News & Analysis

Australia’s first listed fintech investment fund H2Ocean seeks raise of $55 million to fund fintech startups

- August 31, 2016 3 MIN READ

H2 Ventures has announced Australia’s first listed fintech investment company, H2Ocean to expose investors to diverse portfolios and increase funding for early stage fintech startups. H2Ocean is seeking to raise a minimum of $27 million and a maximum of $55 million to provide a permanent and stable pool of capital for long-term investment opportunities.

Cofounders of H2 Ventures Toby and Ben Heap said they have established H2Ocean as a listed venture company to invest in a diversified portfolio of early and growth stage financial technology companies.

Like any startup, these fintech companies often look to reshape and disrupt traditional services and business models with new and innovative products. However, a fintech works quite differently to the average tech-based startup.

For fintechs, gaining market traction and proving the viability of their products is slowed down by a complex regulatory framework. While important for consumer protection, this regulatory environment slows down the process of creating MVPs and can costs startups hundreds and thousands of dollars as they go through the approval process.

“Traction looks different for a fintech. When you’re starting a more general early stage tech startup the traction metrics are often around number of users or website traffic. For a fintech, really important traction is have that got regulatory approval,” explained Toby Heap.

“Often what we’ve found is that investors who are used to looking at just general startups find it harder to analyse a fintech startup and understand if it’s on track or not. That’s why we think it’s important to be specialists and just focus on fintechs,” he explained

H2Ocean’s main objectives include delivering capital growth to investors over the medium to long term and providing an investment alternative to traditional equities through a diversified portfolio of typically privately held Fintech Ventures.

A prospectus was lodged yesterday with ASIC, with the closing date of Offer set to October 11. The prospectus lists three independent directors, including chairman of Pinstripe Media, David Koch, Beyond Bank chair Anne O’Donnell, and former Assistant Innovation Minister Wyatt Roy.

Calling H2Ocean the first of its kind, Koch told Startup Daily that the fund is “just a toe in the water” when it comes to the potential of fintech investment in Australia.

“We have a two-sided problem, where fintech startups find it hard to get access to capital, and then you have a lot of investors who may want to invest in startups but are either too scared to do it or don’t know enough about them to make the right investment,” he explained.

“H2Ocean helps solve a funding problem for startups and it also allows investors to have exposure to a portfolio of startups that is managed by H2 Ventures.”

H2 Ventures has been responsible for investing in 16 fintech startup programs through its H2 Accelerator Program including Equitise, Stockspot and Simply Wall St. The launch of H2 Ventures came after Toby Heap parted ways with AWI Ventures in 2015, looking to help fill the gap in the Australian fintech market when it comes to earlier stages of investment.

“We are in a position to evaluate early stage ventures, and to support entrepreneurs seeking to create new and compelling products, services and business models,” Toby Heap previously told Startup Daily.

H2Ocean also comes as the first investment opportunity for Roy, who has just resurfaced in the fintech and startup space. After being forced out of the political world at July’s Federal Election, giving up his Queensland seat of Longman and his role as Assistant Innovation Minister, Roy took some time out to re-evaluate his next move.

Roy told Startup Daily that he is now looking forward to taking a sabbatical trip around the world for an “indefinite” period of time. As to what his role will be when he returns, Roy is still undecided, however he said his interest in the startup space is as strong as ever and he is still optimistic on Australia’s future as an innovative nation.

“What we’re seeing in fintech is technology disruption, and that greater competition leads to great benefits for consumers with better experiences and better outcomes. That represents a positive effect, not just on the economy, but on society and I think it’s a very exciting place to get involved in,” Roy said.

The Heap brothers said, “We are passionate about the opportunities that are presented by founders and entrepreneurs and we believe that H2Ocean will be a valuable partner for these individuals as they build the businesses that will shape the financial services sector of tomorrow.”

Image: Ben and Toby Heap. Source: Supplied.

Disclaimer: David Koch is a shareholder of Shoe String Media.