Banker by day – start-up investor by night
At first glance, Nick Reade could be just another corporate suit climbing the banking ladder. As general manager of small business banking at ANZ, Reade is the man who oversees the bank’s lending to start-ups.
But Reade isn’t a dispassionate number cruncher who has no empathy for the struggle of entrepreneurs looking for funding.
He is an enthusiast for all things entrepreneurial, having a stake in two web start-ups and a larger, more direct involvement in a third – Jedo, a social media-integrated directory of events.
So how does he manage to mix his dual roles as sober business banker and start-up investor? And what is he looking for when he’s assessing which SMEs to back – in both his day job and his private sideline?
StartupSmart spoke to Reade to find out:
How did you first get interested in the start-up world?
Start-ups have been a passion of mine for some time. I’ve had a career in financial services, but I’ve been interested along the way in the areas of technology and innovation.
I was at SMP in Sydney when I was headhunted by CommSec at a time when the internet was just starting to take off. I saw in that boom, in the late 1990s when I then went on to work on ANZ.com, that there was a huge opportunity around the internet and start-ups.
The entrepreneurial spirit is always something I’ve liked. I like people who have a go and back themselves.
I’ve been working on SME banking now for five years and there’s nothing better than being involved with new businesses. I feel I have the added benefit of understanding where they are coming from when they are looking for money.
I’m involved in Jedo in my spare time. I spend about three or four hours a week on the business. And then there are two other web businesses which I’m more passive with – one in the online storage area and the other in retail.
Why did you decide to be hands-on with Jedo?
Jedo is really one that I can help be successful. Anneliese (Urquhart, the founder) is very good and I feel I can help her with various things to ensure the business can grow.
I have a stake in Jedo of around 30%. I get about five to 10 proposals from start-ups each week from various sources, but I really liked the concept behind Jedo.
Anneliese grabbed me while I was on my way to a function at Crown and pitched the idea to me. The concept behind a business is always very important, but a large part of it is the people and I was very impressed by her.
She proved to be a very strong entrepreneur – she spent 18 months working on the idea in her own time for no income. She has skin in the game, which is the kind of thing you look for.
For me, I wanted to help create something big. We are forecasting earnings of $10 million-plus within three to four years, valuing the business around $80 million to $100 million.
And that’s just the Australian numbers. We should be able to get into the US market, which is about 20 times bigger than here, fairly quickly. Sites like Eventbrite sells tickets whereas Jedo can operate in the middle, facilitating others like Ticketmaster to sell tickets.
There aren’t many others in that middle space and there’s global opportunity there. I want to play my role; I’m not in it just for the short term. I want to help it get to a good level.
Are you looking for more start-ups to back?
I am looking for the right opportunity, yes, but I have to be careful as I don’t have much room time-wise.
I can be involved in a few more on a more passive basis. Some people are questioning the returns on the sharemarket and are willing to take more risk for a higher potential return.
I think I understand the economics and that I can pick them, but I understand that there are failures along the way, which is why you spread your money. I anticipate I’ll push my involvement up to five or six businesses, or even 10, over the next year or so.
But in terms of hands-on involvement, I think Jedo will be it for the time being.
How do you find the time? Is your moonlighting with start-ups ever an issue for ANZ?
I have a full-on day job that doesn’t give me much time for anything else. I am running small business banking, South Australian corporate banking and innovation. There are three hats there and I think my wife would be upset if added too many more!
The bank is aware of my involvement and knows that I am involved in start-ups in my private time. There’s also an understanding that much of it is complementary.
ANZ really recognises innovation – just look at the bank’s involvement with (SA start-up accelerator) Innovyz. I can’t think of another bank that’s doing anything like that.
Why is it so rare for people in the corporate world to get involved in start-ups?
I can only speak for myself, really. I like growing businesses, whatever the size. When I started with SME banking at ANZ it was small and it is now big, the same with eCommerce. I played a role in that and I loved it.
All my roles have been about growing businesses. I just like rolling my sleeves up and getting involved.
I think that attitude is getting more prevalent in other industries, but I can only do what is natural to me.
A major gripe among some entrepreneurs is the big banks’ reluctance to lend to them. What’s your response to this?
Around 25% of our lending is to start-ups. We approve seven out of 10 start-up loans and we’ll look to grow that by 10% this year, so I get a bit frustrated when I keep hearing this.
I’ve been to two Senate inquiries on the topic of banks not lending to start-ups and we’ve been able to demonstrate that we are.
Start-ups are critical to the economy and they are critical to the bank. Ultimately, as a bank, you only have two ways to grow – people switching to you or new start-ups deciding to go with you.
There’s obviously inertia in people switching, so we are lending a lot and have a policy of being receptive to start-ups.
Obviously, if you have a brain explosion one morning for a business and walk in and ask for a loan unprepared, you’ll probably get a “no”.
We have responsible lending guidelines and can’t put ourselves out there for every idea. But if you have a business plan, have researched your idea and have knowledge and experience in the right areas, we’ll have a good look at it.
A lot of people come out of 9 to 5 jobs and want a change by starting a business. We want to encourage that and we feel we are by supporting things such as Innovyz.
How many of your loans for start-ups are unsecured by property or other assets though?
Around 25 to 30%. We realised that home ownership is becoming more expensive and the total unsecured number in our portfolio is quite large. Obviously, the lending rates tend to be higher, but I think customers appreciate that we are looking to support them where we can.
What top tips would you give to a budding business owner on how to secure finance from their bank?
Preparation is critical. There’s nothing wrong with going into your bank for an introductory talk but you need to come back with a business plan, industry research and cashflow forecast.
If you bring the information in with you, we’ll run the numbers. You need to demonstrate that you have a track record in the industry or another industry that’s relevant.
Having the support of friends and family helps, but it’s not critical to you getting a loan. We frequently arrange for smaller amounts of lending too – a $10,000 overdraft may be all you need.
The SME deposits market is three times larger than the loans market. Many small businesses fund their growth from their cashflow, so we’ll look at your forecasts for that lending.
But I’d say the biggest, and most common, mistake we see start-ups make is to come in with no preparation, other than their idea.