In Jim Fagan’s ideal world, Ottawa would be mentioned in the same breath as AI hotbeds such as Boston, London, Montreal and Silicon Valley.
The vice-president of corporate development at local artificial intelligence startup MindBridge Ai knows the city isn’t quite there yet. But from his vantage point at MindBridge, one of Ottawa’s fastest-growing tech ventures, he sees no reason why it can’t be.
Fagan and his colleagues are doing their part to promote the National Capital Region as a “centre of excellence for AI in Canada and North America for that matter,” he says, pointing to the popularity of Impact Ai, a conference his firm launched in 2018 that drew a crowd of more than 800 in its second go-round at Bayview Yards in May.
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If Ottawa is to reach that lofty status, MindBridge will likely be leading the ascent.
The company, which uses AI to detect fraudulent accounting activity in its customers’ books, has had a breakout year in 2019 and looks poised for even bigger things to come. And the firm now has plenty of rocket fuel in the tank to help drive that growth, thanks to a series-B round of financing worth $29.6 million it secured in June.
OBJ and the Ottawa Board of Trade’s 2019 finance deal of the year is a mix of federal government funding and private venture capital.
MindBridge will receive $14.5 million over the next seven years through the feds’ Strategic Innovation Fund. The cash will help finance a $140.8-million project aimed at broadening the company’s AI auditor tool to harvest data insights for companies beyond the accounting field.
The rest of the new financing comes from a group of venture capital firms. New York-based PeakSpan Capital led the round with participation from Real Ventures, Reciprocal Ventures, The Group Ventures and the National Bank of Canada.
“It’s helping us accelerate and scale that up and grow the team across all disciplines,” says Fagan, noting the company’s headcount has nearly doubled to just shy of 120 since the beginning of 2019, with more than half of those staffers devoted to R&D.
The series-B round brings MindBridge’s total financing to date up to more than $40 million, and potential investors are keeping the phones at its rapidly expanding headquarters on St. Laurent Boulevard ringing off the hook.
Fagan says the office gets at least three or four unsolicited calls a week from VCs itching to get a piece of a firm making a name for itself with a list of 330 customers that includes the Bank of Canada, Bank of England, Payments Canada and one of the country’s Big Six banks.
“They see what we’re up to, and we’re creating a lot of interest,” he explains.
Still early in its scaleup journey, MindBridge has taken a patient approach to attracting capital. CEO Eli Fathi, a seasoned entrepreneur who co-founded and sold Ottawa-based Fluidware to SurveyMonkey in 2014, stresses the importance of “putting business fundamentals first,” in the words of founder Solon Angel.
“You really want to have a partner that supports what you’re doing and the team and lets you run the organization to scale and grow it,” explains Fagan. “We’ve been very strategic in how we’ve been raising funds. They may not have been the largest rounds that you see, but you take a look at the timing of them. We’re bringing in the funds that we need to accelerate as we see fit and as we see the market mature.”
When the folks at PeakSpan Capital contacted MindBridge last year as the startup was in the final stages of securing an $8.4-million series-A round, Fathi and Co. were only too happy to listen. Founded in 2015, PeakSpan now has a portfolio of 40 high-growth enterprises in the business software space, and the MindBridge team was impressed with its strategy.
“They make just a few select investments each year,” Fagan says. “They truly believed (in) what we were doing.”
The Ottawa firm was already committed to its partners in the series-A round but kept in touch with PeakSpan’s top fund managers. In a series of visits and meetings throughout 2018 and early 2019, the seeds of the series-B were sown.
“Over the course of that year, it just seemed like a great fit,” says Fagan. “They have a great understanding and grasp of the market that we’re going after. They have the conviction that we’re looking for in the partnership as well as their leadership and strength that they can provide to the corporation.”
Though Canadian AI startups still lag far behind their U.S. counterparts when it comes to landing VC funding, Fagan says he thinks investments like the ones the feds made in MindBridge this summer will help level the playing field.
“It just shows the amount of money that can come in, both from the private side and the public side,” he says. “It helps narrow that gap to give us a more competitive advantage with any potential entrants that would be coming up from south of the border.”
While most of its clients are now based in the U.S., Canada and the United Kingdom, MindBridge plans to push hard into the lucrative European market in the year ahead.
It’s also aiming to continue diversifying its client base, which is heavily geared toward accounting firms. Fagan sees plenty of room for growth in the financial sector, for example, and he sees nothing but smooth runway ahead.
“Everywhere we go, people seem to know MindBridge,” he says. “It’s humbling.”
Previous funding rounds for MindBridge Ai:
June 2017: $4.3M seed round
- Capital Angel Network, Fresh Founders, MaRS Investments and Real Ventures
Spring 2018: $8.4M series-A round
- Real Ventures, 8VC, National Bank of Canada, The Group Investment, Reciprocal Ventures