Wealthsimple raises funds at $13.8-billion valuation as it seeks to rival banks

Wealthsimple Inc. has secured a $425-million financing from existing backers to continue building out its banking and investing services to rival the country’s largest financial institutions for size and reach.

The Toronto-based fintech darling announced Tuesday that it had secured financing at a valuation of $13.8-billion, up from $10-billion a year ago. The deal furthers Wealthsimple’s position as one of Canada’s most valuable private technology companies.

The deal includes $300-million in fresh capital and up to an additional $125-million that investors will spend to buy shares from Wealthsimple employees.

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Singaporean sovereign wealth fund GIC led the round, which included prior backers the Canada Pension Plan Investment Board, San Francisco-headquartered ICONIQ, and Montreal-based Inovia Capital. Longstanding backers Power Corp. of Canada and subsidiary IGM Financial put in $68-million and $96-million, respectively, to maintain the conglomerate’s ownership stake.

“This gives us a balance sheet that reflects the ambition of the business,” said Wealthsimple CEO Michael Katchen in an interview.

Wealthsimple has been significantly expanding both its offerings to customers and the assets it manages for them. In June, the firm announced plans for a new prediction markets app, letting users buy— effectively bet — on event contracts traded on Kalshi, a U.S. platform. Wealthsimple also rolled out accounts for kids and teens. In the last year, it’s also moved to let customers make cash deposits at Canada Post locations, and given investors access to more options trading and the ability to buy into initial public offerings.

Since last October, the value of the assets Wealthsimple holds under administration has grown significantly from $100-billion to $169.2-billion at the end of the third quarter.

Mr. Katchen has set a target of $1-trillion under management, which put it on par with the very largest Canadian banks. He declined to provide a firm timeline for achieving that goal, however.

“If you look at most fintech companies around the world, they typically do one or a small set of things,” Mr. Katchen said. “We really have a broad product portfolio because we’re trying to help clients leave the banks.”

Wealthsimple added more new chequing accounts than investment ones in the second quarter. But the firm still has no plans “in the short term” to seek a banking license, according to Mr. Katchen. It instead partners with existing banks to hold clients’ deposits in trust.

The new funding comes almost exactly a year after Wealthsimple’s last one, a $750-million financing co-led by GIC and Dragoneer Investment Group. That round included a secondary sale of $200-million by existing investors.

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Wealthsimple, which launched in late 2014, has become the flagship investment of Power’s alternative assets business. The firm’s board is chaired by Paul Desmarais III, CEO of Power’s Sagard arm and son of the conglomerate’s chair Paul Desmarais Jr.

Mr. Katchen said there was a “tremendous amount of demand” from new investors to buy into Wealthsimple, but the firm opted to re-up with its existing backers. In particular, he called GIC’s leading role in the new financing a “tremendous vote of confidence” that reflected “the momentum behind the business.”