Why Canadian family office aims to pair FinTech and AI with new accelerator.

AI and finance are a ‘natural fit’, and the Holdun Family Office hopes to connect them in its new accelerator, according to Holt FinTech Accelerator co-founder Brendan Holt Dunn in a research interview with FinTech Global.

The Montreal-based Holt Fintech Accelerator Program, created by the Holdun Family Office, is currently searching globally for 10 FinTech startups for its debut program. Being a family office, Holt Dunn believes it enables the accelerator to observe companies from a client’s perspective as well as an investor.

He said, “We have 8-10 businesses underneath our family office which have all grown to support the family office. So, the accelerator is just a business opportunity that we saw and noticed a gap in the marketplace. We figured that using our brand, network and reputation enabled us to fill it. Therefore us, our advisors and our investors get first rate of refusal on the funding rounds that go throw us.”

Accelerators have played a key role in developing FinTech, with Y Combinator completing the most  deals in the space last year, globally, according to data by FinTech Global. The New York-based accelerator closed 29 transactions, 10 more than Digital Currency Group and Accel Partners made, who were the second and third most active investors in 2017.

Holt’s program will be the only FinTech-focused accelerator in Montreal and the only one which is run in partnership with an AI lab. It is also working alongside Stradigi AI for the accelerator, enabling companies to include and create new technology solutions to greatly improve their service. The partnership was formed due to the interlacing features of AI and finance.

“It’s a natural fit as finance is all data-driven, so it makes sense that most companies should and could benefit from AI. Since we are an investor in an AI lab and an investor in an accelerator, it makes sense to plug those two together, it’s an immediate value add,” he added.

Finance revolves around data, just as AI and machine learning technology is all about improving the use of data. These solutions are able to automate tasks which had previously needed a lot of manual time, and can help a business offer new services like real-time analysis. While Holt Dunn believes that a majority of FinTech companies can benefit from adding in AI technology to their platform, it’s not the right fit for every business.

He said, “I have met some great companies that have great products and are solving a product, but do not need AI. However, those are the outliers. For the majority, I think AI could be a huge benefit for a vast majority of finance companies because it’s all data-driven.” While the accelerator will look to outline the benefits the technology could have, or improve existing infrastructure, it will not force a company to take on solutions they do not want or need.

AI technology has been widely adopted by companies within the FinTech space, but this has meant businesses offering the technology alone can no longer survive. Dawn Capital general partner Haakon Overli previously told FinTech Global that AI technology has become adopted so extensively across all markets, a startup just developing these tools without a strong proposition, will fail.

Offering support from the AI lab to the cohort is one of the unique selling points for the accelerator. Holt Dunn is aiming to reach 400 applications and is expecting to easily hit this mark. Despite the high level of interest, the firm is going to stick with one cohort a year, for the foreseeable future.

This is due to its desire to work alongside the company for an extended period and help them post-program. Companies in the cohort, which goes live in December, will be invited to work in Holt’s office where the will be able to remain even after the three-month accelerator program. This measure has been made to extend the mentoring process and hopefully lead to more success. A company will only need to leave when the next group of companies begin the program the following year.

“Right now, the goal is one cohort a year, so we can spend much more time in-between to scout out the whole marketplace and find the top talents. I think doing two Cohorts a year might dilute the companies you’re bringing onboard.”

The family office decided to launch the accelerator so it could get access to more deal flow and help to foster the development of startups in Montreal. To ensure the companies coming out of the program are ripe for growth and investment, Holt is working in tandem with its partner VCs and banks. Holt is hosting an induction day in Montreal for 30 of the applicants at the end of August, where its partners can get involved with the potential winners and provide feedback on them.

He said, “If a bank comes to us and says these two companies are something that we are interested in as they fit needs or problems we currently have, or a VC fund says a company makes sense and fits with our investment thesis, we’ll acknowledge that. We are bringing back the feedback of all these partners, along with our own feedback to select the top 10 or 12 with the hopes that we’re selecting companies that make sense and fit with the needs of our network.”

Canada

The accelerator is the only one focused on FinTech in Montreal, and the only one in the world to be partnered with an AI lab. Canada is one of the leaders in the world in terms of technology and AI solutions, and Holt Dunn believes that is another benefit of the firm’s new accelerator. There has been a lot of talent coming to the country and supporting FinTech companies, helping to make it an attractive place to set up.

Canada’s FinTech market has been growing in size, reaching a record year for investment volume in 2017, according to data by FinTech Global. Last year, there was $829.5m invested across 60 deals, compared to the year before, which witnessed $558.2m deployed through 73 transactions. The level of capital in Canada’s market has nearly tripled since 2014, when just $288.2m was raised.

Its government has played a big part in helping the country’s FinTech sector develop, having worked actively in embracing technology and being ‘crypto-friendly’. There are efforts to establish the country as a hub for technology, by offering various streams of revenue, which is working as companies like Amazon and Apple are setting up operations there for its technology talent, Dunn said.

“I’m very confident that Montreal or Canada as a whole will continue to be a market leader in technology and/or in AI. The government is very supportive of that and have put tons of money behind that, either public, private or partnerships. A lot of VC funds, have got huge amounts of money from the government all focused-on technology and FinTech investment.”

While the government itself is not going to be a big adopter of FinTech solutions, it has done great work supporting the adoption in the country. Its grants and projects have helped encouraged the private sector to embrace the space, for example the Bank of Canada was one of the early adopters of blockchain technology.

However, there is always work which can be done by regulators to ease the adoption of new solutions and the implementation of new legislation. Speeding up their processes is not the answer though, as this can just bring havoc to the market, with consumers at risk the right protections have not been implemented.

“Regulators are always slow to move or slow to adopt technology because that’s their role as they’re there to protect the consumer. You could always say you’d like them to move faster, but that’s a wish for a trade-off. You don’t want them to move too fast to appease people and build something with increase risk for the consumer.”

Instead, Holt Dunn believes more collaboration and open dialogue with the regulators, startups and financial institutions is necessary to ensure smooth sailing.

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