Vinomofo’s Justin Dry backs fintech ‘robo-advice’ startup Clover but warn regulation is a barrier to new fintechs


Vinomofo co-founder Justin Dry. Source: Supplied

Co-founder of online wine retailer Vinomofo Justin Dry has backed a financial ‘robo-advice’ startup called Clover as Australia’s financial services market begins to see more disruption from new players.

Clover is aimed at younger Australians hoping to save for things such as a house deposit, allowing them to invest a minimum of $2500 in an array of “passively managed” exchange trading funds (ETFs). The users can then choose to continue to invest a monthly amount, with Clover managing the what and how of the investment.

The startup was founded in 2014 by Sahil Kaura, Harry Chemay, and Darcy Naunton who worked together at consulting firm Mercer, where they observed how actively managed funds weren’t providing investors with a significant amount of value.

“Active fund managers were finding it harder and harder to outperform the market over a longer time period. We figured customers would be better off with what we call ‘passive’ management, given we got our asset allocation right,” Kaura tells StartupSmart.

Clover’s initial focus was as a robo-advice platform for a superannuation fund, and the  startup launched its consumer-focused online robo-advice website last year and Kaura says the uptake from users has been strong so far. The majority of interest has come from younger Australians looking to start saving for a house, a feat which now takes on average six years in Melbourne when using options like high-interest savings accounts.

Naunton and Dry have known each other for many years, and the Vinomofo co-founder says that was one of the reasons he became interested in the startup and what the team was looking to achieve. But what got him across the line was the problem the team is looking to solve.

“These robo advice platforms have been available in the US for a while, and there’s been a gap between the states and Australia in this market for too long,” he tells StartupSmart.

“It’s a gap in the market, and I want to use it, other people want to use it, and I believe the way they invest outperforms most other managed funds.”

Dry has been angel investing for the last three or four years he says, both on his own and through Blackbird Venture’s Startmate program, looking for disruptive businesses in areas he understands with great teams behind them. While there’s “no real thread” to his investments, he hasn’t invested in another wine business or one in a similar space to Vinomofo.

Apart from Dry’s investment, the amount of which is undisclosed, Clover has received over $2 million in investment to date, with Australian super fund EquipSuper investing in the business in 2015. Kaura says the startup is continuing to seek funding, “like any fast-growing startup does”.

Regulation a barrier to fintechs, sandbox not pulling its weight

While Dry and Kaura are both bullish on the robo-advice space as one for disrupting the wider financial services industry, they also lament the high level of regulation as a barrier to entry for startups in the space.

Kaura explains Clover has an Australian Financial Services License (AFSL), but had to get a specialised managed discretionary account license due to Clover’s passive management structure, which added another level of complexity to the process.

“It’s very hard to bootstrap a startup in the financial services space as it’s a more regulated space than most,” he says.

Dry agrees, saying he had many “deep and long discussions” with the team about the nature of regulation in the fintech space. While he’s thankful for the regulations existing, he believes it does throw a lot of hurdles in the path of early-stage startups.

“This is why the space has taken a little bit longer to be disrupted,” he says.

Kaura notes the government’s progress in the area with initiatives like the fintech sandbox, but mentions its lack of uptake and additional requirements, with startups having to find a AFSL holder to work under to be eligible for the sandbox.

“More work needs to be done before we get to the stage where startups can test and validate their products because now they have to first bear the burden and costs of going through those regulatory hoops,” he says.

“It’s a fine balance, and we have a way to go.”

NOW READ: Lord Mayor of London praises Australia’s “flourishing” fintech scene, plugs support for new ‘bridge’


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