Pandemic day-trading helped make Wealthsimple a unicorn

Recent raise of $114 million takes the fintech to a value of $1.4 billion

Wealthsimple Technologies Inc. rose to prominence as a result of its robo-adviser investing service, but it may have pandemic-driven day trading to thank for turning it into a unicorn.

The Toronto-based financial startup announced last week that it had recently raised $114 million from investors at a valuation of $1.4 billion, past the billion-dollar threshold that confers “unicorn” status in startup-speak.

Silicon Valley investment firm TCV led the latest round of funding with the new money to be spent on growing the company’s workforce, product lineup and share of the competitive financialservices market.

“Our belief is that Canadians don’t need another bank, they need something better,” said Mike Katchen, Wealthsimple’s co-founder and chief executive.

More than 1.5 million Canadians are already using Wealthsimple products such as its robo-adviser, savings account, tax-filing software and cryptocurrency-trading feature, the company says. However, Wealthsimple Trade, the company’s app for trading stocks and exchange-traded funds with no commission, has seen a surge in customers of late.

Wealthsimple Trade officially launched in Canada in March 2019, when the company had more than 100,000 clients and over $4.3 billion in assets under administration. That’s according to figures from Power Corp. of Canada, entities of which hold a controlling stake in Wealthsimple.

Those numbers grew to more than 250,000 Wealthsimple clients in Canada, the U.S. and the U.K., as well as more than $6.3 billion in assets at the end of 2019. Clients then doubled to more than 500,000 as of the end of June, with assets shooting up to over $8.4 billion.

The jump in customers and assets coincides with the COVID-19-related rise in retail trading by investors who watched stocks collapse in February and March, and then decided to jump in amid the subsequent rally. That trading activity has been enabled by zero-fee apps such as Robinhood in the U.S. — and apparently by Wealthsimple as well.

Katchen said the current environment has helped its robo-advisory business, as some clients may still be leery of going into a physical bank branch. However, “giant” demand at brokerages also lifted Wealthsimple, helping it to capture the second-most number of new trading clients in Canada in the first half of 2020, behind only Toronto-Dominion Bank, according to Katchen.

“We have benefitted in a very outsized way,” he said.