Startup Vic FinTech Pitch Night

The Australian tech sector, especially at the startup end of the industry, is having to grapple with what is fast becoming a major structural and operational challenge: how to hire, remunerate and retain staff. With closed international borders cutting off the supply of overseas students and graduates, and a lack of sufficient home-grown skills, it’s a problem that established businesses and startup ventures alike are having to address. Just last week, the AFR reported that some wages in the tech sector have gone up 30% in the past 12 months. Perhaps this issue was on the minds of the four founders who presented at the recent Startup Victoria FinTech Pitch Night.

The judges for this on-line event, sponsored by LaunchVic, were: Nicole Small, Investment Director at Rampersand; Kim Hansen, Co-founder and CEO of Cake Equity; Caitlin Zotti, Operations Manager at Pin Payments; and “the people’s judge,” Eike Zeller, Community Lead at Stone & Chalk Melbourne. Compered by Josh Sharma, Head of Labs & Startups at LUNA, the evening also featured a virtual fireside chat between Rebecca Schot-Guppy, CEO of FinTech Australia, Dom Pym, Co-Founder of Up, and Julia Bearzatto, Head of Technology for Financial Services at MYOB.

The four startups in order of presentation were (links in the names):

Elbaite

Claiming to be the “first non-custodial cryptocurrency exchange“, part of Elbaite’s mission is to prevent theft or misappropriation of crypto assets held in exchange wallets. What makes Elbaite different from other decentralized exchanges (DEXs) and peer-to-peer platforms is that they escrow the fiat involved in any transaction. While they may not be charging the fees of centralized exchanges (CEXs), they are charging a 1% on crypto purchases (although there is 0% commission on sales). Elbaite is hoping to target institutional clients who may not be as comfortable trading on “traditional” crypto exchanges – although in my experience, many institutional clients actually need third-party custody services as part of their governance and compliance obligations. The judges felt that this is a crowded space (there are more than 250 crypto exchanges globally, plus numerous fiat on/off ramps, brokers, OTC desks and P2P platforms).

Sequrr

Speaking of custody and escrow, who would have guessed that stolen house purchase deposits are such a major issue, unless the team at Sequrr had told us? Despite the use of Real Estate Trust Accounts within the industry, apparently there is not much to stop the account holders from walking off with the deposits. Which rather begs the question why the industry does not already use something like multi-signature digital wallets, which mean that the funds can only be moved once all parties to the transaction agree. Even though this is a tech solution using a 3-way verification model (innovation patent pending), the different real estate laws in each State means that it’s not that simple to roll out nationally. However, the team also see opportunities for other professional and commercial sectors: solicitors, builders, aged care. (Note to the founders: I know that invented brand names were once flavour of the month for tech startups, but I question the wisdom of adopting a word that reads like a spelling error, and sounds like someone coughing up phlegm – especially if you want to be taken seriously by banks and solicitors. Just a thought.)

Nextround

Another issue of trust exists between employers and employees when it comes to reward and recognition schemes. There’s always a risk that whatever structure and incentives companies use, someone will try to game the system (or collude with colleagues) especially if the stakes are high; or, if the rewards are simply handed out for turning up and doing your job, their currency becomes debased. Then there’s the (ill-advised) link between rewards and recognition on the one hand, and performance reviews (plus bonuses and salary adjustments) on the other. It’s a balancing act which Nextround are addressing by making it easier (and less expensive) to reward and recognise all of your staff, not just the usual top 5-15%. They do this by offering managers and team leaders access to rewards of a smaller (yet still meaningful) value, which can be easily redeemed by the recipients, for hospitality rewards, events and experiences. The commercial model relies on an annual corporate subscription fee, and taking a cut of the reward vouchers. Nextround consults with employers on their preferred merchants and suppliers, who don’t necessarily see the vouchers as eroding their margins – rather, it’s another sales channel. This is not a hospitality app (e.g., loyalty program), more of a procurement app. And although there are numerous competitors for reward and recognition schemes, the “smarts” are in the way managers and HR teams can budget and allocate accordingly, without the need for onerous expense form claims because the transactions can all be tracked from the point of redemption back to the point of issuance. The resulting data will also generate a further revenue stream from the valuable analytics, although would I want my employer to know how I used my vouchers (assuming they are not tied to a specific reward)? My other reservation is that if the rewards really are as small as a cup of coffee, or even a round of drinks at the pub, isn’t it a bit like tipping?

SpendAble

Letting people make their own financial decisions is also a form of trust. Most of us would feel we can be trusted to spend our own money how we like. But this assumption may be challenged when it comes to people with a disability. SpendAble is developing payment, saving and investment solutions for people who face physical, societal and intellectual barriers to managing the financial affairs. Starting with a budget-based spending app, SpendAble helps users to allocate, identify and track their purchases more easily, and with much of the payment friction removed. The team will also develop specific applications such as voice-controlled functions for the visually impaired. Largely reliant upon the NDIS for funding and end users to cover transaction costs, SpendAble will plug into existing banking platforms – which might be a better way to underwrite the app? However, some of the online chat on the night suggested that SpendAble could provide well-needed general financial education to school kids as part of its offering, as well as helping to address financial inclusion.

Such was the enthusiasm for SpendAble that they took out the Peoples’ Choice as well as the Judges’ Award.

Next week: Accounting for Crypto

Startmate Virtual Demo Day

Despite being under lock-down, the current cohort of Australian & NZ startups participating in the Startmate accelerator programme managed to deliver their Demo Day presentations on-line, including a virtual “after party” where founders were available for Q&A.

Given the large number of startups, and the fact that several were very early stage businesses, I have grouped them into loose clusters, with just a brief summary of each project. More info can be found at the links in the names:

Real Estate

Landlord Studio – tax & book-keeping solution for landlords. I tend to think the need for very niche accounting solutions is either overstated, or existing software platforms like Xero will come up with a plug-in of their own. Also, tax rules vary greatly by jurisdiction, so scaling internationally can be a challenge.

Passingdoor – an online estate agency trying to remove some of the costs and hassles of selling your home. Rather than listing with a traditional estate agent, Passingdoor will find buyers on your behalf (via a matching process?). I assume that prospective buyers will come from: people in the process of selling their own home; buyer advocates; or recent mortgage applicants – which is why the founders will need relationships with traditional agencies (referrals), mortgage brokers (cross-selling) and real estate ad platforms (leads). But given that sellers on Passingdoor only pay a 0.5% commission once an offer becomes unconditional, I’m not sure how the cashflow model will work.

MedTech

Mass Dynamics – scaling spectrometry for improved patient care. From what I understand, Mass Dynamics is using cloud-based architecture to “lease out” spectrometry capacity on demand, and to accelerate sample analysis.

LaserTrade – a marketplace for second-hand medical laser equipment. Rather than seeing re-usable equipment go to scrap, the founder saw an opportunity to create a marketplace for unwanted items. All items are tested beforehand. Has the potential to extend to other types of equipment, assuming the certification process is valid?

Health & Wellbeing

Body Guide – semi-customised rehab exercises to suit your symptoms. With superb timing as we emerge from months of inaction (or poor posture) while working from home during lock-down, this service is an aid to physical recovery, once your condition has been formally diagnosed. I’d probably want to check in with my GP or physio that the programme was right for me, though.

Sonnar – offers a library of audio content for people with reading disabilities. This is a subscription service, which claims to be cheaper than other audio-book services, and with a broader type of content (periodicals as well as books). I was unclear whether Sonnar is cheaper because they don’t need to pay publisher or author royalties (as it is deemed a charity?), or because they only license out-of-copyright content.

Good Thnx – promises to be “the world’s best gifting and recognition tool, with impact”. Aiming to provide a service for businesses, individuals and partner charities, Good Thnx is still in development. But as part of the Startmate Demo Day, gave attendees an opportunity to allocate a small financial donation to a selection of charities.

Food & Agriculture

Cass Materials – With the search for sustainable alternatives to meat, Cass Materials is developing a cheap and edible high fibre cell scaffold on which to grow cultivated meat – otherwise known as bacterial nanocellulose (BNC). I’m not opposed to the idea of “meat substitutes”, but I’m generally wary of what are sometimes called “fake meats” – vegetable proteins that are so processed so as to resemble animal flesh. I’d rather go vegetarian (I’m not sure I can go full vegan, because if we weren’t supposed to eat honey and yoghurt, why do they taste so good, especially together?).

Digital Agriculture Services – An AgTech platform is using AI-powered applications for developing a range of data-driven solutions across rural, agricultural and climate applications. The potential to bring more business insights and practical analysis to farming and allied industries is of huge potential in the Australian economy.

Heaps Normal – This company has taken a novel approach to producing non-alcoholic beer. Rather than chemical extraction or other processing to remove alcohol from ordinary beer, Heaps Normal has managed to brew beer without alcohol content.

Energy

Gridcognition – Using digital twin mapping of buildings, structures and locations to optimise the planning and operation of distributed energy projects. Given the value of lower transmission and storage costs, as well as more efficient energy generation, Gridcognition is aiming to bring their “decarbonised, decentralised, digitised” solutions to a range of industry participants.

ZeroJet – Helping the marine industry transition to sustainable energy solutions with the development of electric propulsion systems. In particular, targeting small inshore craft which are ideal boats for this type of engine.

Logistics & Analytics

PyperVision – This startup has developed a system for fog dispersal at airports. By aiming for zero fog delays, PyperVision is helping to reduce disruption in the travel and logistics sectors.

Arlula – An API service to stream satellite images from space. As we know, satellite imagery is an important input to modelling, planning and analysis. Arlula also offers access to historic and archive content.

Database CI – A platform for in-house software developers to access the right sort of enterprise data for real-life testing purposes. For example, realistic and appropriate “dummy” data that does not compromise privacy, confidentiality or other obligations.

Law on Earth – On-line access to self-serve legal documents, forms and precedents, plus lower-cost legal advice. With a mission to “empower the public to safely manage their own legal needs”, Law on Earth already has a tie-up with Thomson Reuters, one of the largest legal information providers in the world.

Next week: Are we there yet?

Social Distancing in Victorian Melbourne…

At the time of writing Victorians, like most of Australia, are living under a Covid19 “stay at home and practise social distancing” regime in attempt to “flatten the curve” and reduce the spread of this contagion. I have been working from home for 3 weeks, only going out for essential food shopping and a daily walk for exercise (since my gym is closed). This perambulation has revealed some lesser-seen aspects of Melbourne (apart from the empty streets), including the way the modern city’s 19th century founders went about their approach to urban design – including some examples of built-in social distancing.

The first example is the number of public parks and gardens close to the CBD that were established in the 1800s, and which have managed to survive the onslaught of developers. As we know, public parks, with their trees and green spaces act as the lungs of the city, and provide a place to exercise, relax and get some fresh air. So we need these facilities more than ever in times like these. (Strange why the Victorian Government still insists in allowing vehicles to use the culturally and historically significant Yarra Park as a public car park on so many days, with all the horticultural and environmental damage that this causes…)

Second, the decision to incorporate lane-ways into the grid design of the CBD, as well as throughout the 19th century expansion of the inner city suburbs. While their design was mainly pragmatic (ease of access for night carts, storm drainage), the result is that in densely-built areas such as Richmond, Carlton, East Melbourne, Fitzroy and Collingwood, lane-ways mean even terraced houses can have ample space between them and the next block, allowing for better ventilation, natural light and reduced risk of disease. (For an example of the lane-ways importance to Melbourne’s character and psyche, check out Daniel Crooks’ video, “An Embroidery of Voids”.)

Third, the decision not to build right up to the urban banks of the Yarra River (and the straightening and leveling of the river itself) has left them accessible to the public, both as a means of cycling and walking to/from work, and for recreational purposes. In many cities, riverfront access has largely been blocked off as adjacent land has been appropriated for private, commercial and industrial use.

At a time like this, I truly appreciate the foresight of Melbourne’s Victorian town planners – I just hope we can continue to enjoy their legacy in the coming weeks and months!

Next week: #Rona19 – beyond the memes

 

The State of PropTech

Among the many strands of X-Tech that we have come to hear about, PropTech is currently emerging as something of a hot topic, judging by a recent Meetup in Melbourne organised by MessageMedia. With the ambitious goal of exploring the “Past, Present and Future of PropTech in Australia”, it was clear that the field can mean very different things to different audiences.

Facilitated by Bec Martin, the panel comprised Shelli Trung, APAC lead for the Reach PropTech Incubator; Mark Armstrong, CEO of RateMyAgent; Alan Tsen, seed round investor with a focus on disruptive FinTech startups; and Nigel Dalton – ex-REA Group, who also gave a key note address.

Given the format and nature of the discussion, I won’t attribute specific comments to particular individuals. Instead, here are some of the panel’s observations (in no particular order), including some pitfalls for the industry, and key points that all market participants will need to consider.

  • In light of recent events, it was perhaps unsurprising to hear the view expressed that WeWork is “not very prop, not very tech”, as its business model and funding challenges became apparent. Generally, the view was that the co-working space fad has had its day (although Melbourne still manages to support numerous co-working spaces and models, not all like WeWork, since the local demand is there?).
  • We face significant local economic challenges (low inflation leading to minimal GDP growth and negative interest rates; declining wages/purchasing power in real terms; falling retail spending; over-extended household debt; and underemployment in the wider job market).
  • On the other hand, Australia still hasn’t had a recession since 1991, and house prices have just seen the biggest monthly increase since 2003, yet banks are imposing more stringent lending criteria.
  • Depending on which economic theories you favour, this either means easier access for first time buyers thanks to lower interest rates; or more rent arrears, increased mortgage stress and greater homelessness because of a lack of affordability and/or deteriorating lower cost housing options.
  • PropTech is not just two-sided online residential market places (although data analytics and digital marketing capabilities are integral to that particular segment).
  • PropTech should also embrace sustainability in terms of environmental efficiency and affordability. Social impact will likely mean adjusting home owner expectations in terms of dwelling size and carbon footprint. Equally, smart cities and more mixed use development is also being increasingly factored into urban planning and infrastructure design.
  • The increase in higher rise and higher density housing has also led to cost cutting in the choice of materials (flammable cladding), and deregulation and other factors have exacerbated structural defects where there is inadequate insurance protection for home owners.
  • What is happening where PropTech and FinTech intersect, such as the notion of fractional ownership? While this is something that is increasingly more likely (especially with Blockchain technology and tokenisation) if first time buyers have no other way to access the property market, what should be the appropriate licensing regime for these new financial products? What should be the credit risk criteria, lending models, prospectus design, funding structure and tax & accounting treatment? What if such developments include social and inter-generational housing? Or achieve the highest environmental standards/lowest greenhouse emissions?
  • For Australian PropTech startups wanting to go global, there were some warnings about the lack of cross-border tech transfer, and an absence of cultural awareness and curiosity by founders.
  • Meanwhile, on some measure, Facebook is probably the largest residential rental marketplace in the USA. What does that signify for future markets and property transactions?
  • Despite the success of real estate market places in Australia, the model does not easily transfer or scale in other countries. Equally, models from overseas might not work here. There was some scepticism about the so-called “iBuyer” model, and also the agency aggregation approach by firms like Compass (“you can’t buy relationships”). Plus, even local brands can go sour (e.g., Run Property and its subsequent merger with Little Residential to form LITTLE Real Estate).
  • IoT-enabled solutions are a growing theme, especially in aged care, and where AI learning patterns are being applied to energy efficiency, for example, or to improve facilities management (another PropTech segment ripe for disruption). This also links to the use of and intersection between On-line/Off-line data, such as CAD and 3D modelling, and “digital twins” (real-time databases of building design files) for mapping and monitoring physical structures. While in the UK, the concept of, and need for, Digital Twins has led to a raft of industry-wide initiatives and collaboration.
  • Despite Australia’s impressive work in creating standard data structures for residential property, there is still a lack of transparency when it comes to the results of private auctions (but isn’t that the idea – they are “private”?). According to the panel, similar data overseas is considered to be quite “dirty” (unstructured and non-standard).
  • The panel anticipated new PropTech opportunities for those companies offering “high touch/high end” services, and those providing “low touch / high tech” solutions.
  • One common data and infrastructure management challenge is dealing with legacy information systems, and sluggish internet speeds (despite, or because of, the NBN), meaning there will inevitably be some bifurcation in service and quality, depending on building design, purpose, age, location, value etc.
  • Finally, there were concerns that as security data and facial recognition technology becomes increasingly algo-based, it raises questions of privacy and misuse of personal and confidential data.

Next week: Pitch X – Launch Into A New Decade