Domestic Capital Gap Forces Canadian Fintechs to Look South
AI-generated image · Bay Street Wire
Adam Felesky warns that a lack of pension fund backing for local GPs is leaving growth-stage companies vulnerable to U.S. competitors.
Canadian fintech companies targeting the domestic market are facing a critical shortage of growth capital, as BetaKit first reported. Adam Felesky, CEO of Portage, the fintech investment arm of Power Corporation, noted that while capital is available for companies chasing global customers, there is a distinct gap for those focusing on the Canadian market.
Speaking at the Canada FinTech Forum in Montréal, Felesky identified a specific need for more investment vehicles similar in size to Portage, Export Development Canada, Business Development Bank of Canada, and Inovia to bridge companies between Series A and Series D funding. He cited Wealthsimple as a company Portage funded through to Series D, noting that as companies scale, the required cash injections can become too large for a single fund's concentration limits.
To solve this, Felesky told BetaKit that Canadian pension funds must either back general partners (GPs) or engage in direct investments. He pointed to JP Morgan as a model for how financial incumbents can invest billions into startups that transform their own business models.
This capital vacuum creates an opening for U.S. entrants. Felesky highlighted how Ramp is competing with Float and Robinhood is challenging Wealthsimple. While he expressed confidence in domestic players, he noted that international firms often view Canada as "rest-of-world," which gives local brands a competitive advantage in building specifically for Canadian citizens.
Ahead of Mark Carney’s Canada Investment Summit, Felesky indicated that the sentiment among pension funds is shifting toward more openness regarding the support of local GPs.