PEER-TO-PEER lending platform Validus Capital has secured S$20.5 million in an oversubscribed Series B funding round led by Dutch development bank FMO.
The round also attracted a slate of regional investors: Taiwanese financial services company Cathay Financial Holdings; VinaCapital Ventures, a venture platform seeded by Vietnamese investment manager VinaCapital and AddVentures by SCG, an investment unit of Thailand's Siam Cement Group.
Local investors include venture firms Openspace Ventures and Vertex Ventures, the investment arm of Temasek Holdings. Back in 2017, Vertex had invested in US$3 million in Series A funds.
Founded in 2015, Validus connects accredited and institutional investors with small and medium enterprises (SME) in need of credit, a segment traditionally underserved by banks. It has since facilitated over S$180 million in business funding, with an average facility value of S$70,000.
Validus will use the fresh funding for regional expansion, starting with Indonesia in the second quarter of 2019 and Vietnam later this year, said its CEO and co-founder Ajit Raikar at a media briefing.
To operate in Indonesia, Validus has "finalised as a local partner" the Rachmat family, which owns the Triputra Group, an agribusiness conglomerate. The partnership will take the form of a joint venture.
Under Indonesian registration guidelines, a foreign entity has to be at least 15 per cent owned by a local partner, noted Validus co-founder and executive chairman Vikas Nahata. He declined to reveal the Rachmat family's stake in the JV.
The startup has already applied to register its business in Indonesia. It can only apply for a licence with Indonesia's Financial Services Authority, or OJK, one year after obtaining the registration, said Mr Raikar. But Validus can start operations without any interim restrictions, he added.
FMO, which is 51 per cent owned by the Dutch government, invests in private sector growth in emerging markets. This creates a clear alignment with Validus' business, said Mr Arno de Vette, senior investment officer at FMO. "We love that; it's our mandate to support SMEs in the private sector to have access to banks," he said.
Validus' ability to secure strong local partnerships is another key factor, he said, especially in Indonesia. "It also has very good potential local shareholders to start its business in Vietnam later on," he said.
Validus has taken a "harder but more sustainable" approach with its business model, said Vertex partner Liu Genping. "They go to the key corporates in Singapore trying to set up a long-term relationship, fostering a community around their SME (vendors)... If you settle one corporate you get thousands of SMEs on board," he said.
The maturity of Validus' founders should also not be overlooked, he added. Mr Raikar, for instance, has over 30 years of experience in SME banking, having worked at DBS, Bank Danamon and Citibank.
"As startup investors, we see many founders who are young and driven, which is positive. But in terms of fintech, finance comes before tech. The combined 100-over years of financial experience of the team is really strong and stands out among all its peers in the region," Mr Liu said.