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Funding Societies, a peer-to-peer lending platform in Southeast Asia, said today that it has raised a $25 million Series B led by Softbank Ventures Korea, the Japanese tech conglomerate’s early-stage venture capital unit. The round included returning investors Sequoia India, which led the Singapore-based startup’s Series A two years ago, Golden Gate Ventures and Alpha JWC Ventures, as well as new backers Qualgro and LINE Ventures.
Funding Societies also said it has raised credit lines from banks and financial institutions to lend to small- to medium-sized businesses. Founded in 2015 by Kelvin Teo and Reynold Wijaya, the startup’s name represents its “vision of financial inclusion in Southeast Asia.”
Its Series B was oversubscribed, says Funding Societies, which operates in Singapore, Indonesia, where it is called Modalku, and Malaysia.
When it announced its $7.5 million Series A in August 2016, Funding Societies had disbursed $8.7 million Singaporean dollars, a number that has since grown to $145 million SGD, chief executive officer Teo tells TechCrunch. Since its launch, the startup has increased its lender base to more than 60,000 and now claims a default rate of less than 1.5%, down from about 2% to 3% two years ago, thanks to improvements in its underwriting model.
In a press statement, Softbank Ventures Korea partner and managing director Sean Lee said the firm “has been actively investing across Southeast Asia. SME digital lending across Southeast Asia is where we saw huge growth potential. Among many players, we were most impressed with Funding Societies for what it has achieved in a short period of time and its potential to continue to become the number one player.”
Though Teo says Funding Societies is “always exploring other markets, there is still tons of work we need to do in our current three markets.” Despite its considerable growth over the past three years, the startup’s mantra is “slow and steady,” a phrase Teo repeated often during our interview.
“One of the key things we highlight is that it’s more important for us to grow slowly and steadily instead of fast and recklessly, because it’s a trust-based industry,” says Teo.
“We need to give out loans and be able to collect them back, so we focus on learning the market, understanding the market and solving key pain points instead of giving out a bunch of loans to chalk up high numbers and attract VCs.”
For example, though the platform may offer personal loans in the future, Teo said it currently only lends to SMEs because “we believe that we are strategically better suited to serving small businesses and, in terms of our company’s values, we think that serving SMEs is an expansionary effort. Consumer financing, in our personal view, is more consumptive finance. It doesn’t help grow economies.”
Many of the SMEs the company serves are very small. Some of its Indonesian borrowers, for example, make annual revenue of about $5,000 USD per year.
“Many of these borrowers are seeking their first business loan and do not have other sources of financing. A lot of financial institutions take a collateral underwriting approach and a lot of budding businesses would not be able to secure financing that way,” says Teo.
“But we also see some of them come to us as a form of top-up. They already have a bank loan, but it is insufficient for them, so they come to us because they are limited by the size of their collateral. Also, we are able to process financing faster than traditional institutions.”
Funding Societies was created to give SMEs, many of which had previously relied mostly on friends and family loans, access to more means of financing. The company points to a recent study by Ernst & Young, UOB and Dun & Bradstreet that says 65.2% of SMEs in Southeast Asia do not have easy access to traditional business financing, even though most are open to other options, including peer-to-peer lending platforms.
The company says it was the first online peer-to-peer lending platform in Malaysia and that based on third-party data, it is now the leading SME lending platform there, as well as one of Singapore’s three largest peer-to-peer lending platforms. It also holds sizable market share in Indonesia.
Though its platform uses algorithms for initial application screening, a significant portion of work, depending on loan size, is still done by Funding Societies’ employees, who have grown in number from 70 in 2016 to 165 now (Teo says the company is currently hiring in earnest and willing to pay relocation costs for promising talent). Almost all applicants talk directly to someone from the company. Micro-loans, which range in size from $500 USD to $40,000 USD, usually take about two business hours to approve and disburse, while applicants for larger loans may have to wait a few days to about a week.
“We’ve debated and discussed internally a lot if we leave too much money on the table, because our default rate is lower than certain banks in the markets we are serving, but given that we are still at a relatively nascent stage in the lending market and have no control over financial crises, it is more important to stay prudent than to grow recklessly,” says Teo.
This methodical approach is also important when entering new markets. Though many outside observers take the umbrella term “Southeast Asia” a little too literally, ignoring cultural differences between each country, Teo says it is still a fragmented market, so financial service companies need to localize carefully. When Funding Societies enters a new market, it can probably port about 50% of its tech and business model from its previous market, but the other half has to be built from ground up to account for economic and cultural differences, he adds.
“SME financing is a very localized business. With sufficient capital you can win the market and it’s really driven by subsidies and strong marketing,” Teo says. “But for SMEs, you really, really need to understand the local market.”
As cryptocurrencies continued shaking off their April hangover, the state of New York is trying to figure out what to do with this whole coin thing.
On Tuesday, New York Attorney General Eric Schneiderman announced something called the Virtual Markets Integrity Initiative, a state-level effort to examine the policies and practices of the major cryptocurrency exchanges. Schneiderman’s office emphasized to TechCrunch that the endeavor is a “a fact-finding inquiry” and not an “investigation” as it’s not apparent there is any wrongdoing.
“With cryptocurrency on the rise, consumers in New York and across the country have a right to transparency and accountability when they invest their money. Yet too often, consumers don’t have the basic facts they need to assess the fairness, integrity, and security of these trading platforms,” Schneiderman said.
“Our Virtual Markets Integrity Initiative sets out to change that, promoting the accountability and transparency in the virtual currency marketplace that investors and consumers deserve.”
Schneiderman’s office is often early to defend consumer rights in the state of New York, so the cryptocurrency inquiry is very in line with the kind of work his office already does on behalf of New York state residents.
The attorney general’s office addressed a standard questionnaire to 13 cryptocurrency platforms, from the biggest names in the business to more obscure exchanges.
- Coinbase, Inc. (GDAX)
- Gemini Trust Company
- bitFlyer USA, Inc.
- iFinex Inc. (Bitfinex)
- Bitstamp USA Inc.
- Payward, Inc. (Kraken)
- Bittrex, Inc.
- Circle Internet Financial Limited (Poloniex LLC)
- Binance Limited
- Elite Way Developments LLP (Tidex.com)
- Gate Technology Incorporated (Gate.io)
- itBit Trust Company
- Huobi Global Limited (Huobi.Pro)
The letter seeks basic information about the company’s operations, broken down across eight major categories. Those questions span from basic inquiries about ownership to anti-money laundering precautions to a request for a detailed breakdown of the fees that consumers might incur. You can read the full text of the “Virtual Markets Integrity Initiative Questionnaire” here.
Again, the letter is a broad, standardized fact-finding mission, not an investigation based on specific knowledge. Schneiderman’s office clarified that the initiative seeks to illuminate any potential for market manipulation, abrupt trade outages that go unexplained, and problems customers have withdrawing funds, among other cryptocurrency trader headaches. Still, it’ll tap into some thorny issues (money laundering, anyone?) that some exchanges might not yet have a proper way of handling. Ultimately they hope to use that information to make these platforms more fair and transparent for consumers, regulators and investors alike.
While anxious bullish investors might see the New York inquiry as a threat, many of the relevant exchanges are taking it in stride so far (at least so they say) even applauding the inquiry’s effort to create more transparency that could pave the wave for thoughtful rather than heavy-handed regulation.
In this report, we look at venture and seed investment trends in female-founded startups over the last five quarters. For this time period, we look at more than 9,119 venture deals and 6,802 seed deals for companies with founders associated.
To begin, $3.6 billion was invested in companies with at least one female founder in Q1 2018. That result was up 60 percent from Q1 2017’s $2.2 billion tally but down from Q4 2017 by 30 percent. We fully expect this amount to go up as more fundings are added for the quarter retroactively.
Overall, the money invested into companies with at least one female founder represents just nine percent of venture dollars invested in Q1 2018. That is one percentage point below Q1 2017’s 10 percent result. The second, third and fourth quarters of 2017 all presented higher percentages, as well: 14, 15 and 15 percent of venture dollars invested in those quarters, respectively.
When we narrow the criteria, however, the figures fall. In the Q1 2018, three percent of venture dollars were invested in solo female founders.
From a deal volume perspective, Q1 2018 saw 14 percent of venture deals include at least one female founder. That result mirrored the year-ago, Q1 2017 figure. However, in line with what we saw when looking at 2017’s dollar volume breakdown between teams with and without women, the interim quarters showed a higher deal count at 15 and 16 percent of all venture deals.
Deals of note
While the deal and dollar volume progress will disappoint many, inside the data are a host of interesting deals that we’d like to highlight. However, in the interest of space, we’ve selected three to share.
Here are the notable venture deals made in Q1 2018 with female founders that caught our eye:
- Glossier: A New York-based direct to consumer beauty company founded by Emily Weiss. Glossier raised a $52 million Series C round. Index Venture and Institutional Venture Partners led the Series C round.
- DataVisor: A Silicon Valley-based fraud prevention company led by two female founders, Yinglian Xie and Fang Yu. DataVisor raised a Series C round of $40 million. Sequoia Capital China led the round with previous investors NEA and GSR Ventures participating.
- Zum: A provider of scheduled on-demand rides for parents of children for highly vetted drivers, founded by Ritu Narayan. Zum raised a $19 million Series B round from Spark Capital with previous investors Sequoia Capital and AngelPad participating.
Next, we’ll turn to who is cutting the checks. Or, more precisely, which firms are investing in companies with female founders.
Leading venture investors in female founders
Investors that represented the highest deal count in startups with at least one female founder include Sequoia Capital with seven investments and Omidyar Network with New Enterprise Associates at five each for Q1 2018.
But, of course, investors have different focuses, especially when it comes to startup maturity. So, to that end, we’ll break down investment into companies with female founders of one particular stage.
Seed investments in female founders
Seed-funded companies with at least one female founder raised $218 million in Q1 2018. This represented 18 percent of all seed dollar volume for the quarter, up from 15 percent in Q4 2017 and 17 percent in Q1 2017.
Overall, seed is a leading indicator for venture, and it has been growing year over year in absolute dollar terms and by percent since 2009 when we first started measuring these trends. That means that if the percentage of deals and dollars at the seed level that women are raising is going up, we may be able to expect more women-founded early, middle and late-stage companies to raise venture capital in time.
Here’s a look at the dollar volume of seed capital invested into companies with and without female founders:
Next here’s the same data in relative percentage terms.
Returning to the big picture, seed deal counts are down slightly quarter over quarter. As more than 59 percent of seed deal volume is reported after the end of a specific quarter, the count of seed deals will increase from what is listed below:
Again, we now want to know who was closing these deals with female founders.
Leading seed investors
Investing in diverse founders
Kapor Capital, Backstage Capital, BBG Ventures, Broadway Angels, Pipeline Angels and more have been leading the charge to invest in diverse founders. With the increase in the number of female founders in the last five years, pressure has been growing on the broader venture capital community. With 74 percent of the top 100 firms with no female investing partners, bringing women and minorities both into their ranks and into their investment portfolios is a goal.
All Raise sets new goals for investing in diverse founders
AllRaise.org, which launched this past week, led by prominent female venture investors, seeks to impact these numbers. The organization has set the goal within the U.S. for the percent of female investing partners to double from 9 percent to 18 percent within 10 years or by 2028.
Why 10 years? For the venture industry that’s the typical life term of a single fund. Venture is a cottage industry with partners typically committing to stay for the lifetime of one or more funds. Therefore, turnover at the partner level tends to be much slower than other industries. With funds raising ever-larger amounts, and more often, expanding teams provides an opportunity to bring on diverse candidates. According to All Raise, the fastest growth for female partners is not with existing firms, but with new funds.
In the next five years, All Raise would like to see venture investments in female-founded companies move up from 15 percent to 25 percent. The organization is leading efforts to impact these numbers directly with Female Founder Office Hours supporting women who are seeking funding, to having tech founders and CEOs commit to increasing diversity in their team, board and investors.
Crunchbase is partnering with All Raise to keep abreast of these numbers within the U.S. market. For venture investments in female founders, we have a ways to go to get to 25 percent within the next five years. Reviewing the data over the last 10 years, 2015 is the first year that companies with at least one female founder have broken through the threshold of 10 percent of venture dollars. 2017 represents the best full year to date, at 14 percent of venture dollars.
The U.S. market mirrors this percent. We would need to see an average of two percentage growth points each year to reach this goal. With the number of female-founded companies growing slowly each year, these numbers are a stretch; however, it may still be attainable.
Garlinghouse has had a long and storied career in the tech industry, serving as a Senior Vice President at Yahoo!, President of Consumer Applications at AOL, and CEO of the file collaboration service Hightail. But in 2016, Garlinghouse was promoted from COO to CEO at payment services company Ripple.
Ripple’s goal is to try to make it as easy as possible to transfer money between two stores of value. Right now, that process is incredibly tedious, with no unifying structure to send money overseas or to underbanked communities. The notion of a unifying ledger is not a new one, but it’s one that’s transformed Ripple into a full-fledged company.
But Ripple also created the world’s third-largest digital token, XRP. The token has a current total market cap around $30 billion, and the company is working to expand the use cases for XRP, which has primarily been marketed as a tool for banks but has only attracted cross-border payment services.
As cryptocurrencies continue to evolve and gain mainstream attention, questions continue to mount around how these tokens will revolutionize the economy and gain utility.
TechCrunch founder and former Editor-In-Chief Michael Arrington will join Garlinghouse on stage to discuss the evolution of cryptocurrencies. Arrington left TechCrunch in 2011 and went on to start CrunchFund, which has invested in big name startups such as Uber, Airbnb, and Yammer.
In 2016, Arrington reduced his role at CrunchFund and has since started Arrington XRP Capital, a $100 million digital asset management firm in blockchain-based capital markets. Ripple is one of the first portfolio companies for Arrington XRP Capital.
This comes at a time when the SEC is doing everything it can to learn more about cryptocurrencies, sending out subpoenas to crypto funds far and wide, including Arrington XRP Capital.
This conversation is sure to be an interesting one, and one you won’t want to miss. Tickets to Disrupt SF (September 5 to September 7) are available now.
Just last quarter Netflix passed a $100 billion market cap — and we might already be talking about it as a $150 billion company before too long with yet another big financial quarter that sent its stock soaring.
Netflix, again, beat out some expectations Wall Street held for the first quarter and provided a pretty good outlook for the next quarter as well, where it said it expected to add around 6.2 million new subscribers. In the first quarter, Netflix added 7.41 million new subscribers — around 2 million of them domestic and the rest internationally. The company continued to see some pretty strong streaming revenue growth, which was up around 43% year-over-year in the first quarter this year, to around $3.6 billion.
With all this, Netflix now has nearly 119 million paid streaming memberships — and it wasn’t all that long when Netflix finally said just over two years ago that it would begin opening up in hundreds of new countries internationally. The company’s shares are up around 6% in extended trading, sending its market cap up north of $140 billion. And all this subscriber growth, too, comes before we’re seeing a new tie-up with Comcast’s cable subscriptions that may end up driving that even more. As usual, Netflix expects to lose a ton of money and says it expects between -$3 billion to -$4 billion in free cash flow, but that’s usually not what investors are looking for.
One of the big questions Netflix still has right now is what kind of price tag it will carry as a tack-on to a Comcast subscription. Earlier this week, the companies announced that Comcast would bundle Netflix in to its cable subscriptions, offering yet another entry point for Netflix to ferret up potential consumers that haven’t quite cut the cord yet but still might be interested in Netflix’s content. Netflix normally carries a price tag of around $13.99, but the companies have not said what its price will be as part of a cable bundle yet.
Following Netflix’s last earnings report — which it, as you might expect, included some blowout subscriber numbers — the company rocketed past a market cap of $100 billion. Since then it’s only been an upward trend for Netflix, which prior to its first-quarter report was worth more than $130 billion. Despite increasing spend on original content, that subscriber number is still mostly where it gets its market value because it’s a forward predictor of its revenue.
Netflix late last year said it expected to spend between $7 billion and $8 billion on original content this year, a number that seems to periodically get an upward revision and is still a dramatic step up from 2017. The company in its report today said it expected to spend between $7.5 billion and $8 billion on original content, and expects that marketing and content spend to weight toward the second half of 2018.
But it has to continue to invest in original content because it is a way to attract new subscribers, and also because it’s content that it can more easily distribute across different geographies and itself has control of the rights and what happens to it. It relies on shows like Stranger Things or Altered Carbon to bring in new users, which then hopefully stick around and eventually help recoup the cost of those shows — and then the cycle starts anew.
The European human resources services company Adecco Group said that is acquiring the New York-based, programming, design, and management training startup General Assembly for $413 million.
With the acquisition, Adecco adds to its ability to provide job training and re-skilling services for businesses. It’s proof that General Assembly’s own business has come a long way since its early days as a startup offering continuing education or training programs for new entrants into the tech-enabled white collar workforce.
General Assembly was worth $440 million after its last, $70 million investment round, according to a report in Axios, which means that early stage investors will see a nice return on their investment while many later stage backers — including Wellington Management and Fresco Capital are looking at some pretty flat returns.
Investors likely popping some corks right now include Alex Ohanian’s Initialized Capital, Maveron, and Bezos Expeditions, the venture capital fund of Amazon founder Jeff Bezos (who clearly needs the money).
It’s not an ignominious outcome for General Assembly, which brought in $100 million in 2017, but not the exit that many in the New York tech ecosystem had hoped for.
Over time, General Assembly became less of a consumer facing business and transitioned into one that was serving primarily business clients — which means access to Adecco Group’s over 100,000 businesses is a big boon to the company’s continued expansion plans.
“By offering General Assembly’s services alongside the Group’s existing talent development, career transition and professional staffing solutions we will be able to better respond to… client needs, enhancing both access to and the supply of the most in-demand skills,” said Alain Dehaze, chief executive of the Adecco Group, in a statement.
The company will continue to operate as a separate division and will continue to be led by Jake Schwartz, General Assembly’s founder and chief executive. Schwartz will report to Sergio Picarelli on Adecco’s executive committee.
“General Assembly has always been about creating bridges between education and employment — that’s what has allowed us to scale to 20 campuses, 50,000 alumni, and over 300 Fortune 500 clients,” says Schwartz, in a statement. “As our work with employers has grown, so has our need to connect in a deeper way with the world of human capital, and that is why we are so excited about the transformational opportunities that come with this partnership.”
Adecco has been on a mini-shopping spree lately for venture-backed human resources startups. Earlier this year, the company acquired Vettery in a $100 million deal. That company had developed a marketplace where job candidates could look at offers and schedule interviews with potential employers that interested them — with the potential to receive a signing bonus from Vettery when they took a position.
It’s clear that technology is radically transforming the human resources industry — with new startup companies offering matching, vetting, training, and retraining technologies for employers and job seekers alike.
With these two acquisitions Adecco seems to be pulling the trigger on the starting gun for consolidation in the space. It’s another example of large corporations looking to buy their way into innovation — before they’re overwhelmed by a potential new generation of competitors.