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Cannon-Brookes leads $10m raising for Spaceship amid super crunch

Michael Bailey
Michael BaileyRich List co-editor

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Atlassian co-founder Mike Cannon-Brookes has led a $10 million capital raise for online investment platform Spaceship, as it reveals 5 per cent of its super fund was withdrawn under COVID-19 hardship measures.

Spaceship's raise, via a convertible note rights issue, takes to $50 million the total attracted by the app-based platform, which launched in 2016 with a superannuation product weighted heavily towards technology shares, and aimed at Millennial or Generation Z Australians born since 1981.

However, those younger Australians, who today make up about three-quarters of Spaceship's 85,000 customers, have been hit disproportionately hard by the COVID-19 pandemic.

Superannuation assets comprise $300 million of the $420 million Spaceship had under management as at July 31. But that number would have been about $15 million higher had its members not been allowed to raid their accounts under the government's superannuation early access scheme.

Andrew Moore says about the early super withdrawals: "Most people are doing it out of serious need, and Australia should count itself lucky we have this savings pool." 

About one-fifth of Spaceship's superannuation customers took up the government on its invitation, with just over 100 draining their accounts entirely.

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However, Spaceship chief executive Andrew Moore said he did not oppose the early access scheme.

"From what I've seen, most people are doing it out of serious need, and Australia should count itself lucky we have this savings pool for a time like this," he said.

"I'm more interested in how we educate and engage people about their super, especially those who maybe didn't make the wisest decision in pulling money out, and in government policies that support them in rebuilding their balances."

The fees foregone by Spaceship on the $15 million withdrawn from it are not a reason behind the $10 million capital raise, according to Mr Moore. He claimed the start-up was attracting 200 to 300 new customers each weekday, and that inflows had exceeded outflows throughout the pandemic.

Extra capital for 'new options'

But Mr Moore said the extra capital would help Spaceship navigate the "interesting economic times" ahead, as it targets profitability in the next three to five years. It would help build new options its customers were asking for, he added – initially a managed fund selected on environmental, social and corporate governance principles, then a capital-protected product aimed at customers saving for a house deposit.

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The money is also expected to eventually fund another attempt by Spaceship to gain the right to be trustee of the super funds it sells.

The prudential regulator, APRA, is not handing out any new super trustee licences for now, citing other priorities during the COVID-19 pandemic.

Mr Moore, a former senior Westpac banker, was Spaceship's chairman when the start-up pulled its initial licence application in April last year, reportedly because APRA had informed it of concerns about Spaceship's own corporate governance.

Mr Moore, who replaced co-founder Paul Bennetts as chief executive in August last year, said reapplying for a licence was an option "down the track".

The start-up is clearly investing in the governance improvements required to get APRA's nod, after a chequered history including a fine for misleading disclosures, criticism for high fees (which it has since reduced to market levels) and the departure of all four of its founders from day-to-day operations.

Spaceship founders Paul Bennetts, Andrew Sellen, Dave Kuhn and Kaushik Sen - none of whom remain at the company. 

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Apart from his own appointment, Mr Moore said new positions of chief operating officer, chief product officer and chief marketing officer had all been created and filled in the past 18 months.

In the meantime, he said Spaceship would work with its existing trustee, Tidswell Financial Services, to deliver and improve on its super product.

Vast differences

However, the limits of its influence in that relationship are borne out by the vast differences in performance between Spaceship's non-super managed funds, and its superannuation offerings.

Spaceship's "Universe" managed fund, where its three-person investment team under Jason Sedawie are free to select and trade stocks from anywhere in the world, returned 36.19 per cent after fees in the year to June 30.

Using a philosophy that Mr Moore summarised as "invest where the world is going", the fund loaded up on some of 2020's standout stocks such as Afterpay, Amazon and Tesla. It returned eight times the standard global shares benchmark, the MSCI World (4.82 per cent) and also bested the Nasdaq's 26.94 per cent return for the year.

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But the active superannuation product has to be implemented through exchange-traded funds, and allow for small allocations to defensive asset classes such as cash and fixed interest, in order to get Tidswell's sign-off.

Despite a 33 per cent underlying allocation to information technology stocks, the watered-down approach produced a return of only 14.06 per cent after fees.

Joining Cannon-Brookes' Grok Ventures in the $10 million raise was another long-term supporter, AirTree Ventures, whose partner Daniel Petre continues to sit on Spaceship's board.

Software entrepreneur Simon Clausen, Ellerston Capital director Paul Dortkamp, and founder of fashion e-tailer Showpo, Jane Lu, are among Spaceship's other backers.

Michael Bailey writes on entrepreneurship and the arts. He is also responsible for the Financial Review's Rich Lists. He is based in Sydney. Connect with Michael on Twitter. Email Michael at m.bailey@afr.com

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