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December 19, 2024

$25 billion valuation Chime takes another step towards an IPO

As predicted, ServiceTitan’s wildly successful IPO is beckoning other fintechs to move forward on their own public debuts. Digital bank Chime has filed its confidential paperwork with the SEC, Bloomberg reports. It’s been prepping for this moment since it hired banker Morgan Stanley in September, with an eye to IPO in 2025. 

The IPO won’t really be headed for reality until that paperwork becomes public and institutional investors agree to buy in at a price that Chime wants. That could be a tall order. Chime was last valued at $25 billion when it raised $1 billion in the height of the valuation frenzy of 2021, and has raised $2.65 billion total, Pitchbook estimates. Its investors include Forerunner Ventures, Menlo Ventures, Crosslink Capital, Sequoia, Softbank, Tiger, many others.

Chime declined to comment.

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‘We want to pay it forward’: Funding Societies raises $25M to boost capital for SMEs in Southeast Asia

Small and medium-sized enterprises (SMEs) account for nearly 50% of Southeast Asia’s GDP, contributing to job creation, innovation, and overall economic expansion. Nevertheless, as in other parts of the world, SMEs in Southeast Asia face challenges when it comes to sufficient working capital. In a nutshell, SMEs are typically deemed too risky for traditional banks to lend to them, so those banks charge high rates, if they approve them at all.

Kelvin Teo and Reynold Wijaya, two entrepreneurs from Southeast Asia who met while both were getting graduate degrees at Harvard Business School (HBS), were acutely aware of that gap back home. Inspired by HBS’ stated mission to “make a difference in the world,” they set out to address it.

“We had grown up as underdogs, felt privileged to be at HBS and wanted to pay it forward to Southeast Asia,” Teo said in an interview with TechCrunch. “SMEs resonate with us and financing is their biggest pain point.”

Their startup, Funding Societies, is a Singapore-based SME lending platform with licensed and registered offices in Indonesia, Malaysia, Thailand, and Vietnam. On the back of strong growth across the region — to date it’s loaned more than $4 billion to over 100,000 businesses — the fintech startup has been on a funding tear, too, most recently raising $25 million in equity.

The investment comes from a single investor: Cool Japan Fund (CJF), Japan’s sovereign wealth fund. Notably, this marks the fund’s first investment in a fintech company in Southeast Asia.

The recent funding brings the total raised by Funding Societies to approximately $250 million in equity. Investors have included strategic backers such as Khazanah Nasional Berhad and Maybank, which put in $40 million less than a year ago, as well as SoftBank Vision Fund 2, CGC Digital, SBVA (previously SoftBank Ventures Asia), Peak XV Partners (formerly known Sequoia Capital India), and Alpha JWC Ventures, among others.

Funding Societies was founded in Singapore in 2015 on the back of the two founders’ collective backgrounds. Teo previously worked at Accenture, McKinsey, and KKR Capstone, while Wijaya had experience in a family business in Indonesia. After deciding to build a business to work with SMEs, the duo spent around three years researching the most groundbreaking companies in the U.S., analyzing their journey to the top.

The company says that it has loaned more than $4 billion in business financing to date to around 100,000 SMEs across its five Southeast Asian countries. This is up from $3 billion in April 2023. Additionally, it has generated an annualized payment gross transaction value (GTV) of more than $1.4 billion since expanding into its payments business in 2022.

The startup plans to use the money to expand its primary focus, providing financing services faster to SMEs in Singapore, Indonesia, Malaysia, Thailand, and Vietnam. It is also investing in AI to digitize and automate the lending application process and grow its payments business, which was launched in 2022.

On top of that, through a partnership with CJF, it will offer financial services to back Japanese companies that are already operating businesses, or looking to expand their presence in Southeast Asia, or entering new markets in Southeast Asia, Teo told TechCrunch.

The startup provides a wide range of financing options, including term loans, micro-loans, receivable/payable financing, revolver loans, and asset-backed business loans, ranging from $500 to $2 million, to meet the diverse needs of businesses at different stages. Many companies use the funds for working capital or as bridge loans to scale up.

One of the things that sets the startup apart from competitors like Validus and Bluecell Intelligence is that it offers a one-stop shop service, from short-term financing to supply chain financing, via online and offline channels and partnerships, and payment offerings, according to the company CEO.

Revenue from digital financial services in Southeast Asia is expected to rise, with digital lending leading the way and making up about 65% of the total revenue, according to an e-Conomy SEA Report 2024.

Since a mammoth $144 million Series C+ funding round led by SoftBank Vision Fund 2 in February 2022, the Southeast Asia SME lending market has significantly consolidated, making the startup even stronger as a market leader, claimed Teo.

Ironically, one company’s crisis could become Funding Societies’ gain. Teo said the company expects more consolidation among fintechs focusing on credit in Southeast Asia. That is because many companies are getting to the end of their runways and unable to raise more money in the still-slugging SEA funding climate. Those that have focused on single countries are especially vulnerable, he added.

“Since SoftBank Vision Fund’s investment in February 2022, the macro market has changed considerably, with U.S. banks collapsing, impacting credit supply to non-bank lenders,” Teo told TechCrunch. “U.S. rate hikes have also raised the cost of funds.” Up until September, the macro market faced a 23-year period of rate hikes, and geopolitics have hurt SMEs and raised non-performing loans, he added.

In this challenging period, in December 2022, the company made its first acquisition: Sequoia-backed payments fintech CardUp. This almost tripled its revenue while maintaining its headcount almost flat. Teo noted also that the startup made investments in three companies in the period, including a fintech company and a startup specializing in POS software.

A social and economic impact report that the startup collaborated on with the Asian Development Bank (ADB) in 2020 found that Funding Societies-backed MSMEs contributed $3.6 billion to GDP and created approximately 350,000 new jobs. In addition, it helped SMEs boost their revenue by 13% through quick disbursement and a simple application process, according to the company.

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