SME lender Funding Societies raises $144 million led by SoftBank Vision Fund 2, plus $150 million in debt lines – TechCrunch

Startups

Small businesses are the backbone of Southeast Asia’s economy, but many struggle to get working capital loans because they lack traditional credit records or collateral, Funding Societies founders say. Claiming to be the largest digital finance platform for SMEs in the region, the fintech uses alternative forms of credit scoring and has disbursed more than $2 billion in funding to MSMEs since its launch in 2015. Today Funding Societies announced that it has raised $144 million in an oversubscribed Series C+ equity round led by SoftBank Vision Fund 2, with the participation of new investors such as VNG Corporation, Rapyd Ventures, EDBI, Indies Capital, K3 Ventures and Ascend Vietnam.

It also received $150 million in debt lines from institutional investors, some of which have been withdrawn since last year.

TechCrunch first covered Funding Societies when it increased its Series A in 2016. The company’s previous round was a $45 million Series C that was raised between 2020 and 2021. Some of its latest funding, or $16 million, will be distributed to former and existing employees through its stock option plan in the form of a share buyback.

The company was founded in 2015 by Kelvin Teo and Reynold Wijaya after they met at Harvard Business School. It is now licensed and registered in Singapore, Indonesia (where it is known as Modalku), Malaysia and Thailand. It recently launched in Vietnam and will use part of its Series C+ to enter the Philippines.

The platform provides online loans ranging in size from $500 to $1.5 million. Since its launch, it has disbursed more than $2 billion in corporate financing to SMEs through more than 4.9 million loan transactions. Funding Societies’ customers range in size from convenience stores and e-commerce merchants to medium-sized enterprises, such as high-growth startups and established companies, who want access to faster income-based financing than bank loans, which usually take about two to three months to pay out. , Teo tells TechCrunch.

A recent impact study, calculated using methodology by the Asian Development Bank, showed that finance-backed SMEs contributed $3.6 billion to GDP and 350,000 jobs.

Covering a wide range of businesses, Teo says Funding Societies has better client acquisition costs and loan-to-value ratios. It also collects data faster to train its data scoring models, which draw on traditional and alternative data sources. Traditional sources include bank statements and credit bureau information where available, while alternative sources may include transaction information, online ratings and supply chain data flow.

One of the benefits of Funding Societies is that some of its data sources are proprietary, while they have exclusive rights over others through partnerships. This gives the startup an edge over newer players, Teo says, as does the amount of loan repayment data Funding Societies has collected since launch. He added that Funding Societies’ default rate is between 1% and 2% even during the COVID-19 pandemic, which is why it was able to receive debt lines from so many institutions.

Funding Societies’ interest rates are generally higher than banks, but lower or equal to credit cards – in fact, it offers a credit card with a debit line that serves as a substitute for corporate cards. It also partners with companies including e-commerce platforms such as Shopee and Bukalapak, accounting app BukuWarung, fintech Alterra and agritech platform Tanihub that provide access to working capital loans to their SME clients.

Teo and Wijaya say Funding Societies’ main competitors are not banks. Instead, Teo says many of his clients depended on loans from friends or family, their savings, and personal credit cards to fund their businesses. โ€œThe opportunity is huge because it’s a $300 billion US dollar funding shortfall,โ€ he says.

In a prepared statement, Greg Moon, managing partner of SoftBank Investment Advisers, said: โ€œSMBs in Southeast Asia have traditionally struggled to access institutional funding and have instead been forced to rely primarily on personal funding to support growth. Funding Societies is building a bridge for these companies to access more sustainable and cheaper financing by building unique data sets about their performance and using AI-led technology to assess their creditworthiness more effectively than traditional models.โ€

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