VC’s need to Adapt or Die

Yesterday I had the pleasure of being on the panel for the VC round table at the AFR Innovation Summit. As always with summits of this kind, it’s great to be able to look at how far the Australian ecosystem has come in the last few years.

A mere decade ago, the local market was dormant with just a few key players. Ten years on and the market has expanded and continues to do so, with the local start-up sector flourishing alongside a number of fintech start-ups.

There are now more than 30 active players in the local venture capital market with various business models and strategies in play, including stand-alone venture capitalists and major corporate players. Not to mention the success of Australian-grown companies like Atlassian, Campaign Monitor and Canva, that have paved the way for next generation founders to push forward with their big ideas and ensure the start-up ecosystem continues to prosper.

The long-term view is essential

NAB’s mission is to “Back the Bold to Move Australia Forward”. This has been core to the bank which is focused on the business sector over the past 150 years. NAB Ventures is a critical component of this approach and supports the education and sophistication of the VC and start-up ecosystem. Our role is to find and invest in fintech innovators both in Australia and internationally, that will ultimately enhance the NAB customer experience through new data and capabilities.

It’s comes as no surprise that banking is undergoing significant transformation in the digital and tech space. From a banks perspective, open banking and open data is coming – and we need to be in the best position to anticipate the customer journey and customer expectation that comes with a data play.

Our position has always been to play the long game. The J-Curve of the VC portfolio means that failures happen quicker and realise themselves early, but the successes are at the 5-10 year mark. We’re in it for the long run.

Take a look at NAB’s prior investment into Xero, the cloud-based accounting software for example. NAB helped promote Xero to clients of its New Zealand subsidiary BNZ and was also the first bank to open its APIs to Xero. Users can open their financial data to NAB with a click of a button and be assessed for an unsecured loan of up to $100,000 in 20 minutes via our NAB QuickBiz loan product.

The relationship here proved fruitful, with the bank selling out of Xero at more than 20X the investment, while maintaining a close relationship with the company. Long game.

Making sure we embrace the right changes to deliver new customer solutions is at the core of what we do and it’s exciting to see that the VC market in Australia continues to mature. I’m an optimist and think that it will be 10X more sophisticated in another 10 years!