The BNPL opportunity - time to buy or buyer beware?

Is  BNPL still a hot space in Fintech ?

Why Afterpay was sold for $39b by Square -

And why Zip and Klarna might be a great investment opportunity 

Buy Now Pay Later (BNPL) firms have created one of the fastest-growing segments in consumer finance, with transaction volumes going from $33b in 2019 to $120B in 2021 and expected to go to $680B in 2025 (representing 12% of all eCommerce sales on goods, where BNPL is currently concentrated).

Last year BNPL transactions accounted for 2% of transactions in e-commerce last year, and super popular by the younger online consumers

What it is 

BNPL are point-of-sale installment loans that allow consumers to make purchases and pay for them at a future date. The interest is paid for by the merchant and is easier to get approved for than traditional credit cards or lines of credit and does not affect your credit score.

If a buyer misses the payment they have to pay back interest on the loan depending on the creditworthiness of the buyer. Similar to what happens in the credit card world if you miss a payment.

The benefit to the retailer

increase in sales revenue by enabling the buyer to purchase products that they would otherwise have left due to a higher price tag. 

It’s quite expensive to retailers 4 to 9.5% of the product selling price compared to 2% charged by Credit card companies 

The network effect 

Currently credit cards sit between banks, shops and consumers 

BnPL ,Cash apps , cryptos and wallets will bypass banks 

The PayPal and Cashapp opportunity 

PayPal then bought Venmo enabling consumers to pay each other

When Venmo and PayPal will be able to share balances with each other - moneys willing be able to be used to pay the BnpL instalments - without using banks - - a game changer 

Same with Square and Cashapp 

Risk of BBPL companies

• delinquencies - customers - poor credit quality - 42% lying late - risk mitigation - securitisation of loans 
• Regulation enforcing responsible lending practices - BNPL is sending the Gen cycle and z s into a debt spiral 
• Entry of Apple and super apps - an unbeatable network effect
• Entry by Legacy Bank 

(maybe one of them will buy zip? )

• Klarna which has gone down from $46B in valuation to $6.5B.
• Zip from $3b to $350m
• Block (consolidation of Square and Afterpay has gone  from $60b to $40b

Is this a time to buyin??

The super app model will come into this space - but is all about tech integration which companies like Apple and Google can perform easily. Says NIKHIL VARSHNEY https://nikhilmv.com/2022/07/13/three-reasons-why-bnpl-is-failing-the-future-of-bnpl/

Zeller’s unicorn status is maintained with confident VCs as backers

Cofounders of Zeller  Ben Pfisterer and  Dominic Yap are one of the fastest companies to achieve unicorn status. 

They raised $180m  from Hostplus and  Square Peg , Apex Capital Partners, Spark Capital and Addition (founded by former Tiger Global Management partner Lee Fixel)

“We are up against extremely well capitalised, entrenched incumbent banks,” Mr Pfisterer said. “We have to make sure that we come with sufficient capital… to actually make sure that we get to our audience and businesses know that we’re here.”

Yolanda Redrup of the AFR points out that it joins Cyara, Scalapay and Employment Hero in having raised more than $100 million this year, while Dovetail, HappyCo, Karbon, Milkrun and Eucalyptus have each raised upwards of $50 million.

There has been over $10b invested in Aussie startups in 2021!

“The Australian VC market has never been healthier, but the global market is vastly bigger and the opportunities are incredible for any technology company. We’ve been the beneficiary of that, but we’re not raising for the sake of raising. We have audacious plans that do require material financial support.” Say Ben 

What Zeller does 

Zeller’s aim is to be a one-stop shop for businesses’ banking needs,  providing  a best-in-class, consumerised experience, using modern data availability , AI and best in class technology .

It started off supplying  debit cards, business banking accounts and payment terminals, but it plans to also offer online payment acceptance, credit cards and expense management services.

At it’s heart is  the  “Zeller Contact Directory” making  it as simple as using an address book to maintain up-to-date information about all your business contacts and transactions made with them. With enhanced contact data, merchants can strengthen relationships, identify opportunities and get better oversight of where their business funds are being spent and earned.

Zeller enables businesses to understand their transactions on a deeper level, assess information about their business faster, enable personalised transfers, access enriched data, link financial history, attach transactions notes and better manage personalised information. 

In time, Zeller will expand into lending and become a fully licensed bank under the Australian Prudential Regulation Authority.

“From the very start when we looked at financial services for business, we didn’t believe you could bite off one part of it, be it corporate card, debit card or lending. They’re all big niches, but they’re not everything businesses need.

“We have a very singular focus on being a single provider for business ... so they don’t need to work with various parties.”

Since launching a year ago Zeller has more than 17,000 businesses signing up and over 170 incredibly talented people joining the Zeller team.

Burn the floor

Harley Medcalf Burnn the Floor has given joy to millions of people - and promises to continue giving joy to millions more 

Creating generational legacies 

There is still a lot of dry powder looking to be deployed in VC

 The VC market is not dead Vc says Cameron Stanfill, CFA  of pitchbook 

US VC funds closed on over $120 billion through June 30 2022 - the second-highest total of any year. 

💰 These funds will need to be deployed 

Capital remains available for startups and limited  partners #lp’s are still investing - just differently

• Valuations might be different
• Deals may be less
• Down round May be more common
• Runways will tend to be longer (time before cash burn 
• Less ipos 
• Lower p/e multiples

For more data and analysis, download the Q2 PitchBook-NVCA Venture Monitor.

https://www.facebook.com/groups/sydneystartups/permalink/7667008710007009/

Adtech BlendAI raises $1.5m from EVP

Co-founders Michael Bezman and Dean Krowitz of adtech startup BlendAI have  raised $1.5 million, two years after launching 

What BlendAI does 

BlendAI does for small Business - what traditional advertising agencies do for big business …. And they outperform !

BlendAI , helps small businesses with their online advertising by simplifying  and centralising online advertising for e-commerce stores. Machine learning algorithms distribute content and optimise budgets across multiple channels and helps with ongoing management, optimisation and content creation.

The Pain 

E-commerce stores are easy to create with  Shopify and BigCommerce, but to manage the advertising is a challenge 

“Advertising Channels are saturated and expensive. Witt try he Google , Facebook  , Insta TikTok and others .

“As complexity of the channel mix grows, the need for a centralised tool to manage the underlying platforms is essential - and Blend AI does this really well - says Krowitz 

The Painkiller

“We envision a future where BlendAI is part of the replicate toolkit any ecommerce merchant uses as they establish their business. it is clearly a global business” - says Bezman 

EVP Partner Justin Lipman said when doing due diligence with customers  he frequently heard stories of large step changes in Return on Ad Spend (i.e. 2x to 16x uplifts).

With BlendAI,  Michael and Dean Justin  believes they have the ingredients of a great team and great product to build a great business and solve this pain 

About EVP

EVP manages over $150m and are currently investing out of EVP Fund III.

Their team brings together a range of experiences and skills. Each member of the team consider working in venture capital to be both a privilege and a responsibility, and are all deeply committed to helping our companies succeed. They take pride in building genuine relationships with their companies, and strive to be ambitious, analytical and authentic partners. 

Sidekicker raises a further $20m from Seek Investments - connecting Casual Workers to Jobs

Cofounders of Sidekicker Tom Amos and Jacqui Bull have just raised a further  $20m from Andrew Bassatt’s Seek investments to help capitalise and grow their platform . 

What Sidekicker does 

Sidekicker  is a marketplace connecting employees to casual workers. It has so far given business owners and individuals - such as Uber, Airbnb, Crown and Aussie Post access to a network of 40,000 plus ondemand, prescreened and trusted helpers in their neighbourhood. 

They currently  have  more than 12,000 casual workers and 2000 businesses on the platform, placing up to 2500 jobs per week.

It provides a two-way rating and review system for businesses and employees, adding a layer of transparency to casual hiring arrangements.

What the money will be used for 

The money will be used to help improve the UX to help improve candidate finding and the hiring experience - connecting employees to jobseekers .

Toms Gem 💎 

Tom tells the AFR  “over the last few year - money has been abundant , and it’s created an environment where people haven’t cared about capital enough - it is important to show that your Businesse is profitable ... you can’t be losing money on every transaction.“

Zerojet raise a series A round - making boating green

ZeroJet, founders Rebecca (Bex) R. & Neil Mans

️has just raised a Series A round as they build the next generation of Climate Friendly electrified boats. 

Investors 

Movac, Investible, Booster Innovation Fund, family offices, high net worth individuals, Impact Enterprise Fund and K1W1.

What Zerojet Does 

Aerojet’s mission is to  decarbonise  the boating and shipping industry by helping  the next generation of electrified boats. A wicked problem to solve .

They have developed a new electric jet propulsion system as opposed to the traditional propeller-based unit - initially targeting tenders and smaller boats.

Benefits include being more efficient, more practical, more fun and most importantly environmentally friendly, and quiet.

Founders, Rebecca and Neil say 

“We're stoked to officially announce that ZeroJet has successfully raised its Series A!

Within the marine electrification niche, the time is right for disruption; and we're excited to take our innovation global! 🌍”

#climatetech #electrification #maritimeindustry #nzstartup Ben Lindsay Tom Kline

The HRtech Space is hot - with Paygroup being acquired by Deel for $119m

Deel , a Compliance and payroll tech unicorn is  entering the APAC region by acquiring ASX listed small cap HR company “Paygroup” for $119m at 174% premium to its share price at 5X ARR

What And who is Paygroup 

PayGroup is a SaaS Human Capital Management (“HCM”) product suite. processing about $11 billion in payroll each year for thousands of businesses across 33 countries.

Founded in 2006 by Mark Samlal and wife Michelle in Singapore - they grew it - got it investment ready and listed it in 2017 . They retain circa 19% of the business prior to acquisition for $119m .

In 2019 Paygroup  acquired Astute One founded by Marcus Webb,  - more than doubling  Annual Recurring Revenue (ARR) for FY20 to $17.5m delivering 4.7m payslips annually , servicing the contractor labour market 

In 2020 it acquired Malaysian group Talentoz for $1m (2X SAAS revenue) - $165k in cash and rest in shares adding 40 clients and  11 software modules to its suite -covering areas such as payroll, analytics, talent management, time and attendance, and performance management. 

In 2022 it has been acquired by Deel for 5X ARR at $119m . Mark Samlal of Paygroup is confident that this is a great acquisition for Deel , as it has  strong, recurring revenues from blue-chip customers across Asia-Pacific and can be used as a bridge to building their expertise in Asia.

CEO of Deel Alex Bouaziz said that Paygroup seems like a natural fit to the Deel business, with complementary services and strong talent. It will rapidly grow our footprint in Asia-Pacific,”

What Deel does 

 Deel was founded in SF in 2019. enables businesses to hire independent contractors and full-time employees in over 150 countries, making sure the business is compliant with local laws and takes minutes for o do -  without the need for a local entity. It has 8000 customers including Aussie beverage company Lyre’s, Zoomo, Coinbase and Shopify. 

When a company hires employees or contractors with Deel, Deel takes on the responsibility to ensure the, removing that burden from its customers. It provides the tools  to onboard and pay international teams… totally relevant in this era of distributed workforce 

Move to APAC

 Bouaziz said  that  “APAC is home to two-thirds of the world population, with huge skilled talent pools of knowledge workers and tech talent –.. we can open thousands of virtual employment doors around the world.”

The Leverage Play 

Despite only launching in 2019, the business has already surpassed $100 million in annual recurring revenue, fuelled by the remote working boom. It was valued at $US5.5 billion in a Series D funding round, but in May, Axios reported from undisclosed sources that it had raised another $US50 million at a $US12 billion valuation.

That’s a 50X ARR 

Leverage at its finest 

Takeout 

Australia and Asia is a great hunting ground for these companies trading at 20x  and 50X to acquire businesses for 5X and 10X

“Product led growth” is the holy grail

Kinde - Ross Chaldecott, alongside co-founders David Berner and Evgeny Komarevtsev.

Atlassian - Mike Cannon-Brookes and Scott Farquhar 

Martian Logic - Anwar Khalil 

Atlassian was founded by two university graduates Scott and Mike in 2002 using credit card debt.

It’s only investment round was from US-fund Accel, which bought shares off existing holders 8 years later in 2010 before the company listed in the United States in 2015. 

For a brief period last year, they were the two richest people in Australia with a combined net worth of well over $70 billion (the duo have also made billions from a prescient investment in the US$55 billion Canva).

The secret sauce “Product led growth” being the holy grail 

Atlassian was able to grow so quickly and profitably during its first decade of existence while famously spent almost nothing on marketing, instead relying on ‘product-led growth’. 

That is, CTOs and CPOs loved Atlassian’s revolutionary Jira product so much, it was able to grow virally and organically without the business having to spend millions of dollars on an enterprise sales team.

Times have changed for Atlassian whose Jira is a bit clunky with minimal changes over 10 years - with users having a choice to move relatively painlessly of competitors such as Asana, Basecamp or Monday.com

What is the next Product Led Growth Company? 

That is the holy grail!!!

2 companies to watch 

Martian Logic 

Kinde

$1.2m seed funding for online magazine “Daily Aus”

Online news channel  for the Younger Ozzie’s - The Daily Aus - founded by Sam Koslowski, 26, and Zara Seidler, 24 has raised $1.2 million in Seed funding from channel 9s David Gyngell and Canva’s Zach Kitschke and Rob Kawalsky.

The money will be used  to ramp up its ten  and start growing a UK base.

The Daily Aus now has an Instagram following of more than 370,000.

NSW Government boosting investment by $832.7 million in ‘22 Budget

The NSW Government is investing $96m million in to develop to help build and grow the RNA ecosystem in NsW

The funds will be used to fund an RNA Pilot Manufacturing Facility and commercialise RNA research - that will help combat everything from pandemics to cancer and genetic diseases.

(We’ve all heard of the MRNA vaccine )

Ribonucleic acid (RNA) is a polymeric molecule essential in various biological roles in coding, decoding, regulation and expression of genes . It is expected that  RNA therapeutics to combat everything from pandemics to cancer and genetic diseases. 

The investment will be deployed in conjunction with the NSW RNA Bioscience Alliance, an unprecedented collaboration between all 14 NSW and ACT universities, currently headed by Professor Pall Thordarson from UNSW Sydney .

“By bringing together world-leading universities and industry leaders, we can deliver innovative solutions to some of the most the important and complex challenges facing the world.” 

Minister for Science, Innovation and Technology, Alister Henskens
 

“With the State government’s investment, the NSW research community will be able to address a range of current health challenges and attract a number of national and international industry collaborators and jobs to the state.”