Reinventure says half of its investments should be wrong
Fintech investment fund Reinventure is looking for riskier investments after its latest funding from Westpac.
Investment fund Reinventure, which has Westpac as its largest funder, is changing its investments risk appetite and says half of its decisions should be wrong. Following the latest $50 million of funding from Westpac, the second cheque of that size to come from the Big Four lender, co-founders Danny Gilligan and Simon Cant are sticking to their ethos of backing disruptive startups.
"If you look at the data out of the US, the greatest risk as a venture capitalist is that you don’t take enough risk,” Gilligan said in an interview with The Australian.
“The worst-performing VC funds in the US, 50 per cent of the investments don’t return the capital. The best performing VC funds, 60 per cent of the investments don’t return the capital.”
Reinventure has backed fintech companies such as SocietyOne, Australia's first peer-to-peer lender, and bitcoin wallet Coinbase.
Cant also explained that Reinventure's new riskier strategy will be more "non-consensus" and involve backing more unpopular startups.
"Part of our challenge sometimes is when things look really obvious or make a lot of sense, it’s probably not the right investment for us,” he said.
“But half of our (investments) should be wrong."
The fund is based on a mutually beneficial relationship between Westpac and Reinventure, where the fund receives capital and Westpac receives "deep insight into leading edge technologies, business models and great entrepreneurs".
Westpac has contributed $100 million so far to the fund, the largest direct investment out of any of the Big Four, as well as pursuing partnerships with individual fintech companies such as Prospa.
NAB's investment in fintech have largely remained in-house, but it did establish a $50 million fund NAB Ventures to invest in startups and improve its own products and services.
CommBank has partnered with fintech companies such as OnDeck and Kounta as well as investing in its own innovations, while ANZ has kept its developments in-house but also partnered with fintech co-working hub York Butter and co-working space Honcho.
As this is the second funding round for Reinventure, it will be using lessons learnt from the first round to inform its decisions. However, Gilligan says this isn't easy because of how young the market is, meaning they weren't able to get a "proper report card".
The focus for the next investment round will be in data, security, identity, trust, regtech and AI.