Australia's four major banks cut back on venture capital investment

During the tech bubble, banks' investments in startups could bring them steady financial returns. Unlike traditional venture capital funds, the business model allows the Australian banking industry to offer significant financial support to startups. However, The Australian Financial Review reports that amid the downturn in the tech sector, three of Australia's big four banks are scaling back their venture capital efforts. Westpac has terminated its $150 million investment plan for the fourth Reinventure fund. Furthermore, the Commonwealth Bank's x15ventures is reducing the number of companies it commits to investing in. x15ventures invests directly using Commonwealth Bank's cash, helping existing companies expand and develop new businesses through an "accelerator". A Commonwealth Bank spokesperson stated that the bank's investment in x15 has been growing annually since its launch. Toby Norton-Smith, head of x15ventures, says that while x15 will continue to invest in new companies, it plans to allocate more funds to support its most successful investments, aligning with the bank's wider strategy. Smith stated in a release that this change is more important than achieving a specific scale of the investment portfolio, ensuring that the bank can support businesses with real independent strategic and commercial value. ANZ Bank, one of Australia's big four banks, has also experienced setbacks in the venture capital field. Earlier this year, the CEO of its 1835i project changed from Ron Spector to Justin Greenstein. The latter is generally considered to have less influence in the venture capital field, and this leadership change is seen as an indication of the bank's reduction in venture capital activities. In addition to the major Australian banks scaling back their venture capital investments, similar situations have occurred in other industries. Last month, insurance company IAG laid off 70 employees from its innovation department. Software giant Salesforce also reduced its venture capital business in Australia. Although Australia's big four banks once obtained steady financial returns through venture capital, industry insiders say that technological disruption or competition has forced the Australian banking industry to engage in venture capital business, but fintech is not the investment category preferred by the banking industry. The reasons for reducing the scale of venture capital, in addition to the downturn in the tech industry, are the more complex issues faced by the Australian banking industry, such as the difficulty of maintaining relationships between rapidly developing startups and traditional banking systems. A founder of a startup that received investment from a major bank in Sydney said that the bank liked our idea and invested in us, but the investment also came with the compliance requirements of the traditional banking system. If banks truly exit the venture capital field, it might not be a bad thing for the entire industry. According to information obtained by The Financial Review, Westpac refused to approve Reinventure's fourth fund due to disagreements on terms between its team and the bank.