Neo Financial CEO and co-founder Andrew Chau, centre, with co-founders Jeff Adamson, left, and Kris Read at Neo's headquarters in Calgary.Todd Korol/The Globe and Mail
A Calgary startup led by two SkipTheDishes founders has raised $25-million from some of North America’s top investors including billionaires Peter Thiel, Peter Thomson and Shopify CEO Tobi Lutke, to build a digital challenger to Canada’s big banks.
Neo Financial Technologies Inc. said Wednesday it had raised $25-million in equity led by Mr. Thiel’s Valar Ventures and backed by funds including Montreal’s iNovia Capital, Mr. Thomson’s Thomvest and Dragons’ Den star Arlene Dickinson’s District Ventures. Other investors include past backers of SkipTheDishes, the Winnipeg-based food delivery service bought by Britain’s Just Eat PLC in 2016, including Toronto’s Golden Ventures, Mr. Lutke and FJ Labs, as well as Afore Capital and Maple VC.
(Mr. Thomson, the founder and chairman of Thomvest, is also co-chairman of Woodbridge Co. Ltd., which owns The Globe and Mail.)
Neo has also secured a $25-million debt facility from ATB Financial, one of two financial institutions – the other is Concentra Bank – with whom Neo is partnering to offer high-interest savings bank accounts backed by the Canada Deposit Insurance Corp.
Neo chief executive Andrew Chau – who, along with chief merchant officer Jeff Adamson were senior executives with SkiptheDishes – said his two-year-old company has built the infrastructure to offer a savings account accessible by smartphone and a Mastercard credit card. It has also signed up 2,000 merchants including e-scooter company Bird, Esso and Guardian Drugs to join a loyalty points program. This week, Neo began formally signing up customers from a waiting list the company says numbers in the tens of thousands.
“We’re here to build a meaningful company and get to millions of users,” Mr. Chau said. “The Canadian banking industry is massive, yet the last meaningful challenger was ING Direct,” which launched in the 1990s and is now called Tangerine Bank and owned by Bank of Nova Scotia. “There is such a huge opportunity to layer technology and essentially rebuild the entire banking stack from the ground up.”
Neo’s savings account pays 1.55 per cent annually – much higher than the big banks – and comes with unlimited transactions and no monthly fees. The company claims it takes customers just three minutes to sign up. Mr. Chau said the company plans to expand its offerings to include mortgages, loans and investing products.
Matt Golden, managing partner of Golden Ventures, said that Mr. Chau and Mr. Adamson are passionate, skilled and have the experience in building a big company. “They understand the value of putting their customers and partners first as they did at SkipTheDishes and they will do the same in building a better banking experience for all Canadians through Neo.”
Maple general partner Andre Charoo said the pair “achieved something most people didn’t think was possible on the Prairies.”
He said that success, plus their ability to sign up thousands of merchants for a loyalty program and their home base in Canada give Neo an advantage against other challenger banks from the United States that might be interested in the Canadian market.
Billions of dollars have flowed into the Canadian financial-technology and payments sector in recent months in a flood of public listings, private financings and major acquisitions.
Montreal-based payments company Nuvei Corp. closed the Toronto Stock Exchange’s largest-ever tech initial public offering in September. Nasdaq Inc. bought the St. John’s-based fraud-detection software company Verafin in November for US$2.75-billion. Montreal’s Lightspeed POS Inc. bought two U.S. restaurant-management software companies for more than US$400-million apiece. Toronto wealth-management scale-up WealthSimple Technologies Inc. raised $114-million in October.
And on Tuesday, the Toronto-based free credit-score provider Borrowell – which, like WealthSimple, is backed by Power Financial’s Portag3 Ventures – said it had bought British Columbia’s Refresh Financial, which helps clients get better access to credit.
Though Borrowell gives clients credit scores and financial coaching for free, it makes revenue through referrals to financial services companies whose products and services align with clients’ financial goals. The company has worked with Refresh in this capacity for three years: Refresh’s products, including credit-building loans and secured Visa cards, are designed to improve a person’s credit.
“By bringing them in-house, we can do an even better job at identifying how consumers can use those [tools] productively,” Borrowell CEO Andrew Graham said in an interview. “And by using these products, we can recommend what can come next.”
The companies declined to share the value of the transaction, but Mr. Graham said the acquisition would double both Borrowell’s headcount and revenue. Borrowell had 65 employees before the acquisition.
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Sean Silcoff
Josh O’Kane