Neo Financial co-founders Jeff Adamson, Andrew Chau and Kris Read (L-R) at their Calgary headquarters in 2020. The company has raised more than $700-million since it was founded in 2019.Todd Korol/The Globe and Mail
Some of Canada’s largest institutional investors are backing Neo Financial Technologies Inc. as the digital bank prepares its first loan securitization program.
Calgary-based Neo said Tuesday more than 100 Canadian investors, including provincial pension giant Alberta Investment Management Corp. (AIMCo), have purchased $68.5-million of its equity. That pushes the total amount Neo has raised since the company was founded in 2019 beyond $700-million.
The money will go toward a loan securitization program that Neo believes to be a first for the Canadian fintech industry. Securitization involves pooling together assets that cannot be easily traded as investments and converting them into tradeable, interest-bearing investments.
Securitization is a common funding strategy for large banks. They often pool together assets such as residential mortgages and sell them as securities to remove them from their balance sheets, which frees up more money for lending.
Neo will pool together its credit card balances for its securitization plan.
Jeff Adamson, Neo’s co-founder and chief commercial officer, declined to specify the amount of money the strategy will make available to the company, but said in an interview the initial figure will be in the “hundreds of millions of dollars.”
“It is a master trust so you can plug in other institutions into it and add on $300-million, half a billion, a billion, and just continue to scale as you add new partners on,” Mr. Adamson said. “It gives you a ton of room to grow and it is also an efficient and cost effective way to grow.”
“If you’re funding off of your own balance sheet, you are chewing up your operating budget the more you grow. But by doing securitization you can scale this into the billions,” he said.
Other investors in the funding round announced on Tuesday include Northleaf Capital Partners, Plaza Ventures and Sandstone Asset Management. Neo has previously won investments from Silicon Valley billionaire Peter Thiel’s Valar Ventures, Shopify Inc. founder Tobi Lütke and Slack co-founder Stewart Butterfield.
In 2024, Chinese technology giant Tencent Holdings Ltd. invested US$50-million in Neo at a time when the Canadian company was valued at roughly US$510-million. Just two years earlier, during a funding round completed in the spring of 2022, Neo was valued at more than $1-billion.
Neo is not disclosing the exact valuation used for its latest funding round, Mr. Adamson said, but the figure was higher than the valuation used in 2024 and investor demand was substantial.
“We were going to raise $15- to $20-million but we had $70- to $80-million worth of orders,” he said. “We really didn’t go out to a big network, we hardly marketed at all, but the round kind of just took on a life of its own.”
Mr. Adamson and Neo chief executive officer Andrew Chau previously co-founded popular online food ordering service SkipTheDishes before launching Neo.
Since then, the company has acquired more than one million customers across Canada, primarily by partnering with retailers to offer a suite of Mastercards that are issued by Alberta government-owned ATB Financial and come with a loyalty program.
Neo also offers high-interest savings accounts through Peoples Bank of Canada and has partnered with investment startup OneVest to offer wealth management services. In May, 2023, Neo launched a mortgage product that offers a fully digital application the company claims can be completed in five minutes.
Securitization, Mr. Adamson said, represents a significant milestone for Neo’s growth ambitions.
“The last remaining piece, as a non-bank, is adding in the bandwidth or the runway to really scale this to millions and millions of Canadians,” he said. “This is the last piece of the puzzle that allows us to say now we can really scale up.”