Spaceship launches the future of superannuation

Backed by some stellar names in the tech and startup worlds, Spaceship describes itself as a superannuation fund designed to “invest where the world is going, not where it’s been”. Squarely aimed at 18-35 year-olds (and savvy people in their 40s and 50s….), it is the brainchild of Paul Bennetts (a Partner at AirTree Ventures), Andrew Sellen (ex-Marketing Manager at Australian Ethical Investments) and two tech co-founders, Dave Kuhn and Kaushik Sen. Their central thesis is that global tech stocks are the future, and that these assets should form a greater part of a fully diversified portfolio, with a 10-year plus investment horizon.

spaceship-logo-03I first connected with Paul a couple of years ago, when I was working with a legal technology startup that was an early graduate of the Melbourne Accelerator Program. He was interested in what we were doing at Ebla, but the company was at too early a stage for him to invest in. But I’ve kept an eye on what Paul has been doing since, and have followed the Spaceship story quite closely. We last caught up very briefly during a recent roadshow event in Melbourne, as part of the Spaceship beta launch.

Any new superannuation brand, especially if it is neither an industry fund nor a retail fund backed by a major financial institutions, is going to struggle to attract members: the industry and public sector funds have the benefit of workplace incumbency (sometimes backed by industrial awards), and the big retail funds have extensive distribution channels via advisor platforms, dealer groups and financial planners. As for corporate superannuation funds, in my experience, many of these employer-run funds are often a re-badged or customised version of an existing retail fund, or a highly outsourced business that retains the company name for brand recognition among employees.

Spaceship is challenging the market by using technology (and very targeted marketing) to streamline the recruitment and on-boarding process. As evidence of its marketing success, Spaceship claims to have built a waiting list of 12,000 prospective members in just 30 days, mostly through social media and word-of-mouth. And as evidence of its success in attracting “smart” money, witness some of the big names who have backed the venture as investors, or joined as members themselves.*

Not surprisingly, Spaceship is also developing some interesting content marketing and social media tactics to drive member engagement. This includes thought leadership on portfolio diversification, understanding investment horizons, accessing investments in early-stage tech companies, and investing in tech brands that its members love and use.

But while much of the media coverage for Spaceship has been positive, it has already drawn detractors (almost in the same breath…). Some of the latter reckon that it won’t achieve necessary scale to be sustainable (in light of APRA moves to drive consolidation among smaller funds), it will be highly concentrated in its exposure to tech stocks (which have a tendency to be more volatile), and without face-to-face contact with members, it will be harder to drive customer engagement.

Given that, following some delays, Spaceship does not launch to the general public until the end of this month (it is still running a waitlist), it’s probably a bit churlish to say it is doomed to failure before it has even really begun. Equally, having worked in financial market research myself, I have met with a number of industry, public sector, retail and corporate superannuation funds who cite member engagement and retention as one of their biggest challenges. The main issue is this: how do you interest an 18-year old in something from which they won’t derive any benefit for at least 40 years?  And once you have got their attention, how do you sustain that interest over the lifetime of their membership and into retirement?

Now technology is having a larger part to play in disrupting the superannuation industry, and changing the way members interact with their fund. As the COO of a major industry fund said recently at a FinTech Victoria event, “consolidating your super balances is only three clicks away” (to which Spaceship, replied “it’s now only one click!”). But it’s not enough to have a smart phone app to check your balances, switch investment options or make voluntary contributions. Members are looking for other services, such as financial education, estate planning, insurance, loans and mortgages, and tailored advice. Plus, they expect much more streamlined processes and pro-active member support.

I suspect that a key factor that will likely contribute to Spaceship’s potential success is the growth of the gig economy:

First, with more people working as freelancers, contractors or becoming self-employed, they will have no ties to a fixed workplace or a single employer – so they will be drawn to a fund product that appeals to their independence and flexibility.

Second, much of the gig economy lies in the tech and startup sectors, so again, prospective members might well be looking for a fund that invests in what they are interested and involved in themselves.

Third, if we are all expected to live and work longer, and if we are going to have to rely more on our own accumulated retirement assets, a fund that fully aligns with this long-term investment philosophy is hopefully going to be better placed to help us meet our financial goals.

Of course, it’s worth remembering that the Australian superannuation industry is both large ($2.1tn in assets as at September 2016, and the 3rd largest pool of pension funds in the world), and highly regulated (for very good reason). Equally, it has been slow to adapt to a changing economy and to different market factors, and is increasingly dominated by just a few big funds. Among some large industry funds, there is almost a cosy, symbiotic relationship between their members (who work in say, construction, energy, mining) and some of the assets the funds invest in (infrastructure, buildings, utilities). (But that may prove to be Spaceship’s USP – representing members who work in the tech sector?)

Although the Australian superannuation and managed funds sectors have established strong capabilities in administration, trustee, custody and asset management services, many of these back-office operations run on legacy IT systems which are potentially ripe for disruption. Plus, while government initiatives look for ways to attract more offshore institutions to place their assets with Australian fund managers, under various financial passport arrangements Australian institutions can invest in offshore funds domiciled and managed in key investment centres such as Luxembourg and Singapore.

Finally, new entrants to the superannuation industry are less likely to be reliant on incumbent and legacy service providers, and more able to take advantage of emerging technologies such as blockchain solutions (distributed ledger platforms), and fully integrated end-to-end CX (mobile apps and tools).

* Declaration of interest and disclaimer: I was successful in signing up to Spaceship in beta/waitlist, and have allocated a small portion of my own super to the fund. I do not have any other commercial connection with Spaceship or its founders. I have not been paid to write this article, nor should it be construed or interpreted as financial advice – it has been provided for general information only. BE SURE TO SEEK YOUR OWN INDEPENDENT FINANCIAL ADVICE BEFORE MAKING ANY FINANCIAL INVESTMENT.

Next week: Gaming/VR/AR pitch night at Startup Victoria

The FF17 Semi Finals in Melbourne

As part of the recent Melbourne Startup Week, Next Money hosted the Melbourne heat of the FF17 pitch contest, to decide which local FinTech startup will compete at the FF17 finals in Hong Kong later this week.

screen-shot-2017-01-15-at-8-15-03-pmAt the outset, I should declare an interest, as I myself was one of the pitch contestants, but hopefully that doesn’t preclude me from commenting on the event. The competing startups were as follows (as listed on the event Meetup page):

AirWallex

This payments solutions provider has featured in my blog before. Since the last time I saw AirWallex pitch, the market for cross-border remittance and payment solutions has drawn a lot of attention. First, the growing opportunity for exporters to market products and services to Chinese consumers and tourists means that payment platforms like AirWallex (and others like Novatti, LatiPay and Flo2Cash) are partnering with Chinese payment gateways such as WeChat Pay, AliPay, JDPay and Union Pay). Second, cross-border remittance services has become a key use case for Bitcoin and other digital currencies (as evidenced by the recent partnership between Novatti and Flexepin).

Analyst Web

Still in private beta, Analyst Web is aiming to disrupt the market structure (and payment model) for equity research. By enlisting qualified CFAs to write bespoke investment reports on listed companies, then distribute them via subscription services, Analyst Web claims to be bringing quality, objectivity and value for money to this investor service. Currently, investors have to rely on either brokers (who may offer “free” reports to their clients under soft dollar arrangements) to provide research on individual stocks; or subscribe to independent research houses (such as Morningstar). Typically, neither brokers nor the research houses cover the full market – tending to focus on the bigger stocks and those included in benchmark indices. Of course, companies themselves use investor relations services to issue commentary on their market performance and prospects, but these communications perhaps lack objectivity. There are also other models, such as the ASX Equity Research Service, whereby research providers are “sponsored” by the stock exchange to provide reports on qualifying companies to boost market coverage. Some of the challenges Analyst Web will need to overcome are: investor willingness to pay for research; market credibility and acceptance of their reports; and sustainable financial models that appropriately compensate the analysts without compromising independence and objectivity.

Proviso

Proviso has also been mentioned in my blog before, and they continue to impress with their solution to take friction out of the documentation processes for loan origination, and their ability to secure more financial institutions as clients. In my previous commentary, I noted that Proviso risked being disintermediated by an industry-owned utility. While I still think that is a possibility, I also see that the combination of Blockchain solutions (for distributed ledgers and bank data feeds) and more open APIs for financial data and account information may mean that customers themselves may be empowered to drive the process, since it will be easier for them to demonstrate their creditworthiness and establish their cashflow status, but also have better control over the disclosure of their data.

DragonBill

DragonBill, an invoicing solution for SMEs, is yet another of the FF17 contestants to appear in my blog, most recently when they presented at Startup Victoria’s regular pitch night. In addition to offering both direct payment and escrow options for micro-businesses and sole traders, DragonBill continues to mine an interesting niche market among sports clubs and associations – the reason being that many club members are themselves sole traders. As part of its future developments, the business is scoping a solution to help clients manage their superannuation obligations, and to provide informed advice on cashflow management.

BreezeDocs

Similar to Proviso, BreezeDocs is a document automation solution for lenders, although currently focusing on mortgage origination. And like Proviso, at the heart of the solution is the ability to streamline the extraction and processing of data from customer documents. On top of a core OCR capability, BreezeDocs also claims to be using machine learning to train their systems on different document types, formats, structure and content. Despite the use of ETL processes within financial institutions, the disparate nature of financial products and documentation; the way customer, product and transaction data is often maintained in different systems; and the fact that customers will often have accounts and products with different providers can undermine the need for standardised processes.

Vestabyte

As I commented in my previous blog, equity crowding may be about to come into its own as a way to connect investors with entrepreneurs and startups. Vestabyte are certainly enthusiastic exponents of this method for raising capital, but legal constraints mean that their platform still has to operate under a unit trust model, rather than offering access to investments in the form of direct shares in specific assets, companies or ventures. This may change if the proposed legislation can get through Parliament, although it’s far from being a done deal. But in the absence of formal legislation, it sounds like a great opportunity for a FinTech startup seeking funding to test ASIC’s first licensing exemption under its sandbox regime….

coHome

By their own admission, coHome is very much a nascent business – one that is still defining its customer offering. At its heart, this shared ownership service provides a matching service for aspiring property owners, along with some standard documentation for a co-ownership agreement, known legally as a tenancy in common. With multiple parties to the property transaction and mortgage application, coHome aims to streamline the process, make it easier for buyers to connect with other interested parties, and provide customers with appropriate legal safeguards. It’s clearly an admirable objective, and one that deserves to gain attention. But monetizing the service may prove challenging, unless coHome takes a commission from the mortgage providers, lawyers and conveyancers?

BugWolf

Not strictly speaking confined to the FinTech sector, nevertheless BugWolf, a tool for managing user-acceptance testing, has managed to gain traction with at least one of Australia’s Big 4 banks. Using gamification, competitions and other techniques to recruit, engage and manage teams of testers, BugWolf claims to support all aspects of functionality testing across software, websites and mobile apps. Combined with robust reporting and analytics, BugWolf can also help clients achieve shorter product development cycles.

Brave New Coin

I joined the team at Brave New Coin (BNC), a provider of market data for digital assets, in early 2016. So, it was the first time I have pitched, outside of hackathons, client presentations and sales conferences. And the fact that BNC was a last-minute confirmation for this event made it an even more interesting experience. Established about 3 years ago by a team of founders with an interesting mix of publishing, Bitcoin and full stack development experience, BNC has built a suite of data APIs (market prices, indices, exchange rates and analytics) for Bitcoin and most other crypto-currencies and Blockchain assets. While the APIs are typically used by developers, the growing interest in digital assets among brokers, investors and asset managers means that market data on these new asset classes is in demand, and BNC is busily building distribution partnerships and subscription deals with traditional brokers, market data vendors and exchanges. Recent price fluctuations for Bitcoin may suggest continued speculation in this currency, but the launch of investable and tradeable products such as CFDs, futures, ETFs and other derivatives also suggest that digital assets are starting to achieve broader market acceptance.

BankVault

Unlike other solutions to defeat hackers and hoaxers (e.g., anti-virus software, spam-filters, VPNs and proxy servers), BankVault uses virtual machine technology to protect customers’ bank details when they transact online. This means a “new and instant” machine is created for one-time use only, each time a customer launches the BankVault service. Offering both individual subscriptions and enterprise solutions, the business is in the process of launching in the USA.

Conclusion

The winner, based on the judges’ votes, was BugWolf, which came as something of a surprise to a number of the other contestants, myself included. Without wishing to sound churlish, this event was supposed to be about the future of finance (hence FF17…), so it would seem reasonable that the winner would be based in FinTech (as opposed to TechTech?). The result (although highly deserved and based on an impressive pitch), also reinforced my sense that this event did not draw the “usual” FinTech or startup audience in Melbourne, based on the many pitch nights and meetups I have attended over the past few years. From my perspective, neither was it an investor audience, nor a capital markets audience, meaning I wasn’t really sure who I was pitching to. I’m hoping that the organisers will reflect on this event, and look to make some changes for next year.

Next week: A few rules on pitching

What might we expect in 2017?

On a number of measures, 2016 was a watershed year. Unexpected election results, fractious geopolitics, numerous celebrity deaths, too many lacklustre blockbuster films, spectacular sporting upsets (and regular doping scandals), and sales of vinyl records are outpacing revenue from digital downloads and streaming services. What might we expect from 2017?

Detail from "The Passing Winter" by Yayoi Kusama (Photo by Rory Manchee)

Detail from “The Passing Winter” by Yayoi Kusama [Photo by Rory Manchee]

Rather than using a crystal ball to make specific predictions or forecasts, here are some of the key themes that I think will feature in 2017:

First, the nature of public discourse will come under increased scrutiny. In the era of “post-truth”, fake news and searing/scathing social commentary, the need for an objective, fact-based and balanced media will be paramount. In addition, the role of op-ed pieces to reflect our enlightened liberal traditions and the need for public forums to represent our pluralist society will be critical to maintaining a sense of fairness, openness, and just plain decency in public dialogue.

Second, a recurring topic of public conversation among economists, politicians, sociologists, HR managers, career advisors, bureaucrats, union leaders, technologists, educators and social commentators will be the future of work. From the impact of automation on jobs, to the notion of a universal basic income; from the growth of the gig economy, to finding purpose through the work we do. How we find, engage with and navigate lifelong employment is now as important as, say, choosing high school electives, making specific career choices or updating professional qualifications.

Third, the ongoing focus on digital technology will revolve around the following:

  • The Internet of Things – based on a current exhibit at London’s Design Museum, the main use cases for IoT will continue to be wearable devices (especially for personal health monitoring), agriculture, transport and household connectivity
  • Fintech – if a primary role of the internet has been for content dissemination, search and discovery, then the deployment of Blockchain solutions, the growth in crypto-currencies, the use of P2P platforms and the evolution of robo-advice are giving rise to the Internet of Money
  • Artificial Intelligence – we are seeing a broader range of AI applications, particularly around robotics, predictive analytics and sensory/environmental monitoring. The next phase of AI will learn to anticipate (and in some cases moderate) human behaviour, and provide more efficacious decision-making and support mechanisms for resource planning and management.
  • Virtual Reality/Augmented Reality – despite being increasingly visible in industries like gaming, industrial design, architecture and even tourism, it can feel like VR/AR is still looking for some dedicated use cases. One sector that is expected to benefit from these emerging technologies is education, so I would expect to see some interesting solutions for interactive learning, curriculum delivery and student assessment.

Fourth, and somewhat at odds with the above, the current enthusiasm for the maker culture is also leading to a growing interest in products that represent craft, artisan and hand-made fabrication techniques and traditions. Custom-made, bespoke, personalized and unique goods are in vogue – perhaps as a reaction to the “perfection” of digital replication and mass-production?

Fifth, with the importance of startups in driving innovation and providing sources of new economic growth, equity crowdfunding will certainly need to come of age. Thus far, this method of fund-raising has been more suited (and in many cases, is legally restricted) to physical products, entertainment assets, and creative projects. The delicate balance between retail investor protection and entrepreneurial access to funding means that this method of startup funding is constrained (by volume, amounts and investor participation), and contrary to stated intentions, can involve disproportionate set up costs and administration. But its time will come.

Finally, as shareholder activism and triple bottom line reporting become more prevalent (combined with greater regulatory and compliance obligations), I can see that corporate governance principles are increasingly placing company directors in the role of quasi-custodians of a company’s assets and quasi-trustees of stakeholder interests. It feels like boards are now expected to be the conscience of the company – something that will require directors to have greater regard to the impact of their decisions, not just whether those decisions are permitted, correct or good.

One thing I can predict for 2017, is that Content in Context will continue to comment on these topics, and explore their implications, especially as I encounter them through the projects I work on and the clients I consult to.

Next week: The FF17 Semi Finals in Melbourne

Summing up the #FinTech summit

Coinciding with the launch of the inaugural EY FinTech Australia Census 2016*, FinTech Australia’s first industry summit Collab/Collide was a major beneficiary of the initial round of funding from the Victorian government’s LaunchVic program. The summit provided a useful opportunity to survey the global landscape, to compare notes and of course, to network. But did we learn anything new?

6278fd_bc2f12c8b40744a281f9afbb37ba1a3emv2The summit was programmed around key FinTech themes of payment services, alternative funding, robo-advice, Blockchain, data and regulation. Participation by some key industry figures from Asia, Europe and the USA (both founders and investors) also provided some international perspective.

While Australia appears to be maintaining a top 5 position in the global FinTech rankings, our focus on things like P2P lending, payments and robo-advice risks losing sight of bigger opportunities in Blockchain assets, enterprise solutions and institutional services.

And although it was good to see a team from the Treasury Corporation of Victoria in the audience, as well some of their colleagues from DEDJTR, it was surprising that there was hardly any representation from among institutional investors (superannuation funds, asset managers, insurance industry), major financial institutions, or the traditional financial markets (exchanges, intermediaries, brokers, vendors)**.

Some of the best sessions were the comparative panels on Blockchain, regulation and funding. In particular, there was an interesting discussion on whether Australia should be worried or concerned about UK opportunities post-Brexit, or focus more on Asian markets. But with the development of reciprocal financial licensing arrangements between Australia and the UK, and Australia and Singapore (and between the UK and Singapore), ASIC is clearly trying to engage with both markets.

The Federal Treasurer, Scott Morrison also took time out of his busy schedule to address the audience on the topic of Open Banking Standards, following on from the Productivity Commission’s Draft Report on Data Availability and Use. The overall goal is to have a system of FinTech data and operating standards that is “regulatory match fit”, that delivers frictionless inter-party transactions and enhanced industry participation and collaboration. For example: once the New Payment Platform launches in 2017, we should have more open access to transaction data; the ATO is implementing a “single-touch” payroll process; and ASIC is due to publish recommendations for the financial services Regulatory Sandbox by the end of 2016.

Unfortunately, given the changes in venue and content, the program struggled to stretch to a second full day, as audience numbers dwindled. Something for the organisers to think about next time? I would also advocate organising specific sessions, e.g., for B2B and B2C, or for vendors and institutions.

Finally, speaking to a member of the DEDJTR team, there is a clear desire on the part of the State government that the FinTech community will come together along with other market participants to figure out how to scale this emerging sector. In other words, how to turn the growing number of FinTech startups (often with directly competing products and services), hubs, incubators, accelerators and VC funds into a sustainable industry?

* For a handy summary of the EY survey, check out Lucinda de Jong’s blog for Timelio

** In the interests of full disclosure, a FinTech startup I work with, Brave New Coin (a market data vendor for Blockchain assets) was a Strategic Partner for the Summit

Next week: The Startup of Me v2.0