The company hauled in $80 million in a "milestone" Series C round
Digital mortgage lender nesto raked in $80 million in its latest funding round in December, a development that co-founder and CEO Malik Yacoubi (pictured) described as a “milestone in our journey” that will boost its plans for further expansion and investment in technology.
Led by IGM Financial and backed by high-powered investors including BMO Capital Partners and National Bank of Canada’s corporate venture capital arm NAventures, the oversubscribed Series C funding round marks the latest stage in the rise of a company that’s had a profound impact on Canada’s mortgage space since starting out in 2018.
Yacoubi told Canadian Mortgage Professional that nesto’s goal – to provide a “transparent property financing experience amplified from start to finish [for] Canadians” – had received a significant shot in the arm through the funding, with the support of multiple high-profile investors serving as an affirmation of the efforts made to build the company in recent times.
“I think it’s a great validation of the work that we’ve been doing for the last four years, to build a unique mortgage experience in Canada, and I think having these brand-name investors coming into the shareholder structure of nesto is always a great testament of the work that has been done for the last four years,” he said.
The company bills itself as a digital mortgage lending platform that “offers the floor rate from the start,” differentiating itself from conventional brokerages by having negotiated a lower finder’s fee payable by lenders to give the lowest rates up front to clients.
#CMPTV: Eric Larocque of @CommunityTrustC and Chris Grimes of @FundMoreAI talk about the profound shift in technology and how it has impacted the mortgage industry in Canada.
— Canadian Mortgage Professional Magazine (@CMPmagazine) December 14, 2022
Watch the full episode here: https://t.co/ukqIFOyP7A pic.twitter.com/gW5gh3pk60
Next steps for nesto
An especially noteworthy development in the near future will see nesto push ahead with the rollout of its white-label Mortgage Cloud to financial institutions, with that origination and servicing platform having already funded over $1 billion in mortgage volume, according to the company.
“We’ve been investing in our technology to be a digital mortgage lender for the last four years, so we built that origination platform where clients can do their mortgage application,” Yacoubi said. “We also built a back-end system so our team can do the underwriting by advising the client on the best product, and we also built a servicing platform.
“So all of this has been built from the ground up, a new technology stack. And we found that there’s a great opportunity for us to start offering [what] we’ve been building for the last four years to other financial institutions so they can leverage our tech capacities and our operation capacities.”
The move is aimed at allowing nesto to diversify its revenue streams and customer base, the company said, and ultimately “strengthen its position as the leader in digital mortgage lending.”
In September, the company brought a prominent new team member on board with the appointment of Ricardo Pascoe as executive leader for capital markets.
Moving into 2023
Despite a turbulent year in the mortgage market that’s seen homebuying activity plummet amid rising interest rates and rampant consumer price index growth, Yacoubi said that 2022 had been marked by consistent growth at nesto, with further progress anticipated next year.
“I expect us to continue to grow in 2023 and just focus on making sure we deliver a stellar experience to our clients which will be truly end to end, from origination [to] servicing,” he said.
The company’s latest haul is an even bigger gain than the $76 million it netted during its Series B funding round in June last year, with that 2021 effort led by Assurance IQ entrepreneurs Michael Paulus and Michael Rowell.
Speaking with CMP at the time, Yacoubi said that nesto viewed itself as a complement to brokers in Canada’s mortgage space, rather than a disruptive presence there. “It’s a big market, and I think there’s room for everyone,” he said. “Nesto’s going after a specific segment that could be more tech-savvy and looking more to be serviced online.”
Commenting upon the closure of the Series C financing round, IGM Financial’s James O’Sullivan spoke to the deepening of its relationship with nesto, describing it as a “dynamic and growing company” with both parties “committed to transparency, digital enablement and enhancing Canadians’ access to homeownership.”
How do you see technology impacting Canada’s mortgage space in 2023? Let us know in the comments section below.
