Digital financial advice startup SuperEd raises $5 million from key investors and staff
Tuesday, January 9, 2018/
Digital superannuation advice startup SuperEd has completed a $5 million capital raise from both external investors and staff members to ramp up its expansion, with the 2012-founded company betting on digital advice being a big deal for fund managers going forward.
While the startup was founded five years ago, SuperEd chief executive and co-founder Hugh Morrow had the idea for SuperEd more than 20 years ago while working with Westpac, where he observed that most of the people who sought financial advice could afford the services of a “cost-intensive” financial planner.
“That’s all well and good, but the majority of the population misses out on financial advice — the segment of the population that’s typically less financially literate or understanding of the issues,” Morrow told StartupSmart.
“The objective of SuperEd is to help most of the people with most of the issues, most of the time. We’re not trying to solve every problem for every person, we’re just trying to reach the majority of people.”
When Morrow and SuperEd co-founder and chairman Jeremy Duffield started the company, there were no competitors in the Australian market, and the two looked further afield to the US for inspiration where they thought some of the developments in digital 401k advice might be applied locally.
Today, the team finds itself up against a number of other competitors but aims to set itself apart by turning its approach to advice “inside out” by focusing on consumers and working from there, rather than putting a sole focus on making automated processes more efficient.
“This way we empower consumers to understand the advice and the implications of taking that advice, which builds confidence and better financial understanding,” Morrow says.
Raise a “long time coming”
The company has been seeking to raise for nearly 12 months now, having received $2.5 million in seed and angel investment previously. The team felt confident in seeking capital after having the business validated through a number of significant customers and feedback.
“We wholesale the digital advice solution to other organisations, and we’ve been seeing increasing demand and interest. It’s time we scale up and build more muscle to expand the platform — we’re confident in our offering, now we just need to get it to market,” Morrow says.
For now, that market will just be Australia; Morrow is confident the superannuation and retiree market locally is very healthy and is “content” with conquering the local scene. However, the company has sought patent protection globally for much of its key IP and Morrow says it has an eye on global markets — specifically Asia — for expansion “eventually”.
Happy to get staff on board as investors, but it’s not easy
While the $5 million raise attracted some key investors, such as Retirement Essentials founder Paul Rogan, a “significant” amount was contributed by SuperEd staff, a relatively unusual thing to see from Australian startups.
Morrow says both he and Duffield believe strongly in letting teams share in the rewards of the company and giving them the opportunity to invest not only time, but money into the business.
“If you look at the US, one of the most vibrant venture capital markets, this is absolutely commonplace. It’s the grease that makes the whole machine run,” he says.
However, Morrow cites tight regulation in Australia as a reason we don’t see more startups offering equity as a form of compensation for workers, saying it’s “very difficult” to do tax effectively and could use some reform.
Drawing further comparisons to the US venture capital market, Morrow criticised the local venture capital scene, saying it hasn’t evolved as much and was “continually frustrating” through the raising process.
“It can be a bit faddish in what startups get funding, and we’re in the early stage of building a deep VC and investing community,” he says.
“We’re starting to see entrepreneurs and VCs go through multiple cycles of investing and starting companies, and that’s slowly building the muscle and experience for them, which is exactly what we need.”
“There’s plenty of cash out there, but we were looking for smart money — like-minded people to back the company and the vision.”