Calgary’s Neo Financial says it has raised $68.5 million CAD in equity from a round of more than 100 investors as it hopes to fuel its lending business.
The FinTech company announced on Tuesday that the round included participation from a “syndicate” of Canadian investors, including founders, entrepreneurs, and institutional firms such as the Alberta Investment Management Corporation (AIMCo), Toronto’s Northleaf Capital Partners, Plaza Ventures, Caldwell Growth Opportunities Fund, and Sandstone Asset Management.
Founded in 2019 by the founders of Winnipeg-based food delivery app SkipTheDishes, Neo offers a variety of spending, saving, investing, and mortgage products for Canadians. Co-founder and chief commercial officer Jeff Adamson told BetaKit the company’s equity round was almost entirely Canadian-funded. According to securities filings viewed by BetaKit, around $3,400,000 in foreign investment came from the US and Switzerland.
Adamson says leveraging securitization allows Neo to marry its technology with the capital-efficient model in use by Canada’s tier-one banks.
The money will go towards funding Neo’s “inaugural securitization program,” which Adamson said will allow the company to fund further growth by turning its existing credit assets into cash. In lay terms, Neo Financial can bundle credit balances and sell future repayments to investors, providing upfront capital that can, in turn, be used to issue more credit and grow the business. “You can bundle up all of these securities and then you can basically sell slices of those securities to investors,” Adamson said. “Really, the benefit of it is … rather than needing to fund [growth] off of your balance sheet, you can fund it through securitization.”
Adamson said that leveraging securitization allows Neo to marry its technology with the capital-efficient model in use by Canada’s tier-one banks. “To me, that is…the coming together of two important pieces at such a critical time in Canada,” he said.
When asked if this was a step toward Neo one day obtaining a banking licence, Adamson was non-committal.
“In one way…it’s a recognition of the maturity of the business. Something like that would accelerate the approval of a banking licence,” he said. “On the other hand…if you’re getting access to bank-like costs of funding already, then why bother? Why not just continue operating as a technology company and continue to grow through these types of partnerships?”
A marriage of convenience
Securitization of the company’s credit assets will also allow Neo access to more stable funding, the company said, rather than being constrained by equity-funded lending.
Beyond the benefits Adamson says securitization will provide for the company, he argues the marriage of traditional banking funding models with Neo’s technology brings potential benefits for its customer base of nearly 20 million Canadians. Those benefits might look like more dynamic pricing across clients or access to lending for customers who might otherwise be rejected by traditional banks.
“A lot of people just end up getting rejected because they don’t fit into these conventional boxes … a classic example would be an entrepreneur or small business owner without a traditional credit history,” he said, adding that securitization will allow Neo to further lend to those middle-class Canadians.
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Andrew Chau, co-founder and CEO of Neo Financial, said in a release that this round of fundraising signals “a massive vote of confidence” for the company’s next phase of growth and its ability to challenge Canada’s traditional financial sector.
“By unlocking the power and scale of securitization, we can challenge the financial status quo that has been holding back Canadians’ financial progress for decades,” he said.
Since its inception, Neo Financial has raised more than $650 million CAD, including debt and equity, and was valued at more than $1 billion CAD as of its Series C deal in May 2022. However, Neo’s November 2024 Series D raise—reportedly led by Chinese investor Tencent—reduced its valuation to $510 million USD post-money, according to The Globe and Mail. It landed on The Globe and Mail’s first-place slot for Canada’s top growing companies in 2024, as well as that same number one spot on Deloitte’s Technology Fast 50 program the same year.
BetaKit’s Prairies reporting is funded in part by YEGAF, a not-for-profit dedicated to amplifying business stories in Alberta.
With files from Madison McLauchlan.
Image courtesy Neo Financial.