Employment Hero founder Ben Thompson fired a broadside at one of his investors, Hostplus, claiming the super fund ‘wants to put us out of business’

Disrupting a $3.5 trillion industry is difficult. Just ask fintechs like Cannon-Brookes-backed Spaceship, Superhero, and Verve Super.

Australia’s superannuation industry gets a $362 billion compulsory cake from fees – more than $30 billion annually – and wants to eat it all too.

Treasury put out a consultation paper titled Securing Australians’ Superannuation late last year and Hostplus sent in one of around 100 submissions, focusing specifically on concerns around “Choice of fund, stapling and employee onboarding” – aka Employment Hero’s bread and butter.

The super fund has been keeping an eye on the rise of that onboarding software (which it calls workforce management platform – WMPs) and has some concerns.

“We are concerned that the way that many WMPs have operated to date, and we believe will continue to operate absent government intervention, proves that the software can and is being designed and implemented in a manner that undermines the superannuation system and harms employees,” the submission says.

“In particular, we remain highly concerned by instances of WMPs automating the fund selection process and designing that automated system in a manner that distorts and sidesteps the critically important selection of an appropriate fund for consumers.”

I’m telling you this to understand why Employment Hero founder and CEO Ben Thompson was utterly triggered by one of his investors and ripped into them on Twitter (the platform now known as X) on Tuesday.

Thommo’s taken a gander at the submissions made to Treasury when he stumbled across the arguments put by Hostplus, concluding that they run contrary to everything he’s trying to achieve at his “WMP”.

And he thinks they’re trying to f*^k him.

A bit more background. Hostplus, an industry super fund, tips money into startups through VC funds and its own investments – most recently the $55 million Series D for rocket builder Gilmour Space. Canva, Athena Home Loans and Oxford Nanopore Technologies are also among its portfolio investments.

Last year Hostplus put $100 million into uni commercialisation fund IP Group, having already invested $210m; and also has many millions in funds run by Airtree, Square Peg and Blackbird.

Hostplus has a stake in Employment Hero because when Airtree is a backer, most recently kicking in on a $263 million Series F that valued the company at $2 billion.

But that’s the investment side. Where does all that cash come from? Well, 1.7 million members and more than 308,000 employers tipping in super funds now worth around $104 billion.

It’s that pipeline of money Hostplus is keen to protect, especially when it comes to how employee onboarding startups like Employment Hero are offering super fund options.

Competition is a big issue. Super fund choice has been a big issue. In the bad old days you used to be stuck with a fund your employer chose. Now, thanks to legislative changes and platforms like Employment Hero, you can switch funds at the click of a button. It happens in about 10% of cases.

That’s something Hostplus wants to stop, arguing that the WMPs are also monetising suggested switches without proper disclosure.

And the Employment Hero CEO is not happy, and didn’t hold back on the platform formerly known as Twitter, claiming “Hostplus wants to put us out of business for being too good for members.”

1/ Hostplus wants to put us out of business for being too good for members. Share and fight for competition #superchoice #Ausfinance. A thread… https://t.co/jZWMWH2Pri pic.twitter.com/b0depMU2CV

— Ben Thompson 🚀 (@bnthompson) February 27, 2024

He continued in a thread we reproduce below:

“Share and fight for competition #superchoice #Ausfinance.

“All employees in Australia must be offered a choice of funds when onboarding into a new job. Around 10% of employees who are onboarded via Employment Hero each month select a new fund during the process. These people are choosing to switch and consolidate funds as their…

“Only MySuper approved funds are available, the government’s stamp of approval for low-cost and simple superannuation products. We do not own or operate a superannuation fund. We also provide equivalent access to existing funds and the employer’s default fund.

“We would like to help people consolidate their super funds but the law doesn’t currently allow us to.

“We offer an open marketplace and want to work with all MySuper approved funds including Hostplus and Australian Super.

“Hostplus believe a digital offer like ours could provide a more efficient marketplace for superannuation. This means we will lower advertising costs and therefore the administrative fees that members pay.

“It’s ironic that Hostpus, which is known for investing in innovative Australian startups, now wants to shut down one of their own investments. Yes, Hostplus is invested in Employment Hero.

“Australia’s Megafunds like Hostplus each have over $100b of Australian savings under their control. Australian workers deserve more competition and innovation because it’s good for members.

“Hostplus has misled the government by stating we don’t have appropriate AFSL [Australian Financial Services Licence] arrangements despite knowing that we do.”

We contacted the Employment Hero CEO to see if he had anything to add. He declined.