STEALTH MODE MONEY: Techboard checks under the bed for unannounced capital driving fintech startups – and finds nearly $700 million

The amount of capital flowing into local fintechs is nearly double the known figures according to estimates from funding analytics firm Techboard, which has launched a new report into investment in the sector.

Some of that funding includes millions into VC-backed startups  with around $684 million in unannounced funding discovered alongside $769m in announced deals captured by Techboard in 2023. That takes the total to a much more impressive $1.45 billion for the year and suggests that investment in Australia is not as parlous as some feared. 

Even more astonishing is that unannounced investments represented around 60% of the number of deals done, with Techboard finding 143 fintechs with unannounced raises compared to 83 announced deals.

So it’s not just startups in stealth mode. Their investors overwhelmingly are too.

The Fintech Funding Project 2023 report: shedding light on investment into Australian fintechs was developed in partnership with Fintech Australia and LaunchVic and uses data from corporate regulator the Australian Securities and Investments Commission (ASIC) alongside Techboard’s own deal data.

The full report can be downloaded here.

Techboard cofounder and CEO Peter van Bruchem said they’d estimated that around 50% of capital raises went unannounced, which meant that many decisions by policy makers, investors and others were being made on the basis of inadequate data. 

van Bruchem set out to test his own theory that much like icebergs, there’s plenty of investment under the water, which doesn’t find its way into the media via PR firms and VC humble brags. And he knew where to look for it.

“Whenever a company issues shares it must lodge with ASIC. All data lodged with ASIC is non-confidential and publicly available if you know where and when to look and pay for access to the data,” he said.

“So we knew that there was a vast reserve of valuable information that could be mined to reveal greater insights than could be gleaned just from companies’ announcements. We worked out a way to add this valuable data source to Techboard’s data acquisition to add value to its customers and attract more new customers to its offering.” 

What Techboard unearthed was “quite enlightening”, its CEO said.

Another revelation that emerged is that solely women-founded companies had significantly more unannounced deals, by dollar value, compared to what van Bruchem labelled an “almost negligible dollar amount of announced deals” although the level of investment in 2023 was still behind the proportion of fintechs with women founders.

“We did however find that things weren’t all bad for women-founded fintechs with strong average deal values and levels of investor capital which were in line with the proportion of fintechs founded by women,” he said

The first part of the report addresses Unannounced Capital Raising Activity.

Techboard found that in 2023:

• announced deals accounted for only 37% of likely capital raises we identified in this project (by number of deals). 
• 143 fintechs with unannounced raises collectively totalling just under $684m, supplementing the 83 announced deals raising $769m in announced deals Techboard captured for 2023, taking the total raised by Australian fintechs in 2023 to a total of $1,453.21m for the 2023 calendar year.
• unannounced investments ranged in size from c$50k to over $50m, from pre-seed to late Series C+ stage with the most common size being between $1m and $5m (46 deals).
• 73% of unannounced deals were between $100k and $5m.
• calculated company valuations from unannounced capital raises ranged up to over $1b, with 11 companies with $100m+ valuations and one with a valuation over $1b.
• NSW and Victoria, had a higher proportion of total investments by dollar amount coming from announced deals, whereas the smaller states other than the ACT had a higher proportion of total investments in dollar value coming from unannounced deals. Aside from the ACT, all states had more unannounced deals, by number, than announced.

The unannounced deals identified in the project include:

• Airtree-backed Grow Inc appeared to have raised $77m over the course of 2023, with the existence of part of the raise only being revealed in a news story in June this year.
• Etika issued $53m of capital to its Australian operations following on from an unannounced UK capital raise. 
• Moula appears to have raised a significant series A/B of almost $24m. 
• Afterpay founders Nick Molnar and Anthony Eisen appear to have led a significant (c $13m) round into Jack Bloomfield led Disputify (now rebranded as ReShop) valuing the company at $28m. 
• Ten companies’ first significant fundings, ranging in size from $98k to $10.4m for Traild. 
• 49 seed raises, 13 Series A raises, 10 Series  B-C raises, 55 topup/unannamed raises.

Part 2 of the report investigates the capitalisation/shareholding of companies and found that:

• The leading category of investors by capitalisation were non-institutional investors which accounted for roughly 35% of all investment capital in Australian Private (Pty Ltd) fintechs, ahead of corporate at 31% and venture capital (including Foreign VC) at 23%.
• Australian VC accounted for just over half of all VC (51%) or 11.7% of investment capital. (Limits exist on VCs investing in some types of fintechs under the statutory rules on Venture Capital Limited Partnerships and Early Stage Venture Capital Limited Partnerships).
• Non-institutional investors play an even bigger role in earlier stage investment as high as 60% of all Australian investment capital for companies with $1-5m of investment capital.
• Foreign investors directly own 17.6% of issued capital in Pty Ltd fintechs and contribute an estimated 21.5% of investment capital with their share of capital increasing as the companies capitalisation levels increase.
• Techboard was unable to determine the level of Direct Foreign Ownership in Public (Ltd) fintech companies or see the level of foreign investment via Australian registered investment vehicles or fund structures, including Australian VC 
• The largest amount of foreign capital comes from the US ($346m), followed by Singapore ($112m), UK ($97m) and NZ ($70m).
• A surprising amount of investment came from recognised tax haven countries, which combined would represent the 2nd biggest foreign contributor at $132m.
• The use of convertible notes was highlighted, including in large megadeals (>$50m).
• Corporate structures varied from state to state, specifically when considering Private (Pty Ltd) vs Public Companies (Ltd). WA and Qld had very high proportions of company capitalisation in public companies, which impacted on the amount of data available for analysis as the investors and their shareholdings are only readily accessible for Private (Pty Ltd companies).

The report also unpacks who owns and has invested in Australian fintechs.

“We do breakdowns by investor entity type, classification and location. For the first time we are able to reveal the extent of direct foreign investment into Australian Fintech, the significance of non-institutional investors and the extent to which venture capital is funding one of Australia’s most significant startup industry verticals,” van Bruchem said.

“For several years Techboard has been tracking and reporting on announced investments on the basis of founding team gender. In this report for the first time we look at the capitalisation and shareholding of women founded ventures past what is reported in the press, which adds a new element to the issue of gender equity in startup funding.”

Having delved into fintech with LaunchVic and Fintech Australia, van Bruchem is now looking new partners to explore hidden funding in sectors such as health and medtech, as well as climate tech and AI.

LaunchVic CEO Dr Kate Cornick said the Techboard fintech report highlights there is a lot more work that needs to be done in other startup verticals to understand the true extent of under reporting.

“This work shows a significant underreporting of data on capital raises by fintech startups. The ecosystem valuation, based on capital raised by startups, is even stronger than we had previously thought,” she said.

“It is difficult to get accurate startup data at the best of times.  I congratulate the team at Techboard for this great report.”

Fintech Australia CEO Rehan D’Almeida said it was heartening to see that fintech is represented as one of the most deal-active categories even while the rest of the startup industry endures one of its harshest slowdowns in funding to date.

“Fintech is not completely immune. We know it’s been tough for many of our members out there too.But at a macro level, the industry continues to both deliver for investors and consumers,” he said.

“The guidance offered by Techboard’s data will help us continue to push for stronger mechanisms and initiatives that assist founders in the capital raising process. This will hopefully continuing the trend of seeing fintech companies represented as significant proportion of the total amount of capital raised in Australia.”

Download the full Fintech Funding Project 2023 report here.