2 Nuggets of News in Australia #1

Today you get to consume your nuggets in the form of tech.
2 delicately hand-picked nuggets of information explained in terms both you and I can understand. Cut through the technical BS and find out about the ‘sexy’ industry of this generation, from an Australian perspective.

Fintech.
Paypal launches online storefront where consumers can buy digital gift cards from 40+ retailers.
- Retailers include Woolworths, Myer, David Jones, JB Hi Fi.
- Gift cards are the most popular gift in Australia with 90% of Australians having given or received a card in the last year.
- Australia’s gift card market is worth $2.5bn and PayPal plans to collect an undisclosed commission from sales.
Good on you Paypal, but why?
Paypal needs to expand outside of facilitating payments due to unfavourable customer trends and increasing competition from alternative payment methods.
- Customers are increasingly comfortable directly paying with credit cards and alternative payments (eg. Afterpay) becomes more and more popular.
- The major player in this space is Prezzee with $1m in revenue. They ultimately aim to capture 1% of the gift card market’s sales, equating to approximately $25m and 25x their current revenue.
- Assuming PayPal can capture 90% of its users in Australia (7.2m) at a 2–4% commission from total $2.5bn market, it can only achieve $13–26m revenue.
- Selling digital gift cards by itself is unlikely to be material to PayPal’s $411m revenue in Australia, but it is going to put huge pressure on Prezzee to compete against that readily available 7.2m user base.
Go on, take a guess. What’s PayPals game plan?
(Hit me up with that response below)
Option A — They’re testing the product in Australia first before world domination
Option B — This is a quick and small win for them, no thinking required
Option C — Your thinking is terrible, let me convince you otherwise

Consumer Tech.
Will this October 2018 ASX IPO be hot or frozen? You decide.
- Israeli NiceVend produces ‘Quinzee’ standalone vending machine that prepares smoothies and frozen drinks on demand.
- NiceVend wants to raise $7.5m on the ASX, giving it a $20m market cap.
- Their products are unique because its sugarless and made on-demand, a healthier alternative to traditional frozen drinks.
- NiceVend counts 25 of Caltex’s stores as its partner in Australia, already using the Quinzee white labelled vending machines.
Lance, I can’t wait to hear your opinion..
IPO represents fair value, but existing business is a hard one to scale.
- You probably think about food & drinks 10 times a day, but trying to put a vending machine across every store in Australia requires some damn effort. That’s why NiceVend uses a third party distributor “Mr-Vend-It” to market themselves.
- NiceVend’s future growth plan is two-fold, developing a smaller countertop machine and getting into the mouths & hearts of secondary school students. They’ve already received legal approval in the United States to sell their products to kids.
- Having recorded $US1.6m revenue in FY17, a $AU20m market cap is approximately 10x revenue, which is not too expensive in valuation terms. (10x revenue is some ‘magical’ rule-of-thumb in start-up valuation land).
- Vending machines are a good source of recurring revenue. If they nail a few good partnerships with retail stores, they’ve got a good base of an organisation. If they nail their growth plan, that’s a moonshot.
Take your bets, would you invest?
(Hit me up with that response below)
Option A — You’re wrong in so many ways, let me tell you why in my reply
Option B — Good explanation, but no chance they can succeed (especially against $1 frozen cokes from Maccas)
Option C — I’m convinced, they’re getting some of my cash this October
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