As we draw into the second half of 2024, we are declaring the end of winter for startups, and enjoying the fresh green shoots of startup spring.
While we are all hearing constantly about AI, there are many more areas of growth in the fintech world where we’re seeing warming interest from investors. Payments, digital currencies and supply chain tech are among the sub-sectors we see enjoying moments in the sun.
The painful rationalisation process that took place over 2022-3 sees us now with a blossoming and a robust industry in Australia, with 88% of fintechs in this country now post-revenue and 75% three years old or more.
Crunchbase data shows that funding in Q1 2024 in Australia is up just over 6% over Q1 2023, and Australia is doing far better than the global average, which is down around 20%. Reflecting the maturity of the startup market overall, rounds at seed stage and later attracted bigger cheques in Q1 this year than they did a year ago.
In a delightful evolution of the sector, 2023 saw a massive uptick in female-founded companies being funded.
At Seed Space Venture Capital we have diversity as a core value, so this development is exciting and a trend we hope to see continue.
In an excellent development for investors, we are seeing movement again in both exit and follow-on opportunities.
High profile subsequent rounds for companies like Honey Insurance and Employment Hero have definitely stimulated the appetites of investors here in Australia as well as international investors tracking this market.
And with Canva and Remitter both signalling their intent to list in the US, we see the heralding of a fresh round of tech IPOs that will certainly refresh local enthusiasm for taking to the boards.
Canva investors received an extra bonus with their huge liquidity event, a great signal that those who have built up equity in companies that thrived through the difficult times will be able to be rewarded for their patience.
Payments and the ‘pipes and plumbing’ for financial transactions is an area where the rays of spring are bright.
BNPL has enjoyed a resurgence, but more interestingly we are seeing burgeoning growth in many and varied payments related areas including solutions for rental bond payments; SME employee expense solutions; construction contractor payments, and financial solutions for international students.
The fat in payments is enormous, and we see this dissipating over the coming decade to the detriment of the incumbents and the benefit of those eating up the spread.
Digital assets, and the infrastructure associated with them, are once again an area of interest for investors.
In a speech in March this year, ASIC Commissioner Alan Kirkland talked about the new regulations that are now in development for this sector. With several banks trialling stablecoins and thinking about future tokenised assets, we now see good opportunities in the digital asset space, which was probably one of the most severely affected during fintech winter.
Supportive regulatory regimes in place in Hong Kong and Singapore make APAC more broadly a good place to develop new products and services using these technologies, and we see excellent prospects for fintech companies in Australia to take advantage of these tailwinds.
Supply chain tech continued to grow even through the winter and we are seeing a real maturity in this sector now. Creative implementations for traceability and trade are beginning to get real traction to replace outdated paper-based trade workflows, as well as capturing valuable trade data that can be repurposed to create brand new business opportunities.
Great vintages of venture capital are built during periods of economic uncertainty, and we’re excited both about the growth we’ve seen from our investments during the winter, and about continuing to deploy capital into the current more optimistic environment.
* Dirk Steller is the founder and Managing Partner of Seed Space Venture Capital