It’s three o’clock on a Wednesday afternoon at Sydney’s highest profile fintech hub, Stone & Chalk. A golden bell – not unlike the one which graces the New York Stock Exchange – is rung and dozens of fintech alumni gather around the ‘Sweet Spot’ to hear the latest success story.
“It's a great reminder for everyone that you can feel despondent now – you might have lost a deal – but keep going because next week or next month it could be you ringing the bell,” says Stone & Chalk chief executive Alex Scandurra.
It may be early days but the bell has been ringing loud and clear.
In just over a year since launch, Stone & Chalk has attracted 95 start-up companies which employee almost 300 staff. The potential of those companies, which span diverse sectors such as wealth, payments, credit and advice, has already attracted more than $100 million in direct industry investment.
“We don't take equity being a not-for-profit. We don't scare away the best entrepreneurs. They don't need an accelerator or to give away 5-10 per cent equity so they come here because they get all the other value that would otherwise not be available to them.”
That value is found in a broad fintech ecosystem which differentiates Stone & Chalk from other start-up hubs, according to Scandurra.
“We've got university students getting internships directly into start-ups. We've got about 23 big corporates engaged with start-ups looking at not just the investment opportunities, but partnerships and white label and supply agreements. We really integrate all the key stakeholders in an ecosystem.”
Big and small: working together
Sitting alongside those start-ups are a ‘who’s who’ of major companies, keenly aware of the effect technology can – and is – having on their businesses. They include major banks such as Westpac, ANZ, Suncorp Bank, HSBC and Macquarie Group, as well as American Express, AMP, Optus, ASX and Woolworths.
Australia is just too small for us to be fighting each other
There’s a natural tension between the two groups but the dialogue is starting to change from adversary to partner.
“About a year ago the conversation around the country was still big versus small: ‘all these start-ups are disrupting incumbents and we've got to defend ourselves against them’. What we're saying is Australia is just too small for us to be fighting each other.”
While the relationship between incumbents and start-ups is still in the “courting phase” Scandurra is hopeful that current pilot trials and proof of concepts will lead to a win-win for both sides via white label or distribution agreements.
Australia has so far played a small role in the global fintech gold rush. Citi estimates that fintech investment has skyrocketed from $US1.8 billion in 2010 to $US19 billion in 2015, with the payments sector attracting the largest allocation.
As Aussies, sometimes we just lack the belief that we can do it.
However, Australia counts more than 30 tech companies launched over the past 13 years that are now valued at more than $100 million each, according to not-for-profit organisation StartupAus
. Fintech companies among the group include peer-2-peer lender SocietyOne
, online small business lender Prospa
, invoice company Invoice2Go
, taxi booking app Ingogo
, and payments provider Tyro
(which also runs its fintech hub).
It’s early days for the Stone & Chalk start-ups but Scandurra points to the success of data exchange company Data Republic
, crowdfunding platform VentureCrowd
and web-based supply chain and payments platform Ordermentum
Data Republic recently raised
$10.5 million in equity funding from NAB, Westpac and Qantas and employs 35 staff at Stone & Chalk.
“As Aussies, sometimes we just lack the belief that we can do it. We're caught in scepticism... we've just got to get up, get that grit, go hard and make it happen.”
Meeting the challenge
Start-ups face four main challenges on the path to success: finding customers, raising funding, access to expertise and access to talent.
Scandurra says the biggest obstacle is finding customers – another reason Stone & Chalk is focused on collaboration between start-ups and big companies. More than half of its residents are focused on the B2B market and the big banks dominate distribution of financial services in Australia.
“Getting a customer in a business context or getting customer traction in a consumer context is the number one validation for any potential investor,” he says. “If you can get that then money will flow. And then as you get customers and investment, then you need the talented people and the expertise around it to help you grow and scale.”
As a start-up itself (albeit a not-for-profit), Stone & Chalk has its own pressures. Scandurra says greater government support to offset its property costs would allow it to further boost support for its start-up
“The revenue we get from start-ups only covers about 60-70 per cent of our operating expenses. The biggest cost we all have is property, especially in Sydney, and I don't think there’s been strong enough acknowledgment – at least from the State governments – about how important incubators and innovation hubs are to the economy.”
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