Difference Capital

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The Future of Canadian Fintech

Written on June 3rd, 2016

Written by:

Difference Capital Fintech Team
Tom Liston, CFA, Managing Partner – tliston@nulldifferencecapital.com
Jordan Udaskin, Vice President – judaskin@nulldifferencecapital.com

At Difference Capital we’re proud to have been one of the first Canadian funds with a focus on the Fintech sector.  We invested before Apple Pay and “Tap and Pay” became household terms and have strong relationships with most of our homegrown tech leaders and innovators. Today our Fintech investments represent a material portion of our portfolio.

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Ethoca

Written on November 30th, 2015

Ethoca is the leading, global provider of collaboration-based technology that enables card issuers, ecommerce merchants and online businesses to increase card acceptance, stop more fraud, recover lost revenue and eliminate chargebacks. Through the Ethoca Network – the first and only of its kind in the industry – we are closing the information gap between card issuers and merchants. This unique capability makes fraud intelligence and card acceptance insight available and actionable in real time. Our suite of services delivers significant revenue growth and cost saving opportunities to our card issuer and merchant customers around the world. Seven of the top ten ecommerce brands, seven of the top nine U.S. card issuers, two of the top five UK card issuers and more than 2,100 ecommerce businesses around the world rely on Ethoca solutions and the network that powers them.

The Future of Payments in Canada

Written on May 14th, 2015

Canada’s Non-Bank Payment Innovators

May 2015

To download a PDF version, please click on the following link:
The Future of Payments in Canada

Canadian Payment Innovation Landscape

At Difference Capital, we closely monitor the financial technology sector and have invested in a number of companies in the space, offering us a unique insight into market trends. This is our latest in a series of primers on the Canadian FinTech sector.

For most consumers, how credit and debit card transactions work is a bit of a black box.  You may swipe or tap your card (or if you are a bleeding-edge tech adopter, your phone) and then the terminal may beep and print out a receipt, but what is really happening, and who is making all this stuff work?

We’re excited about the companies that are enabling next-generation electronic wallet technology as well as companies that are making an impact in evolving payment acceptance.  We view this as one of the top growth areas in fintech over the next few years and will continue to keep our eyes strongly peeled to the ecosystem.

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Shipping-as-a-Service

Written on April 29th, 2015

Sorry, we couldn’t help but pile on to the “…as-a-service” theme

April 2015

To download a PDF version, please click on the following link:
Shipping-as-a-Service

With barbecue season fast approaching, we felt compelled to splurge on a special new cutting board worthy of our masterful steak.  Reminded of its recent IPO, we start browsing on Etsy and found the most wonderful Heisenberg cutting board.  For the non-Breaking Bad fans, we offer our sympathies.  Salivating at the prospect of cutting meat on our new board, we hit the checkout button and to our horror, the shipping costs come in at $44.06, which is more than the actual cutting board.  How can this be?  Everything is supposed to be instantaneous in the digital age.  Where are those fancy drones that Amazon has been working on?  After recovering from our post Heisenberg cutting board depression, we started doing some digging on how shipping and fulfillment actually works in the world of eCommerce.  Fortunately, we found some intriguing new tech startups that have the potential to really disrupt today’s shipping and logistics infrastructure.  Dare we call them “Shipping-as-a-Service” pioneers.

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Digital Money

Written on April 27th, 2015

Bitcoin and Beyond

April 2015

To download a PDF version, please click on the following link:
Digital Money

Prologue

At Difference Capital, we closely monitor the financial technology sector and have invested in a number of companies in the space, which gives us a unique insight into market trends.  Earlier this month, we launched our financial technologies series with “Making Cents of Fintech”.  For our second installment we are focusing on Digital Money – Bitcoin and Beyond.  Stay tuned for more installments to come.

Introduction

Digital money (or crypto-currency) has been around for a while but the concept has been rejuvenated with the rise in prominence of bitcoin over the past five years or so.  We are going to start with a high level description of what this concept entails and then quickly jump into some of the key investable areas that touch digital money along with providing our outlook for the industry.  Overall, we are quite enthused about the prospects of the new technology in helping to reduce the roughly $50 billion in annual friction costs associated with just the eCommerce and global remittance markets.  In the longer term, we see lots of potential to repurpose the bitcoin distributed ledger (or blockchain) for a host of other applications outside of the currency markets.

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Making “Cents” of FinTech

Written on April 20th, 2015

Canadian FinTech Innovators Driving Global Change

To download a PDF version, please click on the following link:
Making “Cents” of FinTech

Canadian FinTech Landscape

It wasn’t too long ago that innovation in the financial sector was said to involve only innovative fees and tweaks to banking hours.  These days nimble organizations, both large and small, have begun to disrupt the Canadian financial landscape and unbundle (and improve) services that were traditionally the domain of only the largest financial institutions.  We’ve seen this disruption story play out many times in recent years (Google – advertising, Netflix – broadcast, Amazon – retail, Airbnb – accommodations, Uber – transport, etc.) and are now seeing it take hold in FinTech.

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Tech Companies Fueling a Nation of Entrepreneurs

Written on December 1st, 2014

A couple of multi-billion dollar start-ups got us thinking.  What’s the common thread between Uber and Airbnb?  They don’t sell stuff to people.  Rather they help people sell their own stuff.  In the case of Uber, they help people sell their driving services.  With Airbnb, it’s accommodations that are sold.  Just a coincidence or something bigger at work?  Then we noticed a few more very successful newcomers that fit this theme – Lending Club, Shopify and Square, among others.  Lending Club helps people make a profit by directly lending to other people.  Shopify and Square help people sell their goods through e-commerce and transaction engines.

Some have termed this the sharing economy or peer-to-peer sharing.  We prefer to look at the theme a bit differently.  There are companies that facilitate sharing such as carpools (Live Rides) or even wifi signals (Fon).  We don’t necessarily include these categories in our definition because the emphasis is on sharing rather than selling.  There are other companies like Shopify that don’t necessarily fit into the “sharing economy” because they sell their software to merchants in somewhat traditional fashion.  Why we include them under our definition is because their tool enables anyone to build an online store and sell things.

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Queen Mary’s Always Insightful Views

Written on June 26th, 2014

Queen Mary’s Always Insightful Views

A few weeks ago, Mary Meeker from Kleiner Perkins published her annual “Internet Trends” slide deck. It’s been a must read for all tech investors for years. However it is 164 slides long this year. So we picked the top 10 sets of slides that resonated most with what we are doing at Difference. If you want the full monty you can find it at: http://www.kpcb.com/internet-trends

Let’s start with some fundamental growth. The next three charts show the three pillars of tech growth (i.e. computing, storage and bandwidth) remain deflationary commodities. Note that these are logarithmic charts! This means that new applications that seemed too expensive or slow are soon cheap and fast. We like ‘em cheap and fast! (Apps that is). For example, years ago Netflix would have been viewed as too much of a bandwidth and storage hog. Now it has over 40 million users.

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When Mad Men Meets Flash Boys

Written on May 25th, 2014

To download a PDF version, please click on the following link:
When Mad Men Meets Flash Boys

Advertising used to be simple business. My newspaper has a million readers. My TV program has a million viewers. Now let’s negotiate what it’s worth to you Mr. Brand to put your ad in front of my audience. The web made this dynamic a bit more complicated, but early on the process was quite similar. My website gets a million hits per month and now let’s figure out what a banner ad is worth to you. The story got more complicated rather quickly as a bunch of genius coders realized that advertising is actually the perfect domain for technology because tech is capable of bringing way more measurement and accountability than ad buyers had ever seen before. It’s not a coincidence that all of those high flying tech stocks you follow are really advertising companies – think Google, Facebook, Twitter, Yahoo, Baidu. Online advertising is a $100 billion global market, or about 10x larger than it was in the early 2000s. This segment has risen from nowhere to become second only to television advertising but growing much more quickly.

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It’s Time to Change the Channel

Written on May 5th, 2014

To download a PDF version, please click on the following link: 
It’s Time to Change the Channel

The way we consume media is evolving at breakneck speed while legacy networks and broadcasters scramble to get out of neutral. Everything we know about the media industry is being transformed by interactive and streaming technologies. There are incredible investment opportunities out there available for those who have done their homework and who know the right people.

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