Tiger Global leads $30-million investment in one of Canada's fastest growing startups, SMB credit card issuer Float - The Globe and Mail | Canada News Media
Rob Khazzam, CEO and co-founder of Float, joined the company in March after leading Uber’s expansion in several European markets and Canada.Fred Lum/The Globe and Mail
U.S. private capital giant Tiger Global Management is making a big bet on one of Canada’s fastest-growing startups, Float Financial Solutions, a Toronto company aiming to change how Canadian small and medium-sized businesses spend their money.
Tiger Global is leading a US$30-million investment into Float Financial just five months after the startup raised US$2.8-million in a seed financing equity deal. It’s at least the sixth Canadian investment this year by Tiger, which is renowned for offering fast-growing tech companies big dollars at rich valuations, and a willingness to close deals rapidly.
“We were impressed by how rapidly the Float team delivered a product that customers love after launching earlier this year and believe the company is well positioned” for years of growth, Tiger Global partner Alex Cook said in a statement.
Float Financial is leading a pack of new entrants trying to bring financial alternatives to Canadian small and medium-sized businesses (SMBs) that say they are underserved by big banks. They are following the lead of more established U.S. upstarts including Brex Inc., Ramp Business Corp. and DivvyPay LLC, which have achieved valuations into the billions of dollars by offering their SMB clients corporate credit and charge cards, backed by software to manage spending.
Other startups betting Canada also has a similar potential include Toronto’s Caary Capital Ltd., and Jeeves Inc. of New York, which launched in Canada last week. Corporate cards are useful for smaller enterprises, but can be hard to get from traditional lenders because of difficulties underwriting credit risk of unproven companies.
Float Financial is off to a fast start. It had five customers in March, processing less than US$10,000 in payments that month. Now, the company says, it has hundreds of customers and processes US$1-million-plus weekly.
The new funding reflects that torrid expansion, valuing the 15-person company at 10 times the level it achieved in June. “The traction we’re having is pretty explosive,” said Rob Khazzam, Float Financial’s chief executive officer. Mr. Khazzam joined the company in March after leading Uber’s expansion in several European markets and Canada. “At Uber I saw really fast growth. But this has blown away my expectations.”
Joining Tiger Global in the round are several big-name Canadian tech founders including past Float Financial backers Michael Hyatt, Michael Katchen and Kirk Simpson; private equity stalwart Brent Belzberg; Russ Jones, former chief financial officer at Shopify Inc.; and Golden Ventures, Garage Capital, Susa Ventures and Tiny Capital.
“It’s one of the fastest growing companies we’ve ever seen,” said Chad Byers, general partner with San Francisco-based Susa, a backer of U.S. online trading startup Robinhood Markets Inc.
Float has “nailed product market fit,” said Mr. Hyatt, one of Float’s first investors. “They have a product that everybody wants and their client acquisition is extremely fast.
A major selling point: The cards Float Financial and its rivals offer do not require personal guarantees from business owners. To sidestep the underwriting risk banks face, Float uses a prepaid model: Clients fund an account upfront and can create, control or destroy any number of physical and virtual cards, including single-use cards for specific purchases. Its software makes it possible to set automatic spending controls and receipt collection, and integrates with accounting programs.
Caary Capital also offers corporate cards and similar software, but with a key difference: It offers credit based on a client’s perceived risk level at interest rates in the low- to mid-teens. Caary, which raised $4.6-million in seed funding last summer, partners with data aggregator Flinks to access clients’ transaction data and combine it with other information sources to make credit decisions. Caary plans to bring on up to 100 new clients over the coming months and fully launch in early 2022. “For us, the strategy is really more building that longer-term credit relationship,” Caary CEO John MacKinlay said.
The model Float Financial and Caary Capital are emulating has worked south of the border: Last week, TechCrunch reported that Brex had signed a deal to raise US$300-million, valuing the four-year-old company at US$12.3-billion. Brex last raised US$425-million in April. Tiger Global was the lead investor.
While many Canadian startups look to global markets to expand, Mr. Khazzam and Mr. MacKinlay believe there is enough of a market at home to grow larger, with hundreds of thousands of potential clients. Their research suggests up to 80 per cent of smaller businesses would like to use corporate credit cards, but only a fraction do.
Dan Park, a former Uber colleague of Mr. Khazzam’s who runs online auto sales startup Clutch Canada Inc., said since his company added Float Financial it has issued cards to three-quarters of its 160-person staff. They collectively run about 100 transactions a day through the system. “We can create a card for each different expense item and have that seamlessly integrate with our expense and reporting systems,” said Mr. Park, who is also a Float Financial investor.
So far, Float Financial and its peers are filling a niche rather than disrupting a segment of traditional lenders. But they plan to expand their offerings to areas such as instalment lending, and Mr. MacKinlay said Caary Capital is open to partnering with big financial institutions.
As competition increases, these companies could also become acquisition targets for U.S. rivals or Canadian banks. “Do we see a takeout, potentially? For sure we’re open to anything,” Mr. MacKinlay said. “Right now we’re focused on building a great business.”
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
