Royal Bank Expands Reach into Growing Canadian Tech Sector with New RBCx Platform – –

Royal Bank Expands Reach into Growing Canadian Tech Sector with New RBCx Platform – –

The Royal Bank of Canada has rebuilt its innovation banking unit to help technology companies grow, with the aim of using its size and reach to reaffirm a leading position against its Canadian and American rivals.

The bank is officially launching RBCx this week, a new platform led by Bay Street venture capital veteran Sid Paquette that will include a broader set of products to provide capital to fast-growing tech companies.

To differentiate itself in an increasingly competitive market, RBC intends to offer its core products a range of advantages. These will include partner discounts in areas ranging from cloud computing to accounting, personal banking and personalized wealth management, as well as partnership and sponsorship opportunities.

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RBC is not new to tech banking – it was one of the most prolific Canadian financiers in the domestic industry during the dot-com boom. But it gave ground to its rivals in the mid-2000s. First, US rivals Silicon Valley Bank and Comerica Inc. entered Canada, claiming a larger share of the market. More recently, the Canadian Imperial Bank of Commerce, the National Bank of Canada and the Bank of Montreal have added resources to take advantage of an explosion of activity in the domestic sector.

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CIBC bought Wellington Financial in 2018 as the cornerstone of a new innovative banking unit, sparking a wave of competition that saw other banks poach executives and redouble their efforts to win business from them. tech companies, some at the expense of RBC.

To prepare a response, RBC drew on the ranks of venture capital and entrepreneurship to refresh the team at the helm of its technology banking unit. RBCx’s approach reflects the bank’s broader strategy of using its size and reach to draw customers into deeper relationships by offering them more than basic banking products.

“It takes so much more than capital,” Paquette said in an interview. “Equally important are the non-financial products and services that will help these technology and innovation companies grow their businesses. “

Even at launch, RBCx is a work in progress. “There are products that we must bring to the market to be directly competitive, we are missing a few,” said Mr. Paquette. The bank is developing a risky debt product as part of a suite of new customer offerings and is working on a strategy of direct investment in businesses.

The unit also takes a different approach to venture capital: rather than passively waiting for venture capital funds to seek bank support, RBCx has decided to ‘turn the tide’ and proactively pursue top-performing companies like Vancouver-based Version One Ventures to take money from the bank, Paquette says. RBCx also supported Lumira Ventures of Toronto, making the bank one of the few Canadian institutional investors outside of Quebec to engage in venture finance in the life sciences sector.

And RBCx has built what it calls a “marketplace” of offerings such as discounted prices from leading companies in marketing, consulting, recruiting, law and other fields, specifically for “bribe-free” clients for RBC, said Nicole Kelly, director of RBCx. of the platform’s engagement. Other than winning goodwill from customers, “we don’t get any benefit from it,” she said.

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RBC hired Paquette in March 2020, as Canada was on the verge of plunging into containment measures in the event of a pandemic. A former general manager of the venture capital arm of the Ontario Municipal Employees Retirement System, he is one of Canada’s best-known VC investors, but lacks the typical banker experience.

“He brings to RBC a perspective of what is missing in the tech ecosystem compared to maybe another bank that just wants to work to get more shares of tech companies,” said Michael Serbinis, Founder and CEO of health technology company League Inc., where Mr. Paquette is a member of the board of directors.

Mr. Paquette, who reports to Greg Grice, Executive Vice President of Corporate Financial Services at RBC, now has a team of 85 people, two-thirds of whom are from the bank’s knowledge industries group, and the remainder hired from external or other parts of the bank.

Notable outside hires include Managing Director Tony Barkett and Managing Director Tyler Kirk, both of Silicon Valley Bank; and Ms. Kelly and Venture Capital Director Anthony Mouchantaf, both of whom followed Mr. Paquette of OMERS Ventures. By the end of the year, Mr. Paquette expects to have over 100 employees.

“It’s really kind of a mix between your traditional commercial banking team that specializes in technology all the way to VCs who have never been to a bank before,” Paquette said.

Mixing the spirit of entrepreneurial investing with the risk management restrictions and capital rules of traditional bank lending is the secret sauce of tech banking. But it’s also what can cause big banks to pull out of the industry when they are going through tough times, as many did after the dot-com crash. RBC intends to recruit clients ranging from “two girls in a garage” to tech giants, Paquette said, who often don’t fit the typical profile of a bank’s commercial borrower.

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“The key with Sid is his adaptability,” said John Ruffolo, who worked closely with Mr. Paquette at OMERS Ventures and said he had “an exceptional flair” for technology investment.

RBCx must also coexist with RBC Ventures, a startup accelerator the bank launched in 2018 to reach potential clients long before they need banking products. Mr. Paquette said the two units have “a very close relationship”.

With the booming Canadian tech sector, growing rounds of funding, and increasingly common multi-billion dollar valuations, Paquette is confident that RBC’s current push into tech banking will endure even if the leaders of the bank change and the cycles change. But he also said that RBCx must continue to evolve to keep pace with the competitive dynamics of the industry.

“It is not a strategy to be defined and forgotten. It’s a perpetual movement, ”he said. “It’s going to take a little while. It won’t take as long as expected. “

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