Wealthsimple’s $87 million round makes it the latest tech unicorn

Robo-adviser Wealthsimple Inc.’s latest cash influx has propelled the startup to unicorn status with a valuation of just over $1 billion dollars —due in part to the success of its commission-free trading platform launched to clients last year. 

The Toronto-based startup announced last Wednesday it closed a 114 million Canadian dollar ($87 million) round led by the private-equity investor TCV and it intends to use the new capital to grow its client base, build out its suite of products and services and hire employees, according to a company spokeswoman. “We want to be our clients’ primary financial relationship,” she said. 

Wealthsimple now joins the ranks of fellow startup Robinhood, the undisputed king of free trades, which received a valuation of  $11.7 billion last month. 

Wealthsimple, which manages CA$8.4 billion in assets and has more than 1.5 million Canadian users, has also grown its trading mobile app — Wealthsimple Trade — to more than 280,000 users since its launch in the Canadian market in March 2019

Within the last six months, Wealthsimple Trade has more than tripled its client base, according to the spokeswoman, which tracks similarly to the increase in users Robinhood reported over the same time period. Wealthsimple trading app is only available for the startup’s Canadian users. 

While Wealthsimple’s trading platform has had success, competing robo-advisers are likely to keep their focus on the cash management features of their platforms, according to Backend Benchmarking’s head of research David Goldstone. 

For example, Betterment’s website lists features to come for their checking accounts, but there is no mention of investing account-related releases, Goldstone said.

“Betterment and Wealthfront see an opportunity to become a user’s primary financial institution for their spending and investing needs and are focusing their efforts there,” Goldstone said. “Wealthfront is working on their Self-Driving money, bringing automation to an individual’s spending and saving … most of their users are interested in having a manager take care of their portfolios and they may view self-directed trading as a feature that is not a priority of their user base.” 

Betterment and Wealthfront did not respond requests for comment.

For Wealthsimple, its online trading platform has served as a tool to propel its client base because trading mobile apps are engaging for young investors, according to Sophie Schmitt, senior analyst with Aite Group. “[Wealthsimple] is moving away from the ‘set it and forget it’ thought process other robo-advisers use,” she said. “Instead, having users log back in and check the app via the trading platform just enhances client engagement.” 

Another reason Wealthsimple has likely experienced rapid growth is in large part due to their partnership with Empower Retirement, Schmitt said. “They are one of the biggest record keepers of retirement and offer millions of retired 401(k) plan participants the option to invest with Wealthsimple.”

The post Wealthsimple’s $87 million round makes it the latest tech unicorn appeared first on InvestmentNews.

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