Why COVID-19 was a watershed moment for Australian fintech

Special Report: Seed Space Venture Capital managing partner Dirk Steller opens up on the transformational impact that the pandemic has had on the fintech industry and emerging companies in Australia.

The COVID-19 crisis has caused significant interruptions for the startup ecosystem within Australia, posing a new array of challenges for those seeking to scale or raise money in an uncertain macroeconomic environment.

Yet venture capital firms and startup founders have found ways to remain resilient and succeed by adopting new measures in the face of an unprecedented global pandemic.

Seed Space Venture Capital is one such VC firm that argues the seismic shifts brought about by COVID-19 have triggered increased digital acceleration and uptake of mobile financial services, providing ample opportunity for fintechs to rise up and seize their moment.

“COVID-19 has increased the pace of change in the digitisation of financial services, and e-commerce,” said Dirk Steller, founder and managing partner of Seed Space.

“And that has actually been a tailwind for fintech in Australia because the backbone of e-commerce is driven by fintechs who, in the background, facilitate payments and interfaces with consumers.

“These companies have risen to the fore during the pandemic, providing fascinating new online experiences for customers.

“Being more isolated and doing things more remotely and more electronically has given a turbo boost to the changes that we already expected to happen, but now at a pace much faster than we anticipated.”

For many startup founders, Steller believes this boost has helped to kickstart new ventures, especially with the rapid growth of digitisation across the world when social distancing became mandated. Financial technology and e-commerce have particularly seen a rapid growth in our quest to adapt to the new norms of the COVID era, he added.

“We’ve seen a fundamental step change in the percentage of people who had never used online banking before moving to manage their money digitally, the significant increase in digital services and in e-commerce. And, these are trends that are unlikely to reverse,” Steller told Stockhead.

“What we are witnessing is a new norm which is of extreme benefit to the fintech industry, both here and abroad.”

COVID-19 has also had a flow-on impact on the volume of deal flow and prospective opportunities for Seed Space as it taps into Australia’s fintech market. The venture capital firm maintains there are several key ingredients to look for when identifying successful start-ups and prospective entrepreneurs to join their portfolio.

“One of the critical pieces that we have built over the last few years is access to deal flow,” Stellar said.

“ It’s the lifeblood of any VC, the ability to have deals coming into your pipeline that not everybody sees. To do this successfully, you have to be integrated in the ecosystem, you have to be involved in the startup hubs where these great platforms and new ideas are being incubated.

“You have to be involved in all the industry bodies and you have to be known in the market.

“By analysing trends and market patterns we have been able to invest in incredible companies and have worked with some amazing startup founders. These businesses have all noticed market trends and increased demand for fintech services and digital automation. They are solving a real market problem and have found ways to create new services that cater to these emerging categories or popular demands.”

Stellar says founders are “critically important”.

“At the early stage we invest in, you’re investing in the founders, as much as you’re investing in the idea in the business.

“So many businesses fail not because it wasn’t a good idea or didn’t have a place in the market, it fails because the founding team are not strong enough.”

This article was developed in collaboration with Seed Space, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.