Developing Australia’s fintech ecosystem at Tyro Payments

Earlier today I went on a tour of a new co-working space called Tyro FinTech Hub in the Sydney CBD. Its backed by Tyro Payments. Tyro is a startup but has since grown now to 200 staff.

They’ve moved into a new space with multiple levels. Its still under some construction, but I got a sneak peak at their office and what they are doing.

Here’s some office shots. They’re exclusive shots that I took on my visit from my exclusive iphone 6.

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15 things that happened in the last 12 months in Australian FinTech

We’re seeing a lot of innovation happening in the FinTech (Financial Technology) space. In the past 12 months, I’ve noticed these developments in Australian FinTech industry. I wanted to separate my visit to Tyro’s fintech hub today and the latest news in FinTech. I’ve gathered my insights and news from speaking to industry participants, friends, contacts, startups, banks, reading up about it and just being on the ground. This is from the period of March 2014 to April 2015.

I have a special interest in this space. In my earlier career, before I worked in tech I was a tax accountant at Deloitte specialising in FSI (Financial Services Industry). I worked with banks including the big end of town – Merrill Lynch, BNP Paribas, and Deustche Bank. I also worked with insurance companies, fund management, private equity, venture capital, mezzanine finance, securitisation, and mortgage companies.

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Pitch someone else’s startup

Pitching doesn’t have to be this hard

Today, my friend Bosco and I were helping out another friend with his startup pitch. I got a great tip from Bosco, which was that I should pitch someone else’s startup.

It was actually a really good experience for myself and also the founder that we were helping. The founder was able to see it from another perspective. A founder is always so knee deep in the history and detail of the work they’ve put in. They’ve worked on it non-stop so viewing it from a different perspective is very insightful for them. I was able to synthesise the pitch a lot better because I didn’t have all the legacy about the business bearing down on me and I didn’t feel the need to communicate EVERYTHING.

Funnily enough, when we pitched it and described a certain section in a shorter time span his feedback was “you’re spending too long on these slides describing it”. Our animated response was: “That’s what we’ve been trying to tell you!“. Sometimes it isn’t apparent until you see someone else do it.

I can’t say that I’m great at pitching but I’ve done it a few times and learnt a few things which I can pass on to other people. I hit the panic button when I had to pitch the first time, and luckily I had a few friends & people in my network to lean on for advice. I also watched other people pitch but there’s nothing like actually pitching yourself, and pitching for money.

Hopefully you don’t have to pitch in an elevator

Here are some things that I discovered and some thoughts that I have:

– It gets easier the more times you do it. The first time I did it in front of 40 people, it was pretty nerve wracking. Then I backed up and pitched the next week at another event, and it was much much easier.

– People tend to ask similar questions, so the more times you pitch the better you get at answering questions.

– I always said to myself before I pitched that I had “to give the pitch of my life“. We were at several crossroads that it was do or die so I had to have that mentality. You’ve got to pitch with passion.

– I like to have some backup slides to answer some common questions. In a 5 – 10 minute presentation, you can never address everything. There are certain things that people might ask for e.g. statistics, more details about customer acquisition strategy, exits, etc…

– I’ve never fully understood why investors ask about exit strategy. I’ve been asked this several times. For an early stage business that has just started, shouldn’t a founder try to build a sustainable business that doesn’t need to exit, that can stand on its own two feet? I can understand the logic behind the question, as I worked in an accounting firm providing advice to private equity funds. Per the fund terms, they are required to exit and make a return in certain time frame (e.g. 5 years). An exit could be via IPO, M&A (trade sale), MBO (management buyout), or liquidation. The investor possibly want to see if the founder has given it some thought. In some larger markets (e.g. US), M&A activity is a lot more common but in other markets like China, the exit strategy is IPO. My opinion is that you should build for the long term and not the quick flip.

– I hate working on powerpoint slide decks (or keynote). It could be a combination of my lack of skills in powerpoint and design to make something sophisticated / pretty. The hours spent sweating over the content, the pictures, the layout. Some people enjoy it, but I didn’t. Get a designer to help you.

The school of ABC

– ABC: Perhaps I’ve watched too much Mark Suster on This Week in VC. Always be Pitching, Always Be Raising, Always Be Closing. I know that in the latest YCombinator batch, none of the startups pitched for money at demo day. But I’m from that school of thought of “Always Be Closing!”.

– Take advice from people that have pitched for money before.

– Have a rough idea of how you will spend the money that you raise. Unfortunately, I’ve seen other startups get grilled on this, so I thanked my lucky stars that I had an answer for it.

Pitching is a daunting experience for a new entrepreneur so I hope some of my experiences are useful to you.

I’m out like pitching,

Matt Ho

Is Spotify Profitable?

I just wrote an answer on the profitability of the music subscription model on Silicon Beach. I used Spotify as my example, cause that’s the one I’m familiar with and most high profile. Here is my full answer in case you are not a member of Silicon Beach.


Many organisations are banking on the paid subscription model – from music, news, movies etc..whether its the answer is another question.

Clay Shirky understands this better than most people. He explains the paid content model, comparing music subscription vs news subscription model here:…

I have also been thinking about the music subscription model today. Apple has a whole ecosystem supporting the music experience. People will pay for this convenience and experience.

In terms of music, lets use Spotify as an example since they are most likely to extract value from the rest of the value chain. Is Spotify profitable?

Spotify has 10million users. News articles suggest they have approx 650,000 paying subscribers (~ 1 in 20 paying).


90% of users pay $10 Euros/month = $120 Euros yearly
10% of users pay $5 Euros/month = $60 Euros yearly

On a revenue basis, Spotify generated $74m Euros last year on music  subscriptions alone.


Gigaom reckons that Spotify made $58m in advertising. I take this with a pound of salt cause I don’t see how this could be true. My estimates below are based on the low side.

I project the following revenue streams:

– Advertising (PPC): 10m users x 1% of users click on ads x $0.02 x
365 days = $730k/year

– Ticket sales: $5 commission x 10m users x 1% purchasing yearly =
$500k/year. Using the average Posse commission prices.

– Merchandise: $20 tshirt x 10% commission x 10m users x 1% purchasing
yearly = $200k/year

That’s roughly $76m in revenue.


The only cost that’s public is music royalties at $30m. That leaves $46m on table.

I wouldn’t think the operating cost of a lean startup business would be any more than 40% of remaining revenues (assuming 20 staff, low overheads). Opex = $46m x40% = $18m.

Total profit is = 76m – 30m – 18m = $28m profit.

So in short, their music subscription model is profitable.

I’m sure they’ll have other revenue streams from deals with mobile companies. I think that’s where the real value is for Spotify – the mobile apps. People will subscribe to this. They probably need to get it to 10% – 20% of paying users (currently at 5%). Their push into the US is more likely to build a barrier to competition cause it will prevent other people from moving in.

I’m out like Myspace,

Matt Ho.

Jim Cramer & tulipomania

I really like this video which unspy posted on my blog earlier.

To me its just not fair that hedge funds and corporations can manipulate the stockmarket. It’s the notion that there is no such thing as “market correction” or equilibrium. I believe George Soros said this as well in his book. It’s not a science because there’s humans involved. 

Financial market regulation was an area I could not ignore in my studies as a lawyer and accountant. In fact, I did a thesis on it =P Shenanigans and antics pulled by Jim Cramer’s days as hedge fund don’t give normal people a chance in the stock market. They’re shifting huge piles of money around in back rooms to create artificial lifts in stock prices or spreading rumours to make a stock go down. Essentially, they are screwing with people’s money and the overral stock market. It’s nothing new, its always been going on. 

The fact is that some CEO’s have lied and financial reporter’s don’t do enough digging around to reveal the truth. Financial reports don’t necessarily tell the truth either – sometimes the real info is hidden deep in the notes or in off balance sheet financing and never reported. If it is so opaque what trust do we have in financial markets? There always seem to be a hidden truth and unbelieveable faith that things will get better and an ideal of constant growth.

It’s tulipomania all over again. Check this from wikipedia:

“Tulip mania or tulipomania (Dutch names include tulpenmanie, tulpomanie, tulpenwoede, tulpengekte, and bollengekte) was a period in the Dutch Golden Age during which contract prices for bulbs of the newly introduced tulip reached extraordinarily high levels and then suddenly collapsed.[2] At the peak of tulip mania in February 1637, tulip contracts sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble.[3] The term “tulip mania” is often used metaphorically to refer to any large economic bubble”

I’m out like the bubble bursting,

Matthew Ho

Jim Cramer v Jon Stewart: The Showdown

I’ve been watching these videos for the past hour or so. They’re very interesting, particularly given the current financial climate.  There’s been a feud brewing between Jim Cramer, the host of CNBC’s “Mad Money” and Jon Stewart, host of the Daily Show

I’ve actually got one of Jon Stewart’s books on my shelf (its brilliant!). FYI – Jon Stewart is a comedian. These two networks are supposedly sister networks as well. Watch these unedited & uncensored videos, they are very insightful – I was addicted! (note: the daily show posting these vids on their website)

Part 1

Part 2

Part 3

Based on what I have seen, Jim Cramer was pummeled by Jon Stewart. It was a three round knockout, that destroyed Cramer’s credibility. However, Cramer accepted too much blame. Could ANYONE have predicted some of these crisises and collapses?? If you put yourself out there and tell investors to buy Bear Stearns and then it crumbles, should you accept some of the blame? 

It reminds me of 5 – 7 years ago when people were recommending Enron, Worldcom, etc… and then they collapsed. I don’t think the CNBC network and Jim Cramer should be solely to blame, even though they made those recommendations. Yes, they could have done more due diligence, but it is a crazy stock market out there. Cramer should have stood up for himself more. Jon Stewart didn’t even give him much of a chance to respond either. He just kept knocking him down blow after blow.

The impact is once in a life time, however similar “shocks” have happened before. See Enron bust, bust, Asian Crisis, and Black Monday 1987.

I’ve never doubted that there is manipulation in the stock market, some legal, and some illegal.  

Here’s the original video Jim Cramer did a few years ago, discussing how hedge funds manipulate the stock market:

I’m out like Jim Cramer’s career,

Matthew Ho.

Another day, another financial disaster.


As stock markets crumbled under the weight of the credit crunch, billions of investor’s dollars have been washed away like sand on a beach. Shudders were sent through the European stock market today, as another bank brinked on the edge of the financial precipice. The financial earthquake has destroyed all in its wake and looks to consume another victim in its destruction. Australia’s central bank cut interest rates by 1 basis point, but this did little to alleviate the market’s fear of a global meltdown. The infamous American $700 Billion Bailout was passed a few days ago, however, stock markets moved together in the only one direction they knew: DOWN!

The Iceland stock market halted all stock trading today, as its second largest bank was taken over by the government. The Tokyo stock market tumbled to its lowest point in 4 years. The American government pondered whether they should buy short term bonds in an unprecedented move that would cross the line between sound economic policy and lending directly to the market. The European central finance ministers got together to discuss a bailout, but no resolution was made as political maneuverings show the fractured nature of European states. The markets looked worse today, than they have ever looked before. Like a stranded boat in the open ocean, the financial waves thrashed relentlessly as its sailors/investors looked for help – yet no miracle in the sky came to rescue them.

I believe that most Australians do not understand the magnitude of the situation, even though there is almost daily news about it on the front page of the newspaper I read every morning. Being so geographically remote from the rest of the world, it has its advantages. Sometimes. We are immune to a lot of the news that has engulfed the world. Our stockmarkets are still relatively stable compared to overseas, but it is only a matter of time before we are subject to the same market forces engulfing the rest of the world.

Or are we?

We are all part of the financial ecosystem, whether we like it or not. For those of us like me who are earning a wage (or those that are retired with their savings), we have 10% of our salary compulsorily put into superannuation. Thus we all have a stake in the financial crisis – some more than others. Those with direct investments in shares, derivatives, bonds, and other financial instruments will have a much greater exposure.


As I opened up my superannuation statement today, I read the financial return: -6.6%. Six percent, fantastic! Then I realised the minus sign in front. Ahhh, a negative return! Even better news. It not as bad as my new superfund, which made -8%. So for that, I should be thankful.

Unfortunately, a lot of superfunds to balance the risk and return, invest in overseas shares as well as domestic shares. As overseas equities take a beating like Rodney King, it will only have a flow on effect on to our domestic market. In fact, it already has. Why do you think the Reserve bank cut the cash rate – to relieve the pressure on mortage owners and to stimulate the economy. Many of the managed funds (not just mine!) have been posting negative returns. If any of them posted a positive return this financial year, I’d questioned their earnings statements (profit and loss statement).

The interesting thing is that superfunds and private equity firms, still have mandates to invest. Money is still flowing in from compulsory superannuation – where do you think our 10% goes? Money needs to have a home, except the banks are too scared to lend to anyone for the risk of default (see Lehman Brothers, Bear Stearns, et al). American banks have cut back their lending to a daily basis and money has shifted into safer and more secure assets like fixed term deposits and shoe boxes at the bottom of your bed. The thing is, what could be more secure than short term bonds? The smart thinking was that you would be paid in interest and when those bonds matured – even that’s too risk now. Better to buy a big safe and toss all your money in there. At least it will still be there when you wake up.


Enough doom and gloom.

Instead of pondering on what has happened and all the negativity around it, I have discussed some measures below that would help the global economy at large.

1. Reduce or eliminate capital gains tax (CGT) on shares

I had a lively debate over the internet with my friend in the US who suggested this to me. Since no one is buying shares anyway and everyone is selling, could this be a viable option?

Governments around the world introduced capital gains tax to prevent people from shifting their income into capital for the tax difference. For example, in Australia prior to 1984 (or whatever that date is), people that earned income were taxed according to their tax bracket – as they are now. If that income was deemed to be of capital nature, it was not taxed at all. So smart people with money, simply shifted their income to capital, made gains and were untaxed. Thus capital gains tax was introduced to capture this missing link in the tax landscape to prevent the arbitrage between capital and income.

Whilst, I do not fundamentally believe that reducing or eliminating CGT on shares will have the required effect, it does have some sway. When the economy is in such a dire state, we need liquidity in share markets. People need to buy and sell. We are stuck with the present situation where people are selling and no one is buying. Thus, there is no liquidity (i.e. turnover) in the market.

Margin loans are been called like bluffs at Texas Hold’em, and everyone is losing to the house. Banks have mortgages and other assets which they cannot unload. Eliminating CGT on shares and possibly other assets like real estate, would encourage trading and a greater flow of money into the economy. Yes, some sharp people out there (with tax accountants at their disposal) would shift their income to capital, but is this a bad thing? These are the people with money at their disposal and we need them to do something with it!

The problem with introducing such a financial incentive is that once you unleash it, it is very hard to claw back. Could you imagine the political backlash that would occur if you gave people a tax break and then took it away?

This measure alone cannot be effective in restoring stability into financial markets, but has some merit.

2. Introducing tax breaks for entrepreneurs, greater tax rebates for R&D and innovative practices

I have grouped these together because fundamentally they are similar. We are just trying to encourage a bit of risk taking and expansion of activities that help drive our economy. I can’t speak for other countries as I am not too aware of their tax practices, but from an Australian perspective, surely more than can be done in this area.

Yes, we should encourage entrepreneurs to open more businesses, to think of more ideas, to be able to benefit from their financial losses. They need to fail faster, so they can learn from their mistakes. It is ideas and people that start billion dollar corporations, franchises, improve people’s standard of living and create value. We don’t have enough of them.

Similarly, we need business practices to be more creative and more open minded. Although Australian businesses do punch above their weight in the international arena, I do not believe that the government has enough financial encouragement for new R&D. From memory (and this was a while back), I think the rebate was 125% and the way it works is that for every $1 dollar you spent on R&D, the government reimbursed you with $1.25. I do not see why more money could not be given back to businesses that are becoming world beaters, that are making new production methods and so on.

I have used tax as my first two examples, and this is because the taxation is a natural solution to stimulate economic growth. Tax does several things, and the one good thing it does is that it acts as an automatic stabilizer (inset – see your yr 12 economics textbook).

3. A change in the way we do our accounting and lending practices

Although I have been harping on about tax for a while, it does not solve the core of the problem. The root cause is that some bad decisions were made, assets were overvalued, and some people got a bit too greedy. The problem began with mortgages made to people which were beyond their means, hence the so called “sub prime” crisis.

Banks and other financial institutions have overvalued these assets. Obviously some lax lending practices were involved as well. The bailout is necessary (though financial pundits of free market forces may disagree), but it sets a dangerous precedent. Will banks change their practices? Will anything be learned?

Surely, banks and other corporate institutions need to be more open about their valuation practices. Mark-to market accounting must be adopted i.e. valuing assets at their market value rather than at their historic values. Investors have a right to know if the value of the assets are sinking faster than quicksand.

But fundamentally, more must be done around changing the thinking behind our accounting practices. Accounting standards should at their purpose focus on disclosure rather than measurement. Investors need to know all the financial risks involved. And I believe more investors (especially unsophisticated investors) need to be encouraged to understand how to read financial statements and disclosures.

The problem is that is so much information hidden in financial reports and off balance sheet assets, and continuous disclosure does nothing more than flood more irrelevant information into the market place. There is not space to discuss changes in lending practices, so more on this another day I’m afraid.

4. Increase production of shoe boxes

If all the above fails, and the Bailout does nothing to alleviate concerns in the market place, there is one practice that has stood the test of time. Find a box, preferably of small to medium size, depending on the amount of cash you intend to hoard, and stuff it in a box.

Place it safely under your bed and sleep soundly, for you have avoided yet another day, another financial disaster.