Westpac dips VC toe again with $28m AI cap raise
Westpac is backing an eight-year-old fintech start-up that uses artificial intelligence to make decisions about whether to lend to small businesses in the bank’s largest move into venture capital this year.
Sydney-based Rich Data Co has banked $28 million in a Series B round led by Westpac and nCino, a cloud banking provider based in the United States. The round also received reinvestment from local fund manager BMYG and new investment from Singapore-based Octava Fund.
Major banks are pushing towards real-time loan assessments, pulling data from cloud accounting platforms and customer transaction databases to feed models that accurately profile possible business loan borrowers.
Ada Guan, co-founder and chief executive of Rich Data Co.
Australia’s four largest banks – Commonwealth Bank, National Australia Bank, ANZ and Westpac – have all announced various AI initiatives, ranging from developing cash forecasting tools for customers to stripping out back-office customer service costs. Westpac’s contribution to Rich Data Co’s latest fund raise comes from its own balance sheet and not through its venture arm, Reinventure, which has stopped making new investments.
Ada Guan, the chief executive of Rich Data Co, said that while an explosion in interest in AI meant more people understood the mechanics of machine learning, it remained difficult to explain how an answer was reached.
“Accuracy is super important, but so is transparency,” Ms Guan said. “If I can predict whether you’re going to repay or not, but I can’t explain why I think you’re going to repay or not, then the bank can’t use that model.”
This human-based verification layer has been critical in embedding Rich Data Co’s software inside major banking partners such as Westpac, National Australia Bank and in the establishment of the global resale agreement with nCino, which is listed on the Nasdaq.
North America remains the most lucrative market for Australian start-ups, and Ms Guan said the bulk of the $28 million raised through the Series B round would be used to expand the team abroad. Tech salaries have long soaked up venture funding, but a sharp market downturn has seen US-based salaries come down. As it stands, Rich Data Co employs around 60 people.
While Ms Guan said a more open labour market was helpful, she aims to keep the company small. “In a large business, you have a protective layer of people,” she said. “It’s okay if one or two people aren’t reliable. If you have a small team, there’s nowhere to hide. We’d like to keep that philosophy.”
Ms Guan said a difficult funding environment had made the due diligence process “very intense”. “It’s very hard out there,” she said. “Investors are very thorough at looking through the performance of the business which was not the case two years ago.”
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