Kara Frederick is a fintech leader and an accidental Australian. She has been an investor or adviser for financial services technology for over 15 years, from New York and San Francisco to Sydney, including six years at investment bank Goldman Sachs. Now based in Australia, she has made every success of it, from the professional to the personal: “I am an accidental Australian. While I grew up in the San Francisco Bay area, went to Princeton University and worked on Wall Street, I found the love of my life and moved to Sydney, where I recently became a dual US-Australian citizen. That means I watch both US National Football League as well as Rugby Union.”
In May last year, she became a general partner at corporate venturing unit Reinventure, “the first and largest fintech CVC in Australia”. The limited partner behind Reinventure is Westpac, a top 25 global bank with an about $100bn market capitalisation.
For Frederick, there has never been a more exciting time to get involved. She said: “The Australian venture investment industry is going through a revolution, and financial services is at the heart of this being the single largest part of the economy – more than 14% of gross domestic product.
“While still nascent versus Silicon Valley, there has been a 20-times increase in VC equity capital in the market in the last five years with more than 5,000 ongoing startups.
“When my partners [Simon Cant and Danny Gilligan] founded the fund four years ago, they were at the precipice of the market. So the specific trend in VC and CVC in market was a draw, combined with global fintech disruption that we are investing in, for example Coinbase, and helping to grow in market, such as alternative lenders, new data models, and so on.”
These trends and Frederick’s experience are exemplified in Reinventure’s recent deal with Basiq, a middle-man providing fintechs with access to banks’ consumer data.
In June, Reinventure invested an undisclosed amount in Basiq for its seed round, pre-empting a regulatory environment that could provide a boon. With the Australian Treasury looking to review its policy on open banking in favour of openness, Basiq could take advantage of greater regulatory freedom. As Frederick told the Sydney Morning Herald: “We have a high degree of confidence that this space is changing.”
More than just preparing for future success, this year has already brought it. According to Frederick: “We are still very early in the typical 10-year VC fund journey. However, early success is highlighted in our investment in Coinbase (series C), Hyper Anna (seed investor with series A follow-on by Sequoia), and noticeable traction by early stage investments like online debt solution InDebted.”
Reinventure led InDebted’s $1m seed round in May, and Hyper Anna’s series A round closed at $12.7m in August, following on from October 2016, where Reinventure led the $960,000 seed round for the Australia-based data analysis software provider.
Like any CVC, Reinventure and Frederick are balancing immediate corporate business goals and longer-term strategy. Fortunately for her, the fund’s structure gives Reinventure some leeway: “We are a unique fund structure in that we are a separate VC entity that is not on balance sheet.
“In other words, we are a venture capital vehicle and not part of a corporate’s balance sheet. That means that we are able to take an investment approach that is long-term and aligned with our founders.
“We also must balance this with the fact that our remit also means we add value to Westpac. Therefore, the part of my job that takes the most thought is making sure we are delivering on both fronts.”
A balancing act yes, but it hardly dampens Frederick’s ambition, which is “to achieve several, material and global exits for our portfolio companies and to continue to build out our success by scaling the fund size and thereby achieving more impact”.
Continuing to execute deals as Reinventure has been doing will no doubt aid them. Barring those already mentioned, Reinventure has made another three deals in the past year. In January last year, it led Australia-based Doshii’s seed round, worth $1m to the financial services amiddleware’ software company.
In August, Reinventure led Flare HR’s $7m funding round for the all-in-one online HR platform. They then closed out the year by leading Brickx’s funding round for an undisclosed amount in November.
Frederick repeats a common concern with what CVC units could do to better their overall industry: “Share best practice. VC is still a relatively private, network-based and opaque industry in terms of process, decisions, management, and so on.
“CVC being relatively newer, having a different evolution and needing to provide an additional areturn’ lens of strategic value means that it is even more opaque and best practices should be shared.”