Nesto, the last protégé of Power Corp. in fintech, raises $ 76 million in venture capital – –

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Nesto, the last protégé of Power Corp. in fintech, raises $ 76 million in venture capital – –


Paul Desmarais III, President of Sagard, Portage and Diagram, at the Wealthsimple Toronto office on January 7, 2020. The Senior Vice President of Power Corp. says the Nesto mortgage brokerage service ‘is possibly one of the most exciting fintech games in Canada.’

Christopher Katsarov/The Globe and Mail

Another startup in Power Corp’s team of disruptive fintech investments. landed significant venture capital funding.

Nesto Inc., an online mortgage brokerage service established for three years, has raised $ 76 million in capital led by Michael Paulus and Michael Rowell, the entrepreneurs behind Assurance IQ Inc., a purchased American online insurance seller. by Prudential Financial in 2019 for consideration of up to US $ 3.5 billion.

Funding was also backed by Portage Ventures, the venture capital arm of Power Sagard Holdings’ alternative asset investment unit, as well as Diagram Ventures, backed by Sagard, Facebook investor Jim Breyer and investor and Montreal entrepreneur Marc Alloul. Sagard owns around 20 percent of Nesto.

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“Nesto is possibly one of the most exciting fintech games in Canada,” with a new digital offering for the Canadian mortgage market of $ 450 billion per year, said Paul Desmarais III, president of Sagard, Portage and Diagram , and Senior Vice President. power. “It will be one of the best capitalized fintechs in the country looking for a highly specialized space. “

He said American space actors, including Rocket Cos. Publicly traded Inc and Better.com, which goes public through a merger with a specialist acquisition company, have reached valuations of billions of dollars.

The investment is the latest in a series of financings from Power-backed entities that have helped validate its push into funding disruptors in the financial services industry. Toronto-based Wealthsimple, backed by various Power entities, recently raised $ 750 million, valuing the bank challenger at $ 5 billion. Mobile banking provider Koho Financial Inc. raised $ 70 million this year, and Dialogue Health Technologies, created and funded by Diagram (which creates and funds fintech companies), went public in March on the Stock Exchange. Toronto.

Nesto “is another example of a repeatable investment process that we have built at Diagram and Portage… [to] creating winners over and over again ”in the fintech space, Mr. Desmarais said.

Nesto has created an online mortgage brokerage service that automates much of the application and underwriting process and claims to offer clients low rates, quick approvals, and unbiased advice from human advisors who work for a salary, not a commission. .

The company, which has so far partnered with 11 mortgage providers including MCAP, Equitable Bank and Toronto-Dominion Bank, is on track to create mortgages worth $ 100 million This month, a fivefold year-over-year increase, Nesto co-founder and chief executive Malik Yacoubi said in an interview. He added that each Nesto broker can handle 10 times the typical industry volume thanks to the platform’s digitized workflow.

Nesto got together as Mr. Yacoubi, a serial tech entrepreneur, and his longtime business partner Karim Benabdallah were looking to start their next business together. The couple previously started a web development company in the early 2000s, then a mobile marketing company Mobilito, which they sold to advertising giant Cossette in 2010, with Mr. Yacoubi subsequently serving as chief digital officer for eight. years.

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They started talking to Daniel Robichaud, Managing Partner of Diagram, a former investor in their companies. “We wanted to start a fintech business; we didn’t know exactly what, ”Yacoubi said.

The Diagram team came back and suggested starting a business that would bring more transparency to the Canadian mortgage market. “We fell in love with the idea and decided to go all out,” teaming up with mortgage industry veteran Chase Belair and a fourth partner in 2018, said Yacoubi.

Nesto, which now has 91 employees, had a product on the market in early 2019 and last year raised $ 11.5 million from the investment arm of the Government of Quebec, Investissement Quebec, Diagram and investors. individual.

Mr Paulus said in an interview that he was tricked into investing earlier this year by good ratings from the firm’s clients, including a high ‘net promoter score’ of 76, which measures the likelihood of customers recommend a business.

“I have never seen such a enthusiastic group of consumers” around a financial product, he says. “You just don’t see the Reddit signs where people talk about their mortgage broker. “

Seattle-based Paulus, who has dual Canada-US citizenship, said he and Rowel plan to bring “capital and our expertise in a practical way.”

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