Investible: 3 key trends to watch in Australia’s early-stage capital markets
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Looking back at Australia’s private capital markets in 2019, some marquee late-round capital raises for companies such as Airwallex and Canva grabbed headlines.
But there was also plenty of activity in early-stage funding rounds, as the sector continues to mature and more sophisticated investors assess opportunities to help founders get their business idea off the ground.
One key player in the seed-funding ecosystem is Investible, the angel investment firm which takes a portfolio approach and currently holds stakes in around 70 companies.
The fund is coming off a successful $22m capital raise which it closed in early October, leaving it with more dry powder to invest as it runs the ruler over thousands of startup hopefuls looking for seed capital.
Stockhead caught up with investment director Daniel Veytsblit just before Christmas, for a discussion on what key trends are emerging in the space.
One theme that Veytsblit highlighted is the commercial potential of the Asia-Pacific region for Australian startups looking to scale.
He said pitching into Asia was often easier than more mature markets such as the US which had more competition.
“If you look at the US there’s been an explosion of private funding over a long timeframe. So companies from Australia are competing against a lot of local players and US investors tend to prefer US companies,” Veytsblit said.
He added that most Asian markets viewed Australia as part of the region from a trade perspective, and it also benefited from a “stamp of quality” associated with Australian products.
“They still need to be differentiated and have a good value proposition,” he said.
“And what’s also really important in Asia is to have somebody on the ground. What Asian markets tend to not appreciate is fly-in, fly-out companies; they want you to have a presence and be able to speak with you, and to know that you’re committed to the market.”
Veytsblit said that by sector, property was one asset class where local startups had been able to gain a foothold in the Asian market.
In that space, he said Singapore – where Investible has an office – often provided an effective gateway for Australian companies.
“A lot of global asset management firms have Singapore as their Asian headquarters. And I think that’s helped some of our portfolio companies gain good traction with both customers and investors in the region,” Veytsblit said.
Another key sector of interest Veytsblit highlighted was artificial intelligence (AI), where he said the key focus as an investor was being able to cut through the noise.
“We have made a number of investments in AI and data driven companies, and it’s important to make a distinction between what is real AI and what’s just a complex algorithm,” he said.
He said that over the last two or three years Investible had assessed plenty of companies that were pitching an AI solution without really having a strong underlying product.
When it comes to AI, “you’re really investing in the people behind it because if they’re not competent data scientists with a track record of having worked in the space, then it’s unlikely their solution is going to be real AI”.
He pointed to the example of Investible portfolio company Akin, which is working on AI solutions that can interact with humans to optimise the surrounding living environment.
Akin CEO Liesl Yearsley is a tech entrepreneur who sold a separate AI company to IBM. And the company is currently working with NASA’s Jet Propulsion Lab and academics at the Univesrity of NSW – evidence of a platform “leveraging legitimate resources to solve a problem”.
Lastly, Veytsblit said Investible was monitoring opportunities in the broader industry for health and wellness.
He said that as a thematic, the sector had been building momentum for the better part of a decade, whether it be plant-based food or an increased societal focus towards mental health. But at this stage, Investible hasn’t found a standout in what is a pretty crowded space.
“What we’ve seen in the wellness sector is that a lot of companies start with the business-to-consumer (B2C) proposition, but they realise it’s hard because of marketing costs and per unit economics,” he said.
“So there’s been a shift towards B2B – corporate clients who sell onto the consumer. But we’ve found alot of companies across mental and physical wellness that do this, they’re solving a slightly different problem but they’re all vying for the same share of corporate budgets. So unless they have a really differentiated position, they’re not able to scale.”
Because of that, “we haven’t made an investment in the space yet”, Veytsblit said.
“It is a sector we’re looking at because of the tailwinds, but we haven’t found a company yet that’s got that unfair advantage in the market.”