Westpac's Reinventure fund is rumoured to be imminently yielding significant dividends for the bank, from an early investment the venture capital fund made into Coinbase.
Reinventure invested in Coinbase, which is courting a direct listing (i.e. no initial public offering) on the NASDAQ exchange. Coinbase has a rumoured valuation of USD$65 billion which would deliver a paper profit of around USD$300 million to Reinventure.
Coinbase is a hugely successful bitcoin wallet and exchange platform that allows merchants and consumers to buy and sell with digital currencies. The investment was predicated on, as reported by the Financial Review (paywall), Reinventure's backing of the power of decentralised networks.
The Funds
Westpac's commitments of AUD$150 million to Reinventure is split across three funds, the first being seeded by Westpac with AUD$50 million in 2014. The Coinbase investment was part of this first fund. The return from the Coinbase investment alone will make Reinventure:
one of the best performing funds in the history of Australian venture capital.
Reinventure and Wesptac have now decoupled and Reinventure is looking more broadly for funding for it's fourth fund. This decoupling should allow Reinventure to invest more flexibly and potentially enter the decentralised finance space more heavily given the known reluctance of Westpac to pursue investments in technology which could challenge the existing monetary system.
Round 4
Reinventure aims for the fourth fund to focus on decentralised finance, with Reinventure Co-founder Simon Cant saying:
DeFi is re-engineering the fundamentals of finance from the ground up
and that
It still has a way to go before it starts to be used in a scaled way for real financial applications, but in the meantime, problems around scaling are being worked through and we are particularly bullish on the potential for decentralised finance infrastructure, data and the continued thematic of finance at the edge.
Several banks have followed in Westpac's footsteps including Nab Ventures, ANZi and X15 Ventures (Commonwealth Bank). It will be interesting to see whether these venture arms are also restricted by their owners hesitation to get involved in decentralised finance.
What is clear is that the Coinbase investment alone shows the significant returns that surround even the "picks and shovels" needed for the digital currency boom, and that the rewards go to those who dare back the future.