Canadian robo-advisor Wealthsimple lands unicorn status with $87m raise

Wealthsimple, the Toronto-founded wealth management platform operating in Canada, the UK and US, has landed CAD 114 million ($87 million), taking it to a $1 billion valuation.

Technology Crossover Ventures (TCV), the investor which led Revolut’s half a billion-funding round back in February, led the round.

Other investors in the round include Greylock Partners, Meritech Capital Partners, Two Sigma Ventures and the tech investment arm of Munich-based insurer Allianz.

Wealthsimple serves some 1.5 million users

As part of the new funding, David Yuan, general partner at TCV, will join Wealthsimple’s board of directors. The investment also marks the first time fellow backer Meritech has invested in the Canadian market.

What is Wealthsimple?

Wealthsimple is around 70% owned by Power Financial, a Power Corporation of Canada subsidiary controlled by the wealthy Desmarais family.

Following this $87 million funding round, these investors, who have poured a total of $315 million into Wealthsimple, will own a 60% stake.

The fintech started off as a robo-advisor back in 2014. It has since expanded its offering – most drastically this year.

Its growing 1.5 million customers now have access to a savings account, tax-filing software and a cryptocurrency-trading feature.

The start-up claims it helped more than one million Canadians file their taxes this year. This follows its acquisition of tax preparation app, SimpleTax, back in September 2019.

Wealthsimple’s CEO, Mike Katchen, tells BetaKit that “responsible credit” products such as mortgages, as well as insurance offerings, are on the fintech’s roadmap.

But it’s the start-up’s no-commission, Wealthsimple Trade service, which has seen the real growth this year.

Stock trading platform growth

Live in Canada since March 2019, customers have surged since, especially during the pandemic-induced trading boom.

From the beginning to the end of 2019, trading customers more than doubled from 100,000 to 250,000. This saw assets jump from CAD 4.3 billion ($3.3 billion) to CAD 6.3 billion ($4.8 billion).

Then in the first six months of 2020, trading customers doubled to more than half a million. Assets shot up to more than CAD 8.4 billion ($6.4 billion).

According to Wealthsimple’s CEO, Katchen, the fintech captured the second largest number of new trading clients in Canada in the first half of 2020, behind only Toronto-Dominion Bank.

A different approach to Robinhood?

Unlike other trading apps like Robinhood, Wealthsimple doesn’t offer risky bets, such as options trading.

Wealthsimple’s marketing messaging is also very different to Robinhood’s, despite frequent comparisons.

“Even though Wealthsimple is positioning itself as very aggressive on pricing, its marketing could not be more different than that of Robinhood,” Ian de Verteuil, a CIBC World Markets analyst, tells the Financial Post.

“The tagline ‘Get Rich Slow’ hardly compares to the Robinhood approach, which includes the potential for fractional shares and a ‘video-game like’ app.”

TCV cites this as a reason for its lead investment.

Yuan, the TCV general partner joining the start-up’s board, explains: “Robinhood has done a great job at building game mechanics around trading, whereas Wealthsimple’s ethos is about wealth generation over time, or getting rich slowly.”

Back in February, Wealthsimple’s Europe CEO Toby Triebel told FinTech Futures: “Trading apps are an afterthought. It’s like playing around and you can lose a lot more money.

“You wouldn’t put all your money into trading. 2019 has been great for the stock market but that can change – as the saying goes, my cat can pick stocks better than me.”

Whilst Triebel might still agree with this, Wealthsimple’s stock trading app growth in the last six months points to the feature’s importance far above an “afterthought”.

Read next: How Canada’s Wealthsimple is building a whole financial suite