished mining executive whose accolades include leading the world’s largest gold-mining company, is also an investor.
The new fund has already made two investments, leading a $6-million round in Montreal-based FlexPay, which uses AI to help firms collect revenue from declined credit-card transactions, and a $3.25-million round in New York-based Afficency, which saves insurance companies money by digitizing many processes that would typically need to be done in person.
Afficency plans to use the funds to double its staff, from six to as many as 12 by the end of the year, as well as to finish building its technology.
“We are fortunate that we’re a business where, actually, COVID-19 has helped us,” said Afficency CEO Mark Scafaro. “More people are looking for life insurance and we’re seeing that the insurance companies don’t have digital solutions, they rely on sending someone to your house to take blood, and that’s frozen now.”
Unlike many other Canadian VCs, Impression Ventures has not taken any government money, either directly or via the Business Development Bank of Canada.
“It’s a point of pride on our side,” said Lassonde “I think it speaks to the strength of the fund that we can raise these funds and operate and be successful without that support.”
