Wealthsimple’s chief executive officer Michael Katchen at the company’s Toronto office in July. It has become one of the few Canadian technology companies to achieve a $10-billion valuation.Cole Burston/The Canadian Press
Wealthsimple Technologies Inc. has become one of the few Canadian technology companies to achieve a $10-billion valuation after striking one of the largest domestic venture capital financings in recent years.
The Toronto online financial services provider said Monday that a group led by Dragoneer Investment Group and Singapore sovereign wealth fund GIC had invested $750-million in the financing. Of that, $550-million went to the company, with the balance used to buy shares from existing investors. Wealthsimple has previously raised $630-million from investors.
The Canada Pension Plan Investment Board also invested, as did existing backers Power Corp. of Canada and affiliate IGM Financial Inc., which each put in $100-million to roughly maintain their 54.2-per-cent combined pre-deal stake. Power said in a release that the value of its pre-existing stake had jumped by 47 per cent since June 30 as a result of the financing. Previous U.S. investors in the company – ICONIQ, Greylock and Meritech – also participated.
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The deal is the latest in a string of multi-nine-figure financings this year by Canadian tech companies including Cohere Inc., Jane Software Inc, StackAdapt Inc. and Tailscale Inc., and comes a week after Wealthsimple said it had surpassed $100-billion in assets under administration, up nearly 100 per cent from a year ago. It hit that milestone three years ahead of plan on the strength of soaring markets, which have enticed more Canadians to pour money into online trading accounts.
San Francisco-based Dragoneer, one of the world’s leading late-stage tech investors, led the most recent financing by generative artificial intelligence giant OpenAI, Inc. and has backed well-known tech giants including Uber Technologies, Inc., and Airbnb Inc. It also owns part of PointClickCare Technologies Inc., another one of Canada’s most valuable private tech companies.
CPP’s involvement is particularly noteworthy as Canadian pension funds are often criticized for not investing more in domestic innovators.
“We’re very excited that in some ways we’re making all Canadian pensioners shareholders of Wealthsimple by bringing CPPIB on board,” Wealthsimple chief executive officer and co-founder Mike Katchen said in an interview. “Hopefully that means there is more of that to come and it’s paving the way for even more investment in up-and-coming great Canadian companies.”
Wealthsimple’s surge in assets has accompanied an explosive trend of Canadian investors looking to take ownership of their own savings and retirement. While the big banks continue to dominate online trading in terms of asset size, Wealthsimple says it added more accounts and had more trading volume than any other online Canadian brokerage last year.
The company debuted in 2014 as a disrupter to financial services companies by offering algorithms that could calculate risk profiles for do-it-yourself investors. It later launched savings accounts in partnership with other Schedule I banks to hold client deposits in trust, rather than pursuing its own banking licence, and also offered digital stock and cryptocurrency trading, tax filing services and mortgage products.
This summer, it boosted its banking services with an upgrade to its zero-fee chequing account, an unlimited cashback credit card, a secured line of credit, home cash delivery, paperless cheques, bank drafts and wire transfers. Last week, it announced several upgrades to its investing platform, such as access to low-interest RRSP loans, investment portfolios that include exposure to private markets, fractional ownership of physically backed gold, direct indexing and more advanced options-trading strategies.
It also now allows clients to move mutual fund accounts from other institutions and reinvest them in ETF portfolios with similar market exposure but much lower fees.
“We’re on a roll,” Mr. Katchen said. “For us, the real question is, for an organization of our size, how do we keep ensuring Wealthsimple can keep innovating, keep driving the market forward for our clients. We’ve finally gotten to a place where we have a full suite of financial products that clients can actually leave the banks for and live their financial lives on Wealthsimple.”
Mr. Katchen said his 1,000-person company will use the deal proceeds to expand the depth of its offerings, including through strategic acquisitions.
Wealthsimple was one of many rising digital stars that saw their valuations soar during the pandemic. It was hit by a subsequent crash starting in late 2021 on the fear, later realized, of soaring interest rates, which affected many digital companies. Wealthsimple laid off staff as asset growth stalled, and Power and IGM slashed the holding value of their investments.
But Wealthsimple began rebounding sharply starting in late 2023 and by last fall, it had regained its pandemic-era peak valuation of $5-billion – and kept growing.
“The Wealthsimple team’s ability to execute is phenomenal” said Wealthsimple chairman Paul Desmarais III, son of Power chairman Paul Desmarais Jr., in an interview. “Our conviction is extremely high and we believe we’re building one of the leading financial services companies in the country.”
With a report from Clare O’Hara
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