Afterpay (ASX:APT) venture fund eyes next investment

Afterpay (ASX: APT) venture fund AP Ventures is rumoured to be readying for an investment in a SME service provider. We take a look.

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The Afterpay Ltd (ASX: APT) share price has waned recently from being one of the best ASX performers.

A dampening of optimism for growth shares caused by inflation worries has contributed to a 46% fall in the Afterpay share price since the company's 52-week high of $160.05 on 10 February.

While analysts have been contending over price targets for the buy now, pay later (BNPL) provider, Afterpay's venture capital arm, AP Ventures, has been searching for its next investment.

man sitting in field of grain with binoculars as if watching asx share price

Image source: Getty Images

What is AP Ventures?

Like other companies, Afterpay has a segment of its business that is solely focused on deploying capital in growth opportunities. The investment vehicle came to life from CEO Anthony Eisen reaching out to former Investec Australia senior banker Hein Vogel.

Afterpay holds a 44% interest in AP Ventures and is often its biggest contributor to its investments. The venture fund's website specifies that it "provides high growth, scalable companies that have proven revenue models with access to capital and, where appropriate, Afterpay's experience, merchants and customers".

For context, prior AP Ventures' investments include LayAway. This offering allows customers to pay for holidays, flights, cruises etc, using a payment plan. LayAway was snapped up for $15 million, of which $6.5 million was from Afterpay.

Afterpay investment rumours outside the ASX

As reported by The Australian, AP Ventures is believed to be readying to purchase a services provider for small to medium-sized business merchants. The suspected figure is floating in the region of $45 million.

Currently, there isn't much more light being shed on exactly which company it is in question. It wouldn't be surprising to see a consolidation within the industry, given how popular the space has become in recent years.

There have been dozens of companies on the ASX alone aspiring to the likes of Afterpay and Zip Co Ltd (ASX: Z1P). However, if the environment was to become more challenging, the smaller fish may not survive the rougher waters.

At the time of writing, the Afterpay share price is trading at $86.19, representing a fall today of 0.3%.

Mitchell Lawler owns shares of AFTERPAY T FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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