This Entrepreneur Sold A Company For Over $2.2 Billion And Now Manages A $2.5 Billion Fund To Support Emerging Founders

In a recent interview, we had the privilege of delving into the fascinating career of Adam Felesky, a visionary entrepreneur who navigated from engineering to the heart of the financial services and fintech world.

Adam’s journey is not just a testament to personal resilience but also a masterclass in spotting opportunities and scaling a business successfully.

Listen to the full podcast episode and review the transcript here.

The Unexpected Path

Born and raised in Western Canada, far from the financial hubbub, Adam’s journey began in an unexpected manner. Originally slated to become an engineer in the oil and gas sector, Adam’s life took an unforeseen turn when he went to university in Eastern Canada.

Soon after, Adam took a job and found himself immersed in the world of investment banking in New York. A brief stint in derivatives set the stage for his entrepreneurial venture. As Adam looks back, he was exceptionally good in Math and was one of those kids who grew up trading stocks, even back in the ’90s.

Adam spent time reading stock quotes and newspapers and was always just obsessed with the stock market. His engineering degree was a backup plan that he could rely on as a profession. But, he knew that he would eventually work in the fintech sector.

Being from Calgary, an entrepreneurial hub similar to Texas, Houston, and Dallas, Adam was surrounded by founders. This atmosphere fueled his desire to build something; investment banking was the foundation for getting there.

The Birth of Horizons ETFs Management

Adam wanted to develop a great view and perspective on different asset classes and what it takes to build a company. Subsequently, he studied derivatives, which are actually built on the foundation of engineering and mathematics.

This was an exciting experience since Adam was trading and interacting with end customers, understanding their fears and concerns. His passion culminated in the launch of Horizons ETFs Management (Canada) Inc., a groundbreaking company that pioneered leverage and inverse exchange-traded funds (ETFs).

Adam recalls how they were structuring some of the first swap-based mutual funds on the derivatives desk in the late ‘90s to early 2000. When the market started to blow up, some of these funds were the only way to protect investors or hedge them.

These were specifically inverse and leveraged inverse funds in the United States. Adam took that technology and concept and productized it in Canada but in an exchange-traded fund form. The company’s innovative approach led to rapid growth, scaling from a few hundred million to billions in a remarkably short period.

From Founder to Investor: Horizons’ Evolution

As Adam explains, Horizon’s ETF primarily focused on equity indices, particularly commodities. At the time in 2008, their products were some of the only ways to get downside exposure unless investors were able to use options of comfortable shorting.

As a result, Horizons had tremendous momentum timing and scaled quickly. This momentum allowed them to branch out and do other adjacencies, which, in turn, helped launch some of the first active exchange-traded funds in the world. These funds account for probably the largest share of Horizons’ assets today.

Scaling and Understanding Strategics

Reflecting on the scaling journey, Adam acknowledges his initial ignorance as a key factor in his success. Starting the business at 28, he credits his lack of preconceptions about the challenges ahead. However, he also recognizes the importance of building a sophisticated team, a lesson learned through experience.

As Adam explains, when building Horizons, venture capital wasn’t as prevalent in fintech, particularly when he bootstrapped the company with a small strategic investor, which created a lot of constraints.

The lack of mentorship Adam had relative to what he sees in his portfolio companies today was isolating. He was making pretty big decisions with relatively little counsel.

Adam explains in detail how strategics work. When building his company, he didn’t have many choices of capital, and the strategic he chose was a publicly traded company. This firm had made multiple investments in different companies, and the CEO at that time was a well-known entity in the market.

Adam considered that helpful since he needed a mentor. However, since the firm had to answer to public markets, that definitely changed and impacted Adam’s company. He advises founders to distinguish who the strategic is and what its strength is in the cap table.

Strategics are actually becoming more and more important and replacing the existing infrastructure. Since the amount of capital that needs to be invested upfront is significant and investments are getting bigger, adopting technology early becomes crucial.

While Adam values the increasingly essential role strategics play, he also underscores the importance of having institutional investors at the table.

He talks about ensuring more extensive ownership and more control rights to ensure that founders don’t end up with a consortium discount or their company is not able to maximize its fair market value.

Navigating Challenges and Transitioning

The fintech space has evolved drastically in the last 20 years with respect to regulatory aspects, the capital raising aspect, and the venture world supporting it. There weren’t any dedicated fintech funds, and the generalists didn’t have dedicated fintech partners.

Most of Horizons’ first models were about democratizing different solutions within the vertical of insurance, wealth, or banking sectors. They focused on direct-to-consumer motions. At the time, the incumbents hadn’t faced innovation and competition from digital players, making it an ideal time to start a business.

Adam recalls that at the time, there was an abundance of capital, and people were willing to experience a cumulative cash burn amounting to hundreds of millions of dollars. This is something that investors are not ready for today. That’s when Adam chose to move on to a different phase.

Around seven years into the company’s journey, Adam sold to Mirae Asset in 2011. At the time, it was managing assets worth $2.2B.

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Transition to the Investor’s Seat

Adam’s journey took an unexpected turn when he transitioned from being a founder to an investor. Motivated by the desire to support and mentor fellow entrepreneurs, he co-founded Portage Ventures. This fintech-focused fund quickly gained momentum, becoming a key player in the industry.

Adam explains how he enjoys being a sounding board and open about the mistakes he made with the hope that other founders can learn from them. He wanted to explore what’s next and experience the adrenalin of being around smart, younger entrepreneurs and learning about their business models.

Adam teamed up with Paul Desmarais III, who wanted to make a difference and saw the opportunity to leverage his generational wealth and broader ecosystem, also in financial services, in a positive way.

Portage is primarily a seed series, fintech-focused fund with a small group of investors. Its first investment was a company that is now a leading fintech in Canada, which at its height, was valued at over $5B. Portage is now investing in great companies all over North America and Europe.

Adam and Paul have been re-investing out of their third fund and are ready to launch their fourth fund. Portage has 75 companies in 13 countries and is managing more than $2.5B in assets. It has seven partners from different backgrounds and experiences, which brings diverse perspectives to the table.

The Vision for Portage Ventures

Reflecting on his experiences, Adam emphasizes the importance of understanding the motivations behind a startup. He seeks out founders who are mission-centric and driven by a passion beyond the potential financial outcomes.

Adam envisions Portage Ventures as the go-to partner for entrepreneurs seeking not just capital but genuine support in scaling their businesses. With a flexible investment approach and a focus on being a true partner, Adam aims for Portage to be the first call for ambitious founders. A capital source they believe will truly help them scale their business and be successful.

Portage invests in the front and seed stages all the way to series C on the venture side. The later stage fund series C goes all the way to pre-IPO. About 50 to 60% of its portfolios are in the US, 20% of the portfolios are in Canada, and the rest are in Europe.

Portage’s target is the large ecosystem of portfolio companies in those countries where its IPs are sourced, along with corporate relationships, regulatory connections, and information asymmetries. These factors make it a differentiated investor in those markets.

Looking Back and Moving Forward

In hindsight, Adam’s advice to his younger self would be to maintain an unwavering belief in the vision, surround oneself with exceptional stakeholders, and stay focused on execution.

His journey serves as an inspiration, illustrating that unexpected detours and challenges can lead to extraordinary destinations.

Adam Felesky’s story is a testament to the transformative power of passion, resilience, and strategic innovation in the ever-evolving landscape of finance and technology.

As Portage Ventures continues to make waves, Adam’s legacy stands as a guiding beacon for aspiring entrepreneurs and investors alike.

Listen to the full podcast episode to know more, including:

• Adam Felesky’s journey from engineering to fintech pioneer demonstrates the power of embracing unexpected opportunities.
• The birth of Horizons ETFs Management showcased Adam’s ability to innovate in the financial services industry, leading to rapid scaling and success.
• Adam emphasizes the crucial role of building a sophisticated team for long-term success, a lesson learned through experience.
  Transitioning from a founder to an investor, Adam co-founded Portage Ventures with a mission to support and mentor mission-centric
• entrepreneurs.
• Portage Ventures, managing over $2.5 billion, has become a fintech investment powerhouse with a diverse portfolio spanning North America and Europe.
• Adam looks for founders motivated by a mission beyond financial outcomes, seeking to make a difference in their chosen industries.
• Adam envisions Portage Ventures as the preferred partner for entrepreneurs, providing not just capital but genuine support in scaling their businesses.

 

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