H2 on the future of VC in Australia

We sat down with Ben Heap, the founder H2, Australia’s only FinTech, data and AI accelerator to find out more about the direction in which he sees VC heading in Australia.

Stone & Chalk is extremely lucky to have H2, Australia’s only dedicated FinTech, data and AI accelerator, under its roof. In light of the 2017 EY FinTech Adoption Index’s release we reached out to H2’s founder Ben Heap to find out more about the present and future of Venture Capital in Australia, as well as H2’s perspective on what makes a successful startup and what major banks could be doing to enhance their operations.

Left to right: Toby Heap (Cofounder), Mel Hurwitz (Community Manager) and Ben Heap (Cofounder).

We’ve heard so many definitions of FinTech — it seems to broaden as people acknowledge that finance touches every aspect of our lives and isn’t confined to what the banks are doing. As a VC at S&C, do you have your own definition of FinTech?

Ben: The great thing about ‘FinTech’ is that it covers a broad universe of opportunities. At the highest level we are talking about financial services and technology, but we also break that down into four categories: transactional; lending; wealth and insurance. We tend to think about two customer segments: enterprise (or B2B) and consumer (B2C).

Ultimately, we invest in opportunities where we believe we have relevant experience and expertise and the potential to work with founders to ultimately achieve a terrific outcome!

There seems to be a little bit of a tug of war between the people v. the idea? Do you focus on one more than the other?

Ben: For us, it is all about the people. We invest at a very early stage and recognize that although customers may shape the idea, only the best people can take a good idea, turn it into a better one and actually build a great business.

Left: the previous cohort of H2 startups — including Edstart, Tapview and Loan Dolphin — ring the bell at Stone & Chalk’s weekly Sweet Spot to celebrate their graduation. Right: Ben Heap.

Do you think that Australian and regional startups are facing any particular challenges? How are you remedying them?

Ben: One of the issues that regional startups face is their limited access to mentors and expertise, which is one of one of the reasons we started the H2 roadshow.

We’re intent on finding the best entrepreneurs wherever they might be — in cities, and the regions and even overseas and believe that an accelerator model like ours is particularly attractive in this circumstance.

In your opinion, are there things that corporates/banks and startups could be doing differently?

Ben: There is no doubt that corporates and banks in Australia, and around the world, are aware of the threat coming from new and innovative products and services. Many approaches can be taken to address the threat — corporate venture capital, in house labs and incubators and minority or majority investments in new ventures are just some examples.

There is no right approach: each organisation has a unique set of considerations, but it is critical that they are responsive to this changing and increasingly competitive landscape.

Doing nothing — decision paralysis — is certainly the wrong decision. For startups the challenge is a little different: distraction is a much more serious risk than paralysis. Startups must have a crystal clear focus that they pursue with a stubborn commitment!

Left: H2 Ventures logo. Right: current cohort of H2 startups, just weeks away from graduating.

What are your thoughts on the increasing availability of data in VC today? Does this factor into your investment decisions?

Ben: We believe strongly in the importance of data. We use a lot of data ourselves as do other VCs. Our investment decision certainly has a quantitative element, but also a qualitative element; it’s the nature of venture capital. Ultimately it is a balance between risk and prospective return, as is any investment decision.

Moving forward, are there any categories within VC, FinTech, or adjacent industries that are particularly exciting and lucrative for you?

Ben: The nature of our Accelerator model means we do not have to make a decision about categories or industries. We focus on entrepreneurs, and are excited by the ideas that excite them. However, we are particularly interested by some of the ventures that we see that are leveraging data and AI in interesting ways. In our view, this is the main game over the next ten years.