Following a successful strategy of acquiring wind-up businesses, tech company Rewardle (ASX: RXH) is set to offer micro investment services having acquired fintech Upstreet for pennies-on-the-dollar, just as the start-up was shutting down.
Founded in 2019 within the Antler venture capital accelerator program, Upstreet originally set out to reward shoppers with fractional shares in Australian and US stocks when making everyday purchases, akin to popular cashback apps. The business raised approximately $5 million, with some elite investors backing the venture. But unable to scale the business and reach a critical mass, Upstreet recently declared its intention to wind down its operations.
Throwing backers a lifeline, Rewardle has come to an agreement with Cache Investments Ltd, the manager and administrator of the Fund, to acquire the exclusive rights to appoint a new distributor/promoter for the Fund.
The transaction involves Rewardle paying Cache an initial $30,000 for the distribution rights and committing to pay Cache $15,000 per month to support the Fund’s interim operating costs. Due diligence is currently underway, and the agreement is subject to Rewardle passing reasonable due diligence required by Cache or the Fund’s Responsible Entity.
Ruwan Weerasooriya, Founder and Executive Chairman of Rewardle, said, “While Upstreet ultimately failed to gain traction, the $5 million invested in its development has provided us with valuable insights and learnings. We are confident that, with our operational capabilities, expertise, and extensive member base, we can turn these lessons into a successful venture.”
Rewardle will rebrand the Fund, potentially offering a similar or modified service compared to Upstreet. The company will also take steps to reseed the Fund, allowing unitholders to redeem their investments where possible. Importantly, this agreement only encompasses the distribution rights for the Fund, excluding any of Upstreet’s technology or services.
An example of how Upstreet offered micro investment services was through a partnership with meal kit retailer Marley Spoon (ASX:MMM). Upstreet users were offered $45 worth of fractional equities as a sign-up bonus to Marley Spoon meal kit subscriptions, as well as 2% of the meal kit value purchased being rebated back to the customer in Marley Spoon shares.
Essentially, the more products they purchased, the more shares they were rewarded with.
Rewardle sees this as an opportunity to explore exciting concepts and opportunities in the financial technology sector.
Rewardle has a track record of acquiring struggling businesses on the brink of closure and revitalising them. Notable success stories include the acquisition and relaunch of Your Grocer, an online grocery marketplace and delivery service. This new venture into microinvesting aligns with Rewardle’s strategy of expanding its membership features to generate high-margin digital revenue streams from its existing app user base.
The microinvestment space in Australia is currently dominated by Raiz Invest (ASX: RZI) which automatically invests a user’s ‘spare change’ from their daily purchases in diversified portfolios constructed of low‐cost ETFs, Bitcoin, Australian residential property and ASX listed equities. As of 31 August 2023, Raiz had almost $1.2 billion in Funds under Management, highlighting the opportunity for Rewardle.
For the Full Year ended 30 June 2023 (FY23), Rewardle reported $10.1 million revenue which was a 476% increase on the previous year. The Company also generated $6.2 million in net profit after tax, emphasising their business model of acquiring complementary businesses that can be revitalised with minimal expenditure through leveraging Rewardle’s existing technology.
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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