Tech-talented Winnipeggers will have the opportunity to work at another well-funded start-up as Calgary-based Neo Financial closed one of the largest series A rounds in Western Canada and is looking to staff up.
The Calgary-based fintech enterprise started two years ago by a couple of the founders of SkipTheDishes just raised $25 million in venture capital and secured another $25 million in debt financing to launch a digital "challenger" bank.
Starting with a high interest savings account and a MasterCard credit card featuring a dynamic rewards program, Neo Financial is hoping to capitalize on what its founders believe to be a pent-up demand for a different kind of banking experience than that which is offered by the Big Five banks in Canada.
Winnipeg gets to ride on the coattails of the success of SkipTheDishes as the Neo Financial founders understand the dynamics and talent in the Winnipeg labour market. It is currently looking to fill a number of positions here which may over time, number as many as 200.
When SkipTheDishes was growing, Andrew Chau, Neo’s CEO, was based in Calgary and led a small Skip team there. He and Jeff Adamson, another Skip founder along with Kris Read chose to also set up an office in Winnipeg because of their familiarity with the availability of talent here.
"We kind of think of it (offices in Calgary and Winnipeg) as one office," Chau said.
The capital raise was led by New York-based Valar Ventures, a firm that has already backed a number of other fintech companies in the same space as Neo, but who are operating in other countries, including Germany, France, Mexico and the U.S.
"We are their Canadian play," Chau said in an interview. "They really do pick winners in each of the countries they are investing in."
Chau acknowledged that their experience raising money for Skip helped them get their foot in the door for some venture capital meetings on Neo, but he said their success this time was more about the demand from venture capital investors for the kind of platform Neo is building.
And even though the list of investors is quite long — including Tobi Lutke the CEO and founder of Shopify and Golden Ventures one of the early investors in Skip — Neo only partnered with the firms that were right for them.
"It is a curated list of VCs," he said. "There were a lot more that wanted to invest."
Neo also closed a $25 million debt facility with ATB Financial, the Alberta bank that is partnering with Neo on the credit card offering. It has partnered with Saskatchewan-based Concentra Bank for its savings account, which insures all deposits through the CDIC (Canada Deposit Insurance Corp.)
Chau said part of their original thinking was there was an opportunity to take the work they did at Skip and translate that digital experience over to the banking industry.
"When we look at the Canadian banking industry today the Big Five banks own about 90 per cent of the market on the retail side, a level of concentration unlike most other countries," he said.
But in addition to offering a savings account interest rate 30 times what the other banks are offering, they believe Neo will be able to grow their numbers by enticing consumers with the prospect of signing up for a savings account or a credit card on their phone in three minutes time.
"The digital experience we’ve come to expect from tech companies has not necessarily translated over to the banking industry," he said.
He’s talking about voluminous mortgage documents and more paper work every time you apply for a new product from the traditional banks.
"All these small little pieces are underpinned by the legacy technology the banks have," he said. "With Neo we are re-imagining and re-thinking the banking experience for Canadians."
They have already signed up about 2,000 third party retailers and service companies as part of Neo’s credit card rewards program including a couple of hundred in Winnipeg including Brows by G, Fools & Horses Coffee Company, One Great City Brewing Company, Nuburger and Callia Flowers.
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.