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Varcoe: ‘Step by step towards something much bigger’ – New Financial hits $1 billion worth of ‘unicorn’

“It really validates the tech ecosystem here that we’re building in Calgary,” said Andrew Zhao, CEO of NEO.

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Can unicorns run? In the case of Neo Financial, that certainly seems to be the case.

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The Calgary-based tech startup will announce Thursday that it has completed a new $185 million fundraising round, pushing the total amount of capital it has attracted to more than $299 million since its inception.

The financial services company also joins a small but growing group of tech companies in Calgary that have achieved rare “rhinoceros” status with a valuation of more than $1 billion.

This was done in less than three years.

Neo Financial is one of the fastest growing Canadian startups to make it to that gate, joining Solium Capital (now Morgan Stanley’s Shareworks), Benevity, RS Energy Group and Parvus Therapeutics as local rhino-rated firms.

Everyone has cleared that hurdle since 2019.

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“It really validates the tech ecosystem here that we’re building in Calgary,” Andrew Zhao, CEO of NEO, said in an interview.

“Ultimately, what we build here at Neo isn’t[designed]for overnight success, right? It’s really about building a generational company that can stand up to all of us.

“The goal is to build a premium brand that all Canadians use, and this milestone of reaching over $1 billion is really just the starting point for something much bigger.”

Neo Financial was founded in 2019 by Chau, Chris Simair and Jeff Adamson — the three were co-founders of Winnipeg-based SkipTheDishes, which sold for $200 million six years ago — along with Kris Read.

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Neo’s growth outside of western Canada was meteoric, with Zhao holding early meetings at the Calgary downtown library as the company compiled its initial plans.

Its mission was to disrupt the traditional financial market and compete with banks and institutions using the power of technology.

It now has over 1 million customers and offers MasterCard rewards with no annual fees and a new high-interest savings account. It partnered last year with retail giant Hudson’s Bay to provide a branded credit card.

Other partnerships include H&R Block, Boston Pizza, and Home Depot, and it has 7,000 local and national retailers on its platform.

To support growth, the company has been hiring at a rapid pace. It now has more than 650 people working between its Calgary and Winnipeg offices. Neo also has over 100 open positions.

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In January, the company raised its flag downtown, and leased more than 110,000 square feet of downtown office space in two buildings, including the fourth floor of the iconic Hudson’s Bay Building on 8th Avenue SW.

“Our mission and ambition with Neo . . . is to be this one-stop shop for all financial services for Canadians.”

“It’s really about gaining that full financial experience for Canadians, whether it’s getting their first bank account, whether it’s helping them save and spending and investing – or even buying a home – being able to use technology to seamlessly integrate all of these products.”

New Financial CEO Andrew Chow, pictured in the company's offices on the fourth floor of the Hudson's Bay Company Building.  A few months ago the floor was laid in the women's clothing department.
New Financial CEO Andrew Chow, pictured in the company’s offices on the fourth floor of the Hudson’s Bay Company Building. A few months ago the floor was laid in the women’s clothing department. Gavin Young’s photo /Post Media

New York venture capital fund Valar Ventures, co-founded by billionaire Peter Thiel, led Neo’s Series C funding round.

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The additional investment will help the fintech company bring in more employees and expand the company’s product offerings; Neo will introduce the mortgage product later in the year.

“The speed with which this team is releasing new products and growing their customer base is among the fastest we have seen in our careers,” Andrew McCormack, co-founder of Valar Ventures, said in a statement.

“As a result, NEO could be the biggest disruption the Canadian banking industry has seen in decades.”

The latest funding round comes as a number of Alberta technology companies are gaining momentum and attracting new investors.

Last year, Alberta startups attracted $561 million in venture capital, up 16 percent from the previous year, according to a report from the Canadian Venture Capital Association.

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So far this year, corporate venture capital funding has exceeded $334 million, including recent rounds involving Calgary firms such as Athenian, Helcim and Voledere, according to data from Start Alberta.

Brad Barry, CEO of Calgary Economic Development, said Neo’s rapid development into a rhinoceros indicates that local tech companies don’t have to leave town to find employees or expand quickly to take advantage of an opportunity.

“Neo was barely a company three years ago and now it’s looking at it…we’ve had our fifth rhino horn in the last two and a half years. And there’s a couple more coming up,” he said.

“It just sends the message that Calgary is the kind of place where you can build a rhinoceros in a quick amount of time.”

Neo Financial offices on the fourth floor of the Hudson's Bay Company building in downtown Calgary.  A few months ago the floor was laid in the women's clothing department.
Neo Financial offices on the fourth floor of the Hudson’s Bay Company building in downtown Calgary. A few months ago the floor was laid in the women’s clothing department. Gavin Young’s photo

Neo’s sudden growth comes as no surprise to those who have worked closely with its leadership team in the past.

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Arlene Dweck, who was director of talent acquisition at SkipTheDishes and is now CEO of talent at Calgary-based Harvest Builders, which employs employees for Neo, said company executives understood what it took to succeed in expansion.

“It has benefited them so much for taking in all the lessons, all the successes, but perhaps just as important, the failures that they would encounter on a daily basis at Skip, and they were able to apply that knowledge and experience first-hand in this company.

Chow, who grew up in Saskatoon and moved to Calgary about four years ago, noticed that large international tech companies entered the country and created great brands that influenced Canadians.

The 34-year-old CEO wants to do the same from Neo, who is based in Western Canada and works in the financial field.

“We can build these meaningful companies here in Calgary. We are capable of having talent,” he added.

“Calgary is a unique market. It’s one of those places where we have a great culture as it relates to the ambition we pursue.”

Chris Farco is a columnist for the Calgary Herald.

cvarcoe@postmedia.com

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2022-05-05 11:03:26

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