Vancouver-based Koho has raised an $8 million funding round from Portag3 Ventures.
The company raised its first disclosed $1 million funding round in May 2015, and secured funding from Power Financial — the giant behind FinTech-focused Portag3 Ventures — a year later.
“They, like us, are patient in terms of building a sustainable long-term business in this industry,” said CEO Daniel Eberhard when asked why Portag3 was a key investor. “We believe this is a really important business to build, and it can create a lot of value for people. They’ve obviously been instrumental in Wealthsimple’s growth, and that’s a company we have a great deal of respect for.”
BetaKit has been covering Koho since 2014, when the company was still working on a beta that it hoped would decouple the consumer experience of banking from banks themselves. The company only officially launched in March 2017, with a millennial-focused platform provides users with insights into their spending habits, real-time purchase updates, and financial services like e-transfers, access to 8,000 fee-free ATMs, and making purchases with its Koho card. The cards were the result of a Visa partnership from 2015, while Peoples Trust Company holds the money and Galileo processes transactions.
“It’s a hard business to build and launch. It takes eight to 12 months just to get the agreements in place often before you do anything in this industry, let alone on the technology side,” said Eberhard. “We’re taking a long view on the industry more generally, which is really investing in a foundation of technology and a product experience that can scale. I think that pays dividends long term.”
Eberhard suggested that the company is trying to avoid the growth hype cycle that tends to be common in FinTech. “I’ll be the first to admit it, it’s a hard business to build and it takes a long time to get to market. But given that, we think the way to do is to invest in the technology that’s gonna let your industry scale.”
Koho plans to use the funding to scale its technology platform and hire more engineering and operations at its new Toronto headquarters. Eberhard said that the company expanded in Toronto due to its proximity to strong financial institutions and companies.
“It’s a hard business to build and launch.”
– Daniel Eberhard, Koho CEO
“I think we’ve really reached that late product-market fit stage where we’re seeing consistent usage, and we’re seeing healthy growth rates and adoption rates. And we know this is going to be a capital-intensive business to build, and it’s kind of that incremental process where you prove to your sources of capital that you have a core business.”
Eberhard said the company expects to raise a large round next year. “Now, it’s time to get this to a few hundred thousand Canadians.”
The company has made new additions to its board of directors, including Power Financial SVP and Portag3 Ventures executive chairman Paul Desmarais III; Portag3 president Adam Felesky; and Wealthsimple co-founder and CEO Michael Katchen.
“We’re thrilled to support this promising FinTech company. We look forward to working with Daniel and the Koho team to bring Canadians more inclusion, transparency and access to these great financial services,” said Paul Desmarais III, Senior Vice-President at Power Financial Corporation and Executive Chairman of Portag3.
“It’s an exciting broader story for the Canadian FinTech ecosystem,” said Eberhard. “We’re now Portag3’s second biggest investment behind Wealthsimple. We’re excited about the opportunity.”