Funding Societies has raised more than S$240 million in loans for small businesses in Singapore using its crowdfunding platform, which matches individual investors with SMEs that seek funding. We interviewed the company to learn more about its success and journey.
Funding Societies is a remarkable, Singapore-based startup that uses its crowdfunding platform to raise loans for small businesses. So far, the company has generated over 12,000 loans amounting to more than S$243 million for SMEs in Singapore. This platform has been very successful in generating contributions from individual investors, which is due in part to its extremely low default rate of about 1%.
We reached out to Funding Societies to learn more about their journey from the inception of their idea at Harvard Business School to becoming one of the largest crowdfunding platforms in Singapore. Additionally, we think that their experiences would be useful to any of our readers from casual tech enthusiasts to aspiring entrepreneurs.
When did Funding Societies begin its operations?
The platform was launched in June 2015 and the first deal that month was S$100K to an engineering company. This was one of the fastest having launched within 100 days after incorporating the company. The founders Kelvin Teo and Reynold Wijaya were still pursuing their master's degrees at Harvard Business School when the platform was launched.
When and how did Funding Societies first obtain funding? How long did it take to raise funding?
Our seed funding came from the co-founders, Alpha JWC (VC based in Indonesia) and a few angel investors in 2015. We did our Series A in 2016 with Sequoia India as the lead investor and raised S$10 million, which was the largest Series A by a Debt Crowdfunding platform in Southeast Asia.
What was the biggest challenge that Funding Societies had to overcome to raise capital? What strategy, tactic or know-how was the most helpful in convincing investors to invest in the company?
Not known to many, but we had to creatively pivot our business a short while before our Series A round was finalized, due to regulatory obligations. It was at a time when we had 1-2 months before we ran out of operating funds, but thankfully our investors believed in us as much as we believed in our impact to SMEs, and we rode through this wave.
After its initial funding, did Funding Societies ever require additional financing? Why?
For any company to scale up, finances play a big role and the same applies to Funding Societies too. Shortly after our seed round, we secured our Series A funding to manage the expansion in Indonesia and Malaysia. In our latest Series B funding announced just in April 2018, we have secured US$25 million in the round led by SoftBank Ventures Korea. This also happens to be the largest funding round raised by any comparable platform in Southeast Asia.
How was this helpful for your business?
With the VC funds, we were able to sustain our operations and scale up quickly, hiring the talent we needed to accelerate our growth and impact. The additional has credit line helped in other projects.
How does Funding Societies help businesses better manage their finances?
We understand that business may have varied financing needs and hence have a differentiated suite of products that cater to different industries, different business types (B2B/B2C/B2B2C etc) and also businesses at various stages (early stage/young businesses to growth stage to stable large SMEs).
Because of our ability to structure flexible products and data backed credit scoring algorithm, businesses that are unable to secure any financing (or adequate financing) from banks get help from us.
A business should never borrow more than they need, yet most of the time they lack this understanding when they get offered a loan bigger than what they need. Our relationship managers spend time understanding our clients’ businesses before recommending financing options for them.
How does Funding Societies distinguish itself from Singapore's other crowdfunding platforms?
Funding Societies focuses on doing things right — although sometimes at the expense of revenue. As a platform, we have achieved many firsts in good practices and chartered the way for other platforms to follow. For example, before MAS mandated the usage of escrow account, we decided to engage an escrow agent to manage the investor funds to give accountability and transparency in fund usage.
Funding Societies is also the first to use e-Signature for contracts (both borrowers and investors), making it completely digital and convenient for our users.
Understanding that Singapore has a mobile penetration of 154%, the team also created mobile app for borrowers to apply for loans (FS Bolt) as well as a mobile app for investors to invest and view their portfolio on the go. Both apps are the first in Singapore created by a P2P lending platform.
Additionally, Miyu, our very own chatbot, and the first created by a P2P lending platform, has been a great teammate to the Customer Experience (CX) team. She is constantly learning to help our users round the clock and sends only the tough questions to our CX team.
What advice would you offer to other startups in Singapore who are looking for ways to finance their businesses and operations?
Understand your finances and what you need. Also be sure what type of financing you require and what you’re willing to give up — equity, cost of interests? Work with trusted financing partners to help you grow and become more creditworthy.
Did Funding Societies consider any other locations besides Singapore as its headquarters? Why/why not?
Firstly, we wanted to make an impact in Southeast Asia which is our home. Secondly, a stable regulatory climate and environment for fintech to strive play an important role in our selection. Singapore has been a finance hub and has had a very mature financial market back since many years with increasing support for Fintech companies, so it was an obvious decision for us to begin our Southeast Asian journey here.
What makes Funding Societies' work most challenging? Rewarding?
We are a 2 way platform offering funding to businesses and investment options to individuals as well as institutions. It’s a tough balancing act to ensure the needs and interests of both sets of clients are met. We have to ensure we put up quality deals for investors while ensuring that we are meeting the needs of the deserving SMEs. Add to the fact, the complexity of the 3 markets that we operate in.
Each market is different in terms of business practices, regulations, language and risks and that makes it very challenging. The most rewarding aspect is the satisfaction that we find in serving the deserving but underserved SMEs and see them grow their businesses. We believe in empowering the SMEs and hence our motto 'Stronger SMEs Stronger Societies'.
To learn more about other crowdfunding companies or how your business can obtain a crowdfunded business loan, refer to our website or follow ValueChampion on Facebook. If you are interested in sharing your small business success story, please reach out to us at [email protected], we'd love to hear from you!
This was first published at Value Champion's website, "Strengthening SMEs & Singapore: SME Interview Series with Funding Societies".