Westpac’s new corporate venture capital (CVC) fund, Reinventure, is less than a week old and already has made an investment.
SocietyOne raises $8.5 million
SocietyOne is a peer-to-peer (P2P) lending platform founded in 2012. Reinventure is just one of the investors, taking a $5 million stake.
In the past six months, the SocietyOne loan book has doubled. It has made more than 200 loans with a totalling around $4 million.
It works by matching borrowers with lenders who offer more attract interest rates than banks. Recently, the company launched loans for livestock producers and it is targeting doctors and medical centres with loans tailored to their needs.
It’s a growing business with a huge opportunity to transform the way people lend and borrow money in Australia.
Not just financial services startups
As a startup financial services provider, the interest from Westpac is obvious.
But, Reinventure has an interesting strategy and appetite alongside it being Westpac’s CVC. Anthill interviewed its founders Danny Milligan and Simon Cant about the role Reinventure wants to play in the Australian startup scene.
How does the fund work?
Reinventure has a total of $50 million for investment. This is split into two funds:
“$20 million from the fund is pooled for seed funding investments,” said Cant. “We will invest between $50,000 and up to $1 million in a company that requires seed funding.”
There are a few requirements to be considered, as Gilligan explained “We will invest right down to the formation of stage of the company, if the entrepreneurs are right. But, we are looking for real experience, not just an idea.”
Serial entrepreneurs, who’ve shown they can create and grow a business, are of interest. “If they have a model that is gaining traction in another market, where we can see the potential, then that’s worth investigating,” said Gilligan. “But, in this instance, we will expect the entrepreneur to match the funds.”
That is, if you’re already had an exit from your company and you seek seed capital from Reinventure, you will need to back your own horse.
If you’re not in that category, you will need to have a significant idea that has proven traction in the market and can demonstrate growth and potential, to be considered for investment.
SocietyOne is the first example of a Series A investment from Reinventure. By the Founders’ definition, a Series A investment is for between $1-6 million for a 10-30% equity stake.
While profitability is not required for a Series A investment, product and market fit must be evident and your business model must be validated. That is, your company must be on a growth path and show potential that could be enhanced by having an association with Westpac.
How does Westpac fit in?
Westpac is one of Australia’s largest financial services companies, with more than 10 million customers. It is the largest investor into the Reinventure fund.
However, unlike some other Australian CVCs, Reinventure is an independent venture capital fund. The company presents opportunities to its investment board, some of whom will be Westpac executives. But, ultimately, the investment relationship is made with Reinventure, not Westpac.
What Westpac does bring to the table is an opportunity for the funded companies to leverage synergies that exist. That is, Westpac can learn and grow from what the startup brings to the table, as much as the startup can leverage the customer base, knowledge and support the bank brings to the table.
“Sometimes, it will be a matter of the startup having a solid relationship with relevant areas within Westpac. Other times, it may be a formal agreement,” explained Cant. “We want to create a two-way flow between Westpac and the startup.”
“Traditionally, CVCs tend to invest through a lens,” said Cant. “That is, they look for businesses that purely align with the enterprise level corporate strategy. We are doing it in reverse. We look at the capabilities and value Westpac can bring, this determines why this is a relevant investment.”
In short, Cant and Gilligan are looking for entrepreneurs that can solve a market problem, be it in financial services or, in other relevant markets. For example, as a large enterprise Westpac is a huge consumer of products and services. Businesses that can innovate in an inside or outside the enterprise may be relevant.
What is Reinventure looking for?
Businesses that have the potential to create the future are what Cant and Gilligan are looking for.
A business that has a disruptive model, one that changes the current status quo, is what Reinventure is looking for.
The business should be focused on the Australian and New Zealand market places.
“Disruptive models are either inherently local or, inherently global. Other funds are looking for global growth opportunities. We are looking particularly at local opportunities,” explained Cant.
That doesn’t mean that they’re not looking for businesses that can scale globally but in the first instance, there must be a significant market opportunity in Australian and New Zealand.
The good news is that there are not geographic restrictions for where a company is based within Australia or New Zealand. Some investments require founders to relocate for the opportunity.
Reinventure hopes to have diverse companies spread geographically, to support entrepreneurs in building their business, wherever it may be.
If your next stop is Silicon Valley, Reinventure may not be the funding you’re looking for.
How does a company get on the Reinventure radar?
There are lots of ways to get on the Reinventure radar. Some techniques I wouldn’t recommend are cold calling or sending LinkedIn requests to the Founders.
“The volume through these channels is just so high,” explained Cant. “It’s very hard to give anything coming through those channels the proper attention needed to determine if it’s a good opportunity.”
So, what’s the best way? A warm introduction.
An introduction from other venture capitalists, entrepreneurs and trusted advisors is the way to go. That means, if your business fits the criteria explained here, you’re going to need to use your network.
What role can CVC play in Australia’s startup scene?
Australia has some very large enterprises, Westpac is just one example of a business operating a CVC or variation there of. Others include Telstra, GE, ANZ and Optus are others.
There is a huge role for CVCs to play in the Australian startup space. Each will have its own agenda and niche. Essentially, CVCs will invest in ways that will expand their innovation portfolios – rather than develop in house, CVCs can invest in external ideas that can bring about a transformation at an enterprise level.
And, CVCs never just invest money. As with Reinventure, it is the support and opportunities brought by the corporate partner that can make the difference between success and failure for a startup.
It is an exciting time for the Australian startup community to have Westpac launch its CVC via Reinventure. Hopefully, this will give greater confidence to other corporate businesses to create further funds that will fuel the startup scene and drive Australian smarts to a new level.