Frank Stella's Carpetbag 1987 on the wall beside theatre promoter David Mirvish.Fred Lum/Globe and Mail
Arts impresario David Mirvish is making a significant investment in financial technology firm FundThrough, the modern-day equivalent of the small-business lenders that helped him and his entrepreneur father start their own successful companies years ago.
With a $3.2-million investment, Mr. Mirvish is the largest equity investor in the $34-million Series A financing, which includes $9-million in equity and a $25-million credit facility. The move is Mr. Mirvish’s first direct investment in a fintech company and a departure from his regular investments in theatre, art and real estate.
“I usually invest in my own businesses … It’s very unusual for me,” says Mr. Mirvish, 73, a theatre producer who operates four live theatre venues in Toronto and is an art collector and real estate investor. He also owned and operated Honest Ed’s, the iconic Toronto discount department store opened by his father in 1948 and which closed in 2016.
Mr. Mirvish, who is asked regularly to invest in various ventures, learned about FundThrough through a much smaller investment he made in ScaleUP Ventures, an early-stage technology fund launched in May, 2016. He met FundThrough co-founder and chief executive Steven Uster at a ScaleUP investor event last fall.
“I recognized something from my youth,” Mr. Mirvish says of the FundThrough business model, which gives businesses a cash advance on the value of their invoices. “I immediately recognized our roots … Without it, we would never have been in business.”
Mr. Mirvish says his parents relied on the funding model, also known as factoring, to open a dress shop in 1941 on Toronto’s Bloor Street West that later turned into Honest Ed’s. “By factoring those receivables, they had the money that enabled them to buy more inventory to sell and that allowed them to grow their business,” Mr. Mirvish says. “It was a very important part of our history and our experience as newcomers to the country starting a new business, as young people coming out of the Depression and having an opportunity to grow the business.”
The younger Mirvish also owned an art gallery from 1963 to 1978, which he says was also initially funded through a loan based on his accounts receivables, since at the time customers would take up to a year to pay for a painting. “I understand FundThrough because it’s the type of business that helped me, and will help others,” Mr. Mirvish says.
He sees FundThrough’s technology-based underwriting model as more business-friendly than the options available back in the 1960s. FundThrough says it vets borrowers by assessing their invoice track record, including who they invoice, how often and how quickly they get paid.
“It’s a new world. When I borrowed that money I was grilled up and down, like I was a criminal,” Mr. Mirvish says, with a laugh. “I see this as a good investment … It also fits with the family history of trying to supply something that people need, that will be useful to them.”
Mr. Uster says he was pleasantly surprised when approached by Mr. Mirvish who, as with many of the smaller investors in this and previous financings, understands the need small businesses have to continue operating while they wait to get paid. “It’s like a pay-it-forward story,” Mr. Uster says. “They have experienced the cash-flow gaps we are solving … and wish they had known about something like this when they started. Now they want to help others grow.”
The equity round, led by Mr. Mirvish and ScaleUP Ventures, includes participation from several other entrepreneurs and brings FundThrough’s total equity financing to $15.4-million. Toronto-based merchant banking firm Intercap Inc. is providing the $25-million credit facility.
Mr. Uster says the latest round of funding will help his company speed up its technology development to further grow the business, including nearly doubling its 27-member staff by the end of the year. It will also help the company with plans to aggressively expand into the United States. The company has lent more than $100-million to small businesses since it was founded in 2014.
ScaleUP Ventures was the lead investor for FundThrough’s $24.6-million seed round (equity and loan capital) in the fall of 2016 and hopes the latest round will help the company expand its reach. “We think it can be a very big winner for us,” says ScaleUP managing partner Kent Thexton.
Mr. Mirvish says he did a lot of research before making his investment in FundThrough. “I asked as many questions as I could. I hope I wasn’t being a pest,” he says.
He was particularly attracted to the power online commerce has in today’s society — the same technology that was partly to blame for the closure of Honest Ed’s.
“The way we serviced people was no longer effective,” Mr. Mirvish says of the former family business. That experience is what led to his initial investment in ScaleUP. “I thought if there was a way to support other businesses on the internet, that would be interesting and I’d want to learn about it,” he says.