Investment Notes: Primary
Why AfterWork Ventures invested in Primary, the modern operating system for treasury management
Startups and scale-ups have been notoriously overlooked by the banks. Despite making up the bulk of their deposit base, the average business banking customer will earn 70% less interest than an institutional banking client1. This is where Primary comes in. Their vision is to accelerate financial efficiency to power more successful businesses. Ultimately, they aim to be the financial ‘command centre’ for businesses; and they’re starting this journey with a product that gives their customers access to free money. Their simple software solution makes it easy for startups and scaleups to make the most of their idle cash (through savings accounts, term deposits and fixed income funds) while still giving them the option to access their cash whenever they need it. Maximising cash is a no-brainer, as their 35 customers, with a combined $200m of funds, agree.
AfterWork are excited to be two time backers of Primary; participating in their pre-seed round in November 2022 and doubling down as part of their latest Seed round led by Carthona Capital, with participation from Archangel Ventures, Macdoch Ventures, No Brand, and Resolution Ventures. We see the opportunity and believe in the vision to offer treasury services to companies of all shapes and sizes, no matter how early on in their journey.
What we loved about the opportunity
It’s rare to find a solution that unlocks such immense financial value; and creates a wedge to become a financial command centre
By creating high value products that startups and scaleups need, Primary form strong relationships at a critical moment in time. From this, they are well placed to offer a full financial operations ecosystem with a higher frequency of use. This then deeper embeds them within Finance functions across a wider spectrum of customers, and increases the upside for their business. For example, Primary are on track to offer more services like automated cash sweeping, debt management and payment initiation and orchestration.
Since launch, Primary’s treasury management solution is already loved by their 40 customers. And with good reason; their product allows startups and scaleups to develop a cash management strategy from the get go, in a way that suits their individual needs. Primary gives access to high yield products that have previously been out of reach; either from customers thinking they couldn't access them, not being able to access them or from requiring a process that was too complex and time intensive to navigate on their own.
Most startup and scaleup finance teams do not have treasury expertise, or the bandwidth to put together a strategy for their cash. But it matters. A typical Primary customer, who has raised $10m to fund the business for 36 months, loses $750K by holding funds in a transaction account. This equates to about 3 months of runway; a significant amount in a capital constrained climate.
Tactically, clients use Primary in three key ways.
Operating account - where they perform day to day transactions. This can be connected to Primary, but does not require a customer to move away from their main bank.
Reserve cash - a high interest savings account within Primary held with a Tier 1 bank in the customer’s name, used for storing funds required in the next 3-6 months.
Strategic cash - a combination of accounts within Primary held with Tier 1 institutions comprising fixed income funds, cash funds and term deposits for funds that are not required for 6 months+.
A product obsessed team bringing financial services expertise
We had the pleasure of getting to know founder Ben Buckingham as part of the AfterWork community. Ben is an astute thinker, passionate team player and always willing to contribute his perspective. He brings deep expertise in the fintech sector, via his experience at McKinsey and as an early hire and CPO at Identitiii, where he led the product build of their end-to-end automated anti-money laundering and counter-terrorism financing tool. Ben has bonafide expertise building enterprise grade fintech and lived experience from working hand in glove with some of the world’s largest financial services companies.
Ben’s strategic oversight is matched by the engineering precision of CPO Will Freeborn. Will was formerly Head of Payments & Head of Business Performance at Employment Hero, where he joined through acquisition of his expense management startup, Spense.
The early team also includes Chief of Staff Finn Blake, an unstoppable product builder who joined after working as an entrepreneur and investor for global venture firm Rocket Internet.
A torrent of customer love
By virtue of their target customer, we are well acquainted with the pain point they are solving. In fact, we know some of their earliest customers intimately, as they are companies in the AfterWork portfolio. Since inception, rave reviews have been consistent and complimentary; and the reason they have been able to increase their funds under administration from $0 to over $200m in just 1.5 years.
Everlab, an AfterWork company, had tried to access yield products on their own when they raised funds. The big banks treated them as a small fish, not worthy of their time, so the team had given up on the idea of maximising their money by the time Primary came along. Upon learning about the product, the Everlab team were more than happy to pay Primary a fee to take the account set up burden away from them. From their vantage, it was free money. What’s not to like! This is a common scenario playing out in the startup and scaleup space. In addition to Everlab, other companies in AfterWork’s portfolio are embracing Primary to help them manage their treasury, including Lyka and OwnHome.
“We wanted plenty of buffer & safety in our investments with Primary but wanted to make sure our cash was being optimised as much as possible. The high liquidity options like money market funds meant we could have quick access without needing to sacrifice yield. Primary makes this incredibly easy to set up and manage.”
Marqo VP Finance, Ilonna Babakhanova
The Challenges we saw
Expanding from a tight-knit network of customers in Australia
To date, early traction has rightfully been amongst VC backed startups and scaleups in Australia. This was part of the strategy and a logical first cohort of customers given Primary’s origins and the ‘raise and spend’ nature of VC backed businesses. Primary’s launch has also been timely; in a tighter funding market, startups have an increased focus on extending runway. Accordingly, treasury management through Primary has proven the easiest lever to pull.
Primary’s next challenge will be expanding into new territories outside of their native Australia. This is a non-trivial challenge at the best of times, but doubly so given the regulated nature of Primary’s business, as well as the need to build relationships with relevant financial services operators in each geography.
In addition, Primary are looking to expand upstream into new mid-market segments. Whilst treasury management is universal, the product-obsessed team are focused on ensuring Primary can meet the right jobs-to-be-done for these segments.
Capturing more of the pie
Like many enterprise fintech businesses, a natural end point for Primary looks like capturing multiple revenue streams by creating value for customers throughout the value chain. As we’ve touched on, Primary have a robust product roadmap and line of sight to these new features tying directly to revenue for the business.
Additionally, Primary’s role as an intermediary between its customers and financial services providers means there are credible network effects for the taking. As Primary becomes an increasingly large channel for the likes of money market funds, there is an opportunity to monetise both sides of the market. In this scenario, Primary moves beyond treasury services and into adjacencies like cards and expenses, insights and analysis and global bank accounts, via connection to third parties.
“Business banks have become complacent, and take advantage of smaller businesses who have few options. Primary is here to change that, by making it seamless for smaller wholesale companies to access a range of institutional-grade yield products”.
Ben Buckingham, Founder
Questions we had for the team
In an industry that requires trust, how are you going to build trust quickly?
We have been impressed by the team’s ability to take an ajar door and turn it into a meaningful relationship. Ben’s expertise in the space, both as a founder and via McKinsey, has allowed Primary to turn warm leads into early customers by inviting them to work hand-in-glove as first product users.
Primary have also gained traction by adopting marketing techniques imbued with both surprise and generosity. In a now signature move, the team send CEO’s and CFO’s customised bottle of Four Pillars gin once they learn a funding round has been closed. The bottle comes with a scratch card and a QR code to skip their waitlist - and it works. 75% of recipients booked a first meeting; and 50% of sales come from this unique channel. At its core, the gin initiative makes it clear that behind Primary are real people, that really care about what they do. This act of generosity starts the relationship off on a note of trust - a critical ingredient to succeed in the category.
How we built conviction
Ultimately, we believe in the opportunity Primary is seizing. In a capital constrained climate, they are stepping into the market to offer startups and scaleups solutions they want; at a time when they are deemed insignificant by other banks. Primary’s innovative treasury management solution is an easy get for their customers. With a strong base that has rapidly grown to manage over $200 million in funds, Primary has proven their value proposition resonates. After all, who doesn’t want to maximise idle cash through accessible high-yield products and turn otherwise lost revenue into tangible gains?
The expertise of the founding team, combined with their commitment to build meaningful relationships, design a user-friendly platform and experiment with creative marketing techniques gives us confidence they are the right team to achieve their vision; and have the permission to expand their services offered as they grow. At AfterWork, we aim to be the first believers in generational startups; and we are thrilled to support Primary as they set out to play a similar role for startups, as their financial partner.
Aggregate data from 2023 annual reports of CBA, NAB, Westpac and ANZ - where 'net interest margin’ is cited.