Fund focus: Reinventure seeks disruptive fintech

As a commuter steps out of her door in Sydney, she places an order through the Hey You app on her smartphone. Thirty minutes later she enters her favorite café, where her coffee is hot and ready to take away - no need to wait.

The service is enticing for caffeine addicts, but would seem to have little connection to a bank. But Reinventure Group, a VC firm backed by Westpac Banking Corp, saw Hey You as a good bet and led a A$5 million ($3.8 million) investment in 2015. Following another round this year, Reinventure pitched the start-up's business model to Westpac for its online platform.

"It's an example of payments becoming embedded in the food and beverage space. That's been integrated into the Westpac mobile banking app as an additional feature," says Danny Gilligan, co-founder of Reinventure. "The idea is extending a service for payments into a utility service for end consumers."

With a fresh commitment of A$50 million from Westpac for its new fund, Reinventure is now looking to back more start-ups that offer inventive solutions for the financial technology industry. Its partnership with the bank is a cornerstone of its strategy.

Like the first fund - raised in 2014, also with a corpus of A$50 million - the new vehicle will mainly invest in two types of start-up: the Hey You kind that help the bank enter spaces not directly connected to its financial products; and those offering technology solutions that can be integrated with Westpac's systems. Data security solutions provider Data Republic, which raised a A$10.5 million Series A round earlier this year with participation from Reinventure, falls into the latter category.

"As trends mature you get this kind of horizontal modularization, so layers are delivered by independent providers," says Gilligan. "Data Republic is peeling off that data layer, doing that more effectively than any one bank does itself and providing this service cross market."

Reinventure backs companies in the seed and Series A rounds, and reserves capital for follow-on investments as well; 40% of the first fund remains un-invested and earmarked for follow-on rounds. Australian companies form a significant part of the debut vehicle - as an Early Stage Venture Capital Limited Partnership (ESVCLP), 80% of the capital must be deployed domestically - though Reinventure has also invested in companies based in Silicon Valley, Singapore and New Zealand.

Although Westpac is the sole LP for Reinventure, the firm emphasizes that it is more than an arm of the bank. Reinventure sees its role as pursuing an independent strategy to find start-ups that can enhance the bank's operations but on which Westpac is unlikely to risk its own capital.

"It's all about horizons, short-term and long-term," says Gilligan. "We're the long-term horizon people, and the short-term horizon teams at the bank can do that very well. So we coordinate with them, but we've got distinct mandates."

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• Topics
• Australasia
• Technology
• Financials
• Fundraising
• Venture
• Reinventure Group
• Australia