The National Australia Bank’s venture capital fund NAB Ventures’s primary objective is to further the strategic aims of the bank, says managing director Todd Forest.
The fund was announced
in 2015 as a way for NAB to leverage fintech innovation for its own strategic priorities by investing in start-ups the bank could collaborate with. It has a three-year, $50 million commitment from NAB and has so far made 11 investments and two follow up investments.
“A lot of it is about how do we work with start-ups to be able to be agile and create better customer experiences,” says Forest. “The attitude is we don’t have to build everything ourselves. We’ll look to build and digitize whatever make sense, but we also leverage third-party partners that are doing interesting things to ultimately improve the customer experience.”
The fund makes its investment across four broad themes: providing a “connected” experience for small and medium businesses; supporting retail customers through the full home ownership journey; building easier, faster, richer payments for customers; and helping customers build, monitor and manage wealth.
The primary objective of the fund is to make investments that will be of strategic investment to the bank rather than to make a financial return, says Forest, previously the head of MSN Asia Pacific and chief executive of Clipp, a mobile payments and data start-up with a focus on hospitality.
“It either helps NAB create a better customer solution which could be a cybersecurity company which we use, we take on as a client which protects our customers. Or another example would be one like Xero
, that we on-sell to our customers which still creates a better customer experience, but that we’ll actually distribute it to our customers,” Forest says.
The increasing importance of data
NAB’s investment in the Xero cloud-based small business accounting package actually came before the fund was established, but Forest says it is a good example of what the bank is trying to achieve.
The bank rolled out the package to clients of its New Zealand subsidiary BNZ and was also the first bank to open its APIs to Xero. Users can open their financial data to NAB with a click of a button and be assessed for an unsecured loan of up to $100,000 in 20 minutes.
The bank has since sold out of Xero – for 38 times its initial $3.2 million investment – but retains a close relationship with the company.
The fund’s other investments also include BRICKX
, which allows people to make investments of as little as $100 into individual residential properties; no-fee international money transfer start-up veem
; and Wave
, a small business accounting app.
Forest points to Data Republic
as a successful investment and an example of how fintech can bring innovation to a bank. NAB co-invested alongside Westpac and ANZ and they have worked together to develop a set of standards to provide security and governance around the sharing of data.
This is becoming more important as the government moves to introduce its open data regime forcing banks and other retail businesses to share individual customer data with those customers.
“Two years ago, we didn’t know the specifics of how open data was going to unfold. But, we saw that the lack of ability to share data in a governed, secure way was holding back the economy and innovation,” Forest says.
Strategy and founders the winning combination
While there could be occasions when working to further NAB’s strategic aims might not be the best long-term option for a start-up, Forest says several meetings and discussions with the start-up before any investment decision mean they can usually identify those that won’t be a good fit.
But he acknowledges things can change. “If the start-up ends up going a slightly different direction we understand that. That will happen in some cases, and maybe we don’t end up using them or we can’t distribute them. That’s fine as well,” he says.
The NAB Ventures investment committee consists of senior executives across the bank as well as one external member, Bill Bartee, the co-founder and managing director of VE firm Blackbird Ventures.
They consider the strategic elements – such as will NAB be able to grow start-ups and whether they can bring innovation to the bank – as well as the founders, whether they are passionate and tough and working to solve a problem rather than just seeking an exit.
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