Tag Archives: #startups

FinTech Fund Raising

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In the wake of the Banking Royal Commission, will FinTech startups capture market share from the brands that are on the nose with customers? And will these upstarts manage to attract the necessary funding to challenge the deep pockets and huge balance sheets of the incumbents? This was the underlying theme of a recent panel discussion hosted by Next Money Melbourne.

The panel comprised:

Nick Baker from NAB Ventures, typically investing $1m-$5m in Seed to Series C rounds, self-styled strategic investor with a particular focus on RegTech, Data and Data Security, and AI/Deep Learning

Ben Hensman from Square Peg Capital, writing cheques of $1.5m-$15m into Series A onwards, more of a financial investor, mainly in businesses starting to scale. Sees that the industry is ripe for disruption because of the mismatch between profit pools and capital pools, compared to the size of the economy.

Alan Tsen an Angel investor, making personal investments of $10k-$25k, mostly into teams/founders that he knows personally and has had an opportunity to see the business evolve fairly close up.

Key topics included:

Open banking – Will this be the game-changer that many people think it will? Are the banks being dragged kicking and screaming to open up their customer databases? What will be the main opportunities for FinTech startups? While customers often express an intention to switch banks, the reality is that few actually do. In part because current processes make it relatively difficult (hence the current Open banking initiative, which will later be extended to utilities); in part because there is little to no differentiation between the major banks (in products, costs and service). Also, it seems that banks are quietly getting on with the task in hand, given that resistance is futile. My personal view is that banks may have a significant role to play as custodians or guardians of our financial and personal data (“data fiduciaries”) rather than directly managing our financial assets. For example, when it comes to managing the personal private keys to our digital wallets, who would we most trust to hold a “back up of last resort” – probably our banks, because even though we may love to hate them, we still place an enormous amount of trust in them.

Full stack financial solutions – Within FinTech, the panel identified different options between full stack startups, compared to those that focus on either the funding layer (sourcing and origination), tech layer, and the CX layer.

Neo-banks – Welcome source of potential competition, but face huge challenges in customer acquisition, brand awareness and maintaining regulatory capital requirements.

Unbundling the banks – Seen as a likely outcome from the Royal Commission, given that we have already seen the major banks largely exit the wealth management and advice business. But the challenge for FinTech startups will be in developing specific products that match and exceed current offerings, without adding transactional friction etc.

Identifying Strong FinTech Teams – There needs to be evidence of deep domain expertise, plus experience of business scaling. Sometimes it’s a fine balance between naivety and experience, and outsiders versus insiders – bringing transferable external experience (especially with a view to disrupting and challenging the status quo) can easily trump incumbent complacency.

Funding Models – While most VC funding is in the form of equity, some VCs offer “venture debt” (based on achieving milestones) which can be converted to equity, but while it can lead to founder’s equity dilution, it may represent a lower cost of initial capital for startups. The panel mentioned the so-called “Dutch model” (because it has been used by Dutch pension funds) that local mortgage company Athena has brought to the market. Rather than seeking wholesale funding or warehouse financing to back their home loan business, Athena allows institutional investors such as superannuation funds, to lend direct to homeowners. This means that the funds receive more of the mortgage interest margin than if they were investing in RMBS issued by the banks and mortgage originators. Athena is mainly geared towards refinancing existing mortgages, rather than new loans, but also offers a new approach to mortgage servicing and administration.

Generally, VCs prefer simpler structures rather than, say, funding milestones, because of the risk of misaligned goals, and the impact this may have on subsequent price rounds. There are some models that create a level of optionality for founders, and others which are royalty-based, or which use a form of securitisation against future cash flows.

Meanwhile, the panel were generally not in favour of IPOs, mainly due to the additional regulatory, compliance and reporting obligations of being a public company. So it would seem their favoured exit strategy is either a trade sale or a merger, or acquisition by a private equity fund or institutional investor.

Next week: Crypto House Auction

Startup Vic’s SportsTech Pitch Night

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Last month’s Startup Vic’s Pitch Night featured SportsTech, one of the semi-regular topics in Startup Vic’s themed pitch nights. Hosted by LaunchVic at the Victorian Innovation Hub, supported by the Sports Geek podcast and Track, Victoria University’s sports partnership institute.

In a new partnership between Startup Vic and LaunchVic, upcoming pitch nights will feature EdTech, Diversity and HealthTech. Meanwhile, back to the sport. The competing pitches were (links in the names):

Benchvote

Describing itself as a Sports Fan Engagement Platform, Benchvote has a tag line of “the Canva of creating high performing digital campaigns for sport”. Covering marketing, sponsorship and commercial, the platform claims to achieve 50%+ conversion rates on campaigns, partly achieved through a gamification aspect to appeal to fans.

The platform offers campaign templates, drives social media traffic to users’ own websites,
thereby converting that traffic into firm leads. It also has the potential to support other related verticals – including entertainment, media and betting. The proprietary nature of the solution is the combination of a SaaS model plus insights algorithms.

Asked by the judges about customisation versus scaling, we were told that it is a totally white label solution. Although the platform can support agencies as well as product providers with creative content and digital assets, the preference is to let clients do their own (given the business origins as an agency turned software company).

In terms of the competitor landscape, it’s between agency solutions and software services on one hand, and integrated platforms and single solutions on the other.

Potentially integrating ticketing data, the team are also looking at international expansion, and are in the middle of a raise.

MarineVerse

This is a VR sailing platform, that claims to be “Democratising sailing by enable people to sail in VR”. A big call.

Already running a VR Regatta competition, the team is building a community of clubs, members, and daily races. There’s also a VR sailing classroom, with the MarineVerse Cup – a two-week event – to come. Competition exists in the form of Virtual Regatta, which is actually a non-VR, e-sports platform.

Offering a $10 per month subscription model, MarineVerse is banking on the new
Oculus Crest device to boost adoption. The business has been bootstrapped for three years, and is experiencing 8% monthly growth.

Targeting a demographic of 30-55 year olds who are cashed-up and time rich, the team are also developing multiplayer races. The judges asked if there was potential to support high-performance training and use player data for predictive performance or behaviour.

Unite

A platform for sports club and team administration, Unite developed by Eastwood sports tech offers apps such as training calendars, fixtures management, media engagements, sponsor obligations and travel planning. Designed to help manage “Commitments to the team and individual level”, Unite offers a B2B subscription module (individual team players are the actual users) for professional, semi-professional, e-sport and collegiate teams.

Although TeamWorks is a major competitor, in fact there is much more competition at the grass-roots level, because peak bodies and administrators want to own the data. Currently at the working prototype stage, with an MVP. The service is designed to manage and approve player activities and such as media commitments, sponsorship and endorsements. It is built as a hosted SaaS using AWS security features, sitting behind the  club’s own fire wall.

Wedge Pro

As the name suggests, this device is all about “The Art of Wedge Play”, designed to reduce player handicap, and help with short game training, especially lifted wedge shots. According to the pitch, many amateur players suffer from poor technique, poor distance control, and lack confidence.

Apparently, there is a $2 billion global market for golf accessories, such as this physical attachment which launches a monitor linked to an app.

A 2017 winner at the La Trobe Accelerator Program, the team is looking for an app developer for data capture. While offering post-sales service and device re-calibration (for adjustments according to player height, the cord length matrix and player handicap), judges wondered if there was also the opportunity for VR applications as well as the kinaesthetic experience. Asked about distribution, the team mentioned getting the product into golf shops and pro shops (without providing any specifics), while building a brand for a suite of golf tech products.

After all the cotes were counted, the People’s Choice was Unite while MarineVerse was the Judge’s favourite.

Next week: FinTech Fund Raising

Pitch X

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Organised by Academy Xi in conjunction with Melbourne Silicon Beach, the latest edition of Pitch X was hosted at YBF Ventures last week. The event sponsorship, prizes and judging panel came from Everest Engineering, Luna, Shiftiez, Lander & Rogers, LaunchLink and YBF Ventures itself.

Image sourced from Pitch X Eventbrite page

Each each start-up was given 90 seconds to pitch, followed by a one-minute Q&A with the judges. The best three presentations were then shortlisted and invited back on stage to make a 5-minute pitch, followed by a 2 minute Q&A.

Some of the pitches were really only ideas, a few had reached MVP status, and a couple were in advanced beta with actual customers. And most of the projects still at the drawing board lacked key tech skills and resources to execute on their ideas. So there was a bit of an imbalance across the initial presentations. It’s not for nothing that most successful hackathon teams comprise a hacker, a hipster and a hustler…

In order of presentation the pitches were (website links where available are embedded in the startup names):

Backyarda – “the spontaneous experience curator”, promoting unsold event inventory via Facebook Messenger. Needs a co-founder and development skills as well as seed funding. Takes a 30% sales commission, and is at MVP stage, targeting 18-35 year olds.

Virtual Amputee Experience – providing training to prosthetic users and raising empathy and public awareness. Positioned as a research tool and data acquisition model. Seeking funding for software and hardware development. It’s a spin-off from an academic research project. Judges asked about the revenue modelling and the data privacy issues.

Betabot – by Beta Launch – “Empowering teammates, Supercharging augmented teams”. Designed as a Slack plug-in. The solution is in fact a time-zone calendar management tool. (But as the MC noted, it’s also the name of a computer virus…)

The Neighbourhood Effect – “your local green living guide”. Making it easier (and financially positive) to be green. Employs gamification and behavioral science, for example a User Questionnaire model. Free version plus white label solution for local governments, and product providers. IP resides in the data mapping. Has had success in ACT via a rapid local campaign model.

The Good Bite – “providing financial independence to women who are suffering domestic violence”. A social enterprise for corporate catering, offering training and employment opportunities.

Young Adult Grief Space – “online counselling service”. Based on a P2P experience via shared narratives. Very much an idea at this stage, judges asked how sessions would be moderated, and how professional counsellors would be involved.

Pearlii – “dental checkups via selfie”. Aimed at early detection and prevention.
Uses a smart phone app to take 5 photos, then applies a diagnostic algorithm via ML and image processing. Freemium model – a basic account plus a premium profile management solution. Building their own tech/IP from scratch, and see future applications in tele-medicine, removing reliance on experts, placing trust in AI, image processing and analysis.

Inside Outcomes – “better communications between psychologists and their patients between sessions”. An app to chart personal outcomes etc. Judges asked how it integrates with existing patient management systems? Currently much of the work is done manually.

Abadog – “behavioural advice for dog owners”. Consultation via observed data and individual report delivered online. 20% of dogs have anxiety disorder. There is a lack of certification or legislated standards for best practice for dog trainers and behaviouralists. Aiming for a subscription model.

The Social Agenda – “Efficacy and Integrity in Government”. Talked about three different modules for public policy design, deliberation and decision-making. Goal is “Policy Certainty”. Wasn’t clear what the actual project involves, so hard to evaluate the concept.

Winners were:

1st prize –  Neighbourhood Effect

2nd prize – Pearlii

3rd prize – Abadog

Next week – Startup Vic’s SportsTech Pitch Night

Startup Victoria: supporting successful founders

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I’ve been attending Startup Victoria’s meetups for more than 5 years, and have been a paid-up member for most of that time. The event formats and the key personalities have changed over the years, but the mission has always been to help create more founders and better founders, and to support the broader startup ecosystem. At last month’s AGM and panel discussion, the Board announced that the focus has now shifted to “helping founders to succeed”. A subtle change, but an indication that the local startup scene is finally maturing.

As part of this renewed focus, Startup Vic wants more corporates to engage with local startups – as suppliers, strategic partners and potential target acquisitions. Given the challenges startups face in meeting enterprise procurement processes (especially in the public sector…), this will not be easy. The path to engagement with startups has to be considerably de-risked before purchasing managers will get the sign-off to onboard new vendors.

That challenge aside, another observation from the panel discussion of founders and advisors was that Startup Vic needs to connect newer founders with more experienced founders, those who have already taken a startup to scale up to exit. Plus, as a leadership organisation, Startup Vic recognises that more needs to be done to highlight local success stories. That doesn’t just mean the startup community celebrating itself – it means spreading the word publicly and getting more media airtime for businesses that are building sustainable growth in the new economy.

One of the panelists asserted that “some of our politicians would rather have their photo taken with the winner of the Melbourne Cup, than be seen with the founders of Atlassian”. A bit harsh, perhaps – but I know that they mean. Aligning themselves with sporting heroes probably does more for their public profile, compared to hanging out with our key tech entrepreneurs in order to learn what government could do to foster more startup success.

To be fair to the Victorian Government, it has been trying to implement an innovation strategy that brings participants together – founders, investors, incubators, accelerators, etc. This has resulted in: the Victorian Innovation Hub (plus a number of sector-specific tech centres); LaunchVic (to provide grants to projects designed to foster the startup community); and engagement with overseas VC funds and offshore tech companies (to position Victoria as an investment destination, and as a national, regional or even global HQ).

Meanwhile, the panel also debated whether too many local founders are more interested in building a “lifestyle business” for themselves, rather than creating say, a $250m company. This apparent lack of ambition was seen as something of a local phenomena, partly linked to Melbourne’s status as one of the world’s most livable cities, partly linked to a generally benign Australian economy (but with a growing number of stress points), and the usual cultural factors such as the tall poppy syndrome. There are also some structural challenges in the economy (restrictive trade practices, a lack of competition in highly concentrated markets, continued economic uncertainty post-mining boom, delays in rolling out the NBN, a potential credit squeeze…), plus a growing distrust of public institutions and major corporations. This disenchantment and disengagement is not helped by a lack of strong leadership in government and in business – so why would anyone with any sense want to get involved, and hence the desire to take care of one’s own needs first.

Finally, emphasizing the need to re-think the founder mindset and to provide a better foundation for building the businesses of the future, Startup Vic is also committed to both the professional and personal development of founders.

Next week: Blipverts vs the Attention Economy