“A bigger pie”: Why Fair Go Finance opted for a $20 million majority-stake buyout
Wednesday, September 25, 2019/
Western Australian startup Fair Go Finance has seen a change of majority ownership, with Skybound Capital Australia buying out 60% of the business for a $20 million investment.
But, founder and chief Paul Walshe says this is just the beginning of a new era of growth for the fintech.
Founded back in 2008, Fair Go Finance is an online provider of credit and personal loans.
Previously, the majority shareholder was Luxembourg-based business MyBucks, which is now shifting its strategic direction.
The investment follows a strong few years of business for Fair Go. Founder Paul Walshe tells StartupSmart the business has doubled its revenues year-on-year, and in the financial year 2018-19, it saw growth of 130%.
The shift in majority ownership brings a new type of investor to the table, Walshe explains. While the previous parent company was an operator, Skybound is a private equity investor.
“It brings capital, and with that capital, we can expand,” he says.
While the business saw significant growth with MyBucks on board, “Skybound can see us ready to go to the next level”, he adds.
Equally, there’s a benefit to shaking things up every once in a while. This change “really invigorates myself and the management team”, Walshe says.
Although the business has been around for more than 10 years, it feels like “a new dawn, or a new era”, he adds.
“We still have that startup feeling … it’s a really exciting phase that we’re going into.”
The $20 million investment is pegged for exploring new avenues of fintech development, and exploring new growth opportunities. Walshe also has plans to expand into new markets within Australia, and diversifying Fair Go’s product offering.
“We’re small enough in the Australian market to see opportunity here, and we will play to our strengths,” he says.
A smaller piece of a bigger pie
For some founders, giving up the majority share of their startup is like handing over a part of their soul. But for Walshe, bringing on a majority shareholder has been the best thing for the business.
For some businesses, getting hung up on keeping 51% can mean “you’re stifling the growth of your business”, he says.
“Different businesses have different needs,” he explains.
“The nature of a lending business is that it’s capital intensive — you’re going to need capital.”
Walshe has gone through the stages of being the 100% majority owner, to raising capital through a friends-and-family equity round, to an institutional round, and transferring majority ownership to a corporate fund manager.
“It’s a progression,” he says.
“With each of those, as you grow, you hope the pie grows, and your shares grow in value.”
Better to have “a smaller share of a bigger pie”, he adds.
As a founder and chief, having an external majority shareholder can also serve to keep you on your toes.
“I’m very conscious that I need to continue to add value in that role,” Walshe says.
“The business needs a competent management team. If I’m relying just on shareholding to keep that role, I’m probably not the right person for the job.”
If investors continue to have confidence in Walshe’s leadership, then he remains in his role, he says.
And, if the business ever gets to a level beyond his leadership capacity, then he says they will look at changing things up.
“But, where we’re going, the longevity in the role has been a real advantage,” he says.
“I think we’re really primed now for the next step.”
Evolution and opportunity
Having been in the fintech space for about a decade, Walshe says he’s seen a few changes.
In general, the Aussie fintech space is “certainly going in the right direction”, he says.
“Different states have different approaches to how they’re adopting the industries and attracting the industries,” he notes.
For example, while Victoria is doing a lot to support fintechs, there could be more done in Walshe’s home state of WA, he suggests.
Equally, he says more clarity on R&D tax incentives could encourage more investment in the space.
“But, on the whole, I think it’s a really healthy industry,” he says.
A move towards open banking, and tech trends such as artificial intelligence, are “breaking down the walls” and allowing for more competition.
At the same time, the findings from the Hayne banking royal commission has reduced trust in the big four.
“Reputations have been tarnished and consumers are up for grabs,” Walshe says.
“If you can use technology and have a relevant product offering and a good brand, then it will probably resonate with people,” he adds.
“And that creates opportunities.”
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