Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 167

How angel investors give birth to disrupters

Ben Heap is Founding Partner of H2 Ventures, the manager of the H2 Accelerator programme, which helps to launch early-stage fintech start-ups. Each programme runs for six months, with H2 choosing up to 10 start-ups per round. Typically comprising two to three entrepreneurs per team, H2 looks for a combination of technology expertise, such as a coder or engineer, and financial markets expertise. The aim is to have a marketable product within three to six months. H2 takes a 10% equity share in return for $100,000, and is building a portfolio of 100 or more fintechs.

Ben spoke to Graham Hand at the Sydney fintech hub, Stone & Chalk, on 29 July 2016.

“The point of an accelerator programme is taking raw talent, often with a nascent idea that they think is more advanced than it is, and refining the idea until they have a minimum viable product. Our mission is to help them on this journey.

Entrepreneurs are great at convincing themselves that their idea will change the world. It’s completely different making that into a viable business. We are angel investors, we put a structure around the idea and provide mentoring as they turn the idea into a business. Angel money is often family and friends, while an accelerator is more professional and adds discipline. Angel money is usually $50K to $250K, while seed money is $500K to $2 million, often from an outsider who wants to actually make some money. At the seed stage, the business moves from the two- to four-person founder team who are not being paid, to hiring employees, and paying the founders a bit of money.

Angel money does necessarily require that founders can’t be paid from the money. Everything we do is about giving the founders as much flexibility as possible. If the founder wants to pay themselves, we ask them to carefully consider if it is the best use of the money at the early stage. The mistake an accelerator or angel can make is to spoon-feed the founders, then at the end of the programme, they are in a world of pain because they have to work it out for themselves. We might help with the pros and cons but we let them make the important calls. We want to set them up to pitch their business to seed investors.

It’s not all about the idea. It’s 99% perspiration and 1% inspiration. Our focus is on the individuals and the team and whether they are capable of delivering the idea, or the idea they move to as they start to test it. The majority of teams we back, the idea evolves, or ‘pivots’ as we say. As investors, it’s not only the idea, the key is always execution.

I have described our business as talent identification, similar to a search firm. We look at a lot of applicants, and we have a structured process of screens and interviews. We expect people to read our website and self-select away if they don’t like what we do. It’s not always young people. In fintech, we find an older cohort than other VCs although it’s mainly 25 to 35-years-old, with some older. We want people who have seen a few things, different roles in different places. We look for the ability to cope and apply a skill.

It’s not dissimilar to fund managers. They are often a bit quirky, with an ability to focus 24/7, and a healthy level of self-confidence. It’s important, since most of their smart friends will say, ‘That’s never going to work’ or ‘Nobody will buy that.’ They need enough confidence to push through that when others will stop. But that’s why the opportunity exists. They also need to take onboard the right advice, and they must sift through it, while still owning the problem.

They must work full-time, and a leave of absence from a job is not good enough. We don’t think the project can work without full commitment, they need to forget Plan B.

We have learned the dynamics of teams. When two to four people come into a start-up, it’s akin to a marriage. It’s a long-term commitment. They depend on each other, and foibles will annoy each other. We have made mistakes in not anticipating these problems. We are always improving our legal documents to help founders to protect themselves. Founder shares allow for a claw back of shares if someone leaves early. Of course, you can have advisers and board members who provide advice.

In financial services, regulation is often the biggest hurdle. Despite ASIC’s ‘sandbox’ approach for startups, the time and complexity of the licencing process does not lend itself to the iteration process of a start-up. ASIC needs flexibility to accept new approaches rather than retro-fitting businesses into existing regulations. By the end of the programme, the start-ups should be over regulatory hurdles.

Australian fintech is new so we cannot identify an excellent business we have missed, although there are some terrific founders we have seen who will become incredible success stories at some stage. We meet most of them given our position in the market. Our accelerator may not be right for them, they may be past that stage.

What if the money runs out but the idea is still there? An accelerator model demands they go out and raise seed money. We expect 75% of the ventures in the programme to be successful enough to raise seed money. We don’t put more money in once a start-up is in the programme.

We will move into the early seed money at some stage. We see an opportunity in future for retail investors to invest in a diversified fintech portfolio that is professionally managed.”


Graham Hand is Editor at Cuffelinks. Ben Heap is Founding Partner of H2 Ventures.



Being Jon Medved: three decades of start-up investing

How to invest in early-stage tech businesses

Private equity’s role in a well-constructed portfolio


Most viewed in recent weeks

Lessons when a fund manager of the year is down 25%

Every successful fund manager suffers periods of underperformance, and investors who jump from fund to fund chasing results are likely to do badly. Selecting a manager is a long-term decision but what else?

2022 election survey results: disillusion and disappointment

In almost 1,000 responses, our readers differ in voting intentions versus polling of the general population, but they have little doubt who will win and there is widespread disappointment with our politics.

Now you can earn 5% on bonds but stay with quality

Conservative investors who want the greater capital security of bonds can now lock in 5% but they should stay at the higher end of credit quality. Rises in rates and defaults mean it's not as easy as it looks.

30 ETFs in one ecosystem but is there a favourite?

In the last decade, ETFs have become a mainstay of many portfolios, with broad market access to most asset types, as well as a wide array of sectors and themes. Is there a favourite of a CEO who oversees 30 funds?

Betting markets as election predictors

Believe it or not, betting agencies are in the business of making money, not predicting outcomes. Is there anything we can learn from the current odds on the election results?

Meg on SMSFs – More on future-proofing your fund

Single-member SMSFs face challenges where the eventual beneficiaries (or support team in the event of incapacity) will be the member’s adult children. Even worse, what happens if one or more of the children live overseas?

Latest Updates


'It’s your money' schemes transfer super from young to old

Policy proposals allow young people to access their super for a home bought from older people who put the money back into super. It helps some first buyers into a home earlier but it may push up prices.

Investment strategies

Rising recession risk and what it means for your portfolio

In this environment, safe-haven assets like Government bonds act as a diversifier given the uncorrelated nature to equities during periods of risk-off, while offering a yield above term deposit rates.

Investment strategies

‘Multidiscipline’: the secret of Bezos' and Buffett’s wild success

A key attribute of great investors is the ability to abstract away the specifics of a particular domain, leaving only the important underlying principles upon which great investments can be made.


Keep mandatory super pension drawdowns halved

The Transfer Balance Cap limits the tax concessions available in super pension funds, removing the need for large, compulsory drawdowns. Plus there are no requirements to draw money out of an accumulation fund.


Confession season is upon us: What’s next for equity markets

Companies tend to pre-position weak results ahead of 30 June, leading to earnings downgrades. The next two months will be critical for investors as a shift from ‘great expectations’ to ‘clear explanations’ gets underway.


Australia, the Lucky Country again?

We may have been extremely unlucky with the unforgiving weather plaguing the East Coast of Australia this year. However, on the economic front we are by many measures in a strong position relative to the rest of the world.

Exchange traded products

LIC discounts widening with the market sell-off

Discounts on LICs and LITs vary with market conditions, and many prominent managers have seen the value of their assets fall as well as discount widen. There may be opportunities for gains if discounts narrow.



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.