Nesto, a startup focused on simplifying the mortgage financing experience, raised $11.5 million CAD in Series A financing.
The equity round was led by Investissement Québec and Diagram Ventures, a venture co-creation firm, which helped found Nesto. A group of undisclosed, “highly strategic” investors also participated in the Series A.
“We intend to transform the Canadian mortgage industry.”
– Malik Yacoubi, Nesto
“This new round of financing marks a turning point in nesto’s young history that will enable us to continue to deliver an outstanding experience to our clients as we invest in the evolution of our tools,” said Malik Yacoubi, Nesto’s co-founder and CEO. “We intend to transform the Canadian mortgage industry.”
Nesto plans to use the capital to invest in its technology, as well as its marketing and communications. A company spokesperson told BetaKit that the goal is to “let Canadians know that we are here to help them save money.”
The startup was launched in May 2018 by Yacoubi, Karim Benabdallah (CTO), Chase Belair (principal broker), and Damien Charbonneau (COO). Through its online platform, Nesto analyzes the mortgage market to find the best mortgage terms available. The company is authorized to pursue mortgage brokerage in Quebec, Ontario, British Columbia, Saskatchewan, Newfoundland and Labrador, Nova Scotia, and New Brunswick.
Prior to its Series A, Nesto told BetaKit it previously raised “several mini-rounds” of financing, which Yacoubi classified as “seed extension” rounds. He did not disclose the overall amount of seed funding or the specific strategic investors, but said the capital totalled “several million.”
Nesto is one of seven companies co-founded and backed by Diagram. Power Financial-backed Portag3 Ventures led Diagram’s second fund, which officially closed in June 2019.
BetaKit spoke with Power Financial senior vice president and Portag3 Ventures executive chairman Paul Desmarais III, last year, who introduced Nesto as the “newest member of the FinTech Justice League.” Portag3 itself has stakes in three of Canada’s most prominent FinTech startups: Koho, Wealthsimple, and Borrowell. All three specialize in financial services that frame themselves as modern alternatives to traditional banks.
Nesto’s approach is a mix of both challenging the incumbents and working with them. The startup partnered with life insurance provider SSQ Insurance last year and has an index of over 20 partnerships with mortgage providers across Canada, including TD and Scotiabank.
RELATED: Canada’s open banking consultations delayed until Fall “at the earliest”
“We’re challenging them while we’re cooperating with them,” Yacoubi said to BetaKit last year of the incumbents in the mortgage industry. “Many lenders are liking the way that we are working. They want to learn more and see how we can better collaborate. We try to be as cooperative and transparent with our lender partners as we are with our customers.”
“We are very happy to have witnessed and believed in nesto’s potential from the get-go,” said stated Daniel Robichaud, managing partner at Diagram. “This new financial support will allow the company to speed up its growth and reach even more ambitious heights as it transforms the Canadian mortgage market.”Amid the ongoing pandemic, Nesto reported a significant increase in business volume in May, tracking its best month to date with a 729 percent increase in demand for its services compared to the same period last year.
Nesto told BetaKit that it felt the effects of COVID-19 in the first month of the pandemic, but as consumers started using more online services it saw “rapid growth.”
Nesto said the increase was “fueled by the context of the pandemic” due to more use and demand for virtual platforms. This comes at a time, the company said, “when the pandemic and gradual deconfinement encourage Canadians to turn to technology for their mortgage-related needs.”
“There is no doubt that a service such as nesto makes perfect sense at a time when a pandemic significantly limits people’s ability to get around,” said Yacoubi. “We provide sustained and personalized support to our clients and, thanks to technology, we can offer them better mortgage rates as well as all the information they need based on their situation.”
According to the company, its mortgage rates are the lowest in the market as a result of its “unique model” that reduces commissions to a minimum.
Along with its Series A funding, Nesto also grew its team, bringing on a vice president of lender relations and a senior director of operations. Marie-Elaine Gaudreault is joining to build lender partnerships and was formerly the vice president of mortgage loans at Industrial Alliance. Greg Perowne, formerly of Goodfood and Uber, is taking on the operations role.
Images courtesy Nesto