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Helicap plays matchmaker for underfinanced SMEs
Its technology evaluates the funding needs of SMEs in Southeast Asia and positions them as attractive investments. Most investors, like family offices and high-net-worth individuals who are new data from the loan books of lending companies to understand the performances of SMEs. to the private debt industry, have one “We started with a vision to use big problem: how to find legitimate fintech-powered risk management and attractive portfolios to invest to provide vital liquidity to the in without having to do rigorous region’s top growth companies, thus and time-consuming research. On enabling financial access for millions the other hand, small businesses of underbanked consumers and struggle to obtain financing. This small and medium enterprises,” is where Singapore-based fintech David explained. of US$15m which startup Helicap comes in, trying to ErudiFi will use to help the students fill these gaps. across the Philippines and Indonesia
Founded in 2018, Helicap by offering them affordable tuition developed its MAS-licensed instalment plans. institutional-grade credit analytics Helicap recently raised $6.94m technology that churns and analyses in a strategic funding round. The Southeast Asia’s small and medium round was led by Temasek-backed enterprises (SMEs’) loan data international alternative asset points and extracts meaningful management group Tikehau Capital, credit rating insights. Helicap’s and integrated Asian financial house subsidiary companies, through a PhillipCapital. After the funding risk-management framework, curate round, Tikehau Capital’s Global them as investment opportunities and Co-chief Investment Officer Jean then position the SMEs as attractive Baptiste Feat and Phillip Private investments to help investors in turn. Equity Executive Director Grace Tang
The company’s name comes from joined Helicap’s advisory team. David the words “helicopter capital” which said they plan to use the fresh funds reflects the company’s vantage point to expand their suite of data-driven as it observes attractive firms in the products and services like Helicap’s region, David Z Wang, CEO and cofounder of Helicap explained to Asian Banking & Finance.
“For investors, we do the heavy work of analysing the companies that we think are worth investing in. This risk management is done on our part, leveraging our analytics technology to do the large-scale analysis and to give us speed. For issuers, we ensure that we understand their businesses, in order to provide them with access to funding to further grow their business,” David said.
Lack of financing has always been the number one problem of SMEs. A survey by Bain and Company in 2019 said that 80% of SMEs need to borrow money but lack access to credit.
Funding and plans
The data that Helicap’s technology comes from origination platforms such as Funding Societies. It gets its Institutional Analytics Software and its Credit Analytics software and continue to democratise access to private investments through a datadriven fintech investment platform that prioritises risk management. Since its founding, Helicap has completed 300 deals worth $205.45m (US$150m) in volume by working We started with closely with leading alternative lending a vision to use platforms and presenting investors fintech- with positive returns throughout. powered risk One such deal Helicap helped is the management to provide vital liquidity to the region’s top growth companies fundraising of tech-based education financing solutions startup ErudiFi. Through Helicap, ErudiFi managed to secure a debt facility. “Most platforms of today focus on providing multiple products and letting their customers select these products either through their risk appetite or through an AI recommendation. Our platform provides registered users (who need to be Accredited Investors) curated access to deals where the risk management has been done by our proprietary risk management tech stack. Accredited Investors would have a certain level of sophistication themselves in understanding private market investments, and deal structuring to make their own decisions,” David added. With Helicap’s technology, investors won’t need to spend too much of their time trying to research the perfect investment. Technology David Z Wang does it for them.
With Helicap’s technology, investors won’t need to spend too much of their time trying to research the perfect investment
FINTECH ANALYSIS Fintech funding slows as COVID’s digital hype fades
Valuations of technology stocks, both public and private, are down 60%.
Fintech funding hit a record number of volumes in 2021, with 5,684 fintech deals for a whopping US$210b in total investments garnered during the year–the second highest annual total ever, according to data from KPMG. Yet come a year later and the global fintech investment market is in a downward trend. Global fintech funding fell 33% quarter-overquarter to hit $20.4b — its lowest level since Q4 2020, CB Insights revealed in a report.
The APAC region was not spared, where apart from a few certain markets, the fintech sector saw investments funneled towards them shrink in the first half of 2022.
This is not just a fintech problem, analysts told Asian Banking & Finance. The volatile stock and investment market situation has pushed investors to take flight to the sidelines and keep their monies close at the moment. Fintechs were not spared from the cautiousness.
“There’s been a consistent declining trend in 2022 across IPOs, SPACs and M&A transactions, not only fintech funding. Investors bearing losses from stock market valuations will become more selective in making new investments,” Tzu-Chung Liang, Southeast Asia Financial Services Strategy and Transaction Leader at EY, told Asian Banking & Finance in an interview.
In particular, the rising interest rates and renewed fears of a recession encouraged investors to focus first on business fundamentals and exercise more caution on where they sink their funds into, explained Anton Ruddenklau, Partner and Global Head of Fintech, KPMG International.
“Rising interest rates to combat inflation has added to the cost of capital and therefore the required return on that capital. This has sharpened investor resolve to target fintech firms that are more structurally profitable, are at a later stage in the funding journey or that have demonstrated operational profitability post scaling,” Ruddenklau noted.
Ruddenklau noted that the digital hype that rose during the COVID years have faded, which is also currently driving down valuations of technology stocks by up to 60% lower.
“Again, this has resulted in investors looking for differentiated technology business models, investing in the next generation of sectoral change or focusing on firms with a clear path to profitability. Unicorn minting has stilted as investors take a more sanguine rather than speculative view of the business fundamentals of fintech firms,” Ruddenklau explained.
Going up
The good news is that the dismal state of funding will likely not last, according to analysts.
“Interest in fintechs in the APAC region remains strong, especially those targeting growth markets such as China and Southeast Asia,” Liang said.
Ruddenklau also forecast that funding will grow as financial technology innovation ramps up over the next 7 years.
“Based on the addressable market, we nonetheless forecast financial technology innovation growth to
There’s been a consistent declining trend in 2022 across IPOs, SPACs and M&A transactions, not only fintech funding
The volatile stock and investment market situation has pushed investors to take flight to the sidelines
Investors are focusing less on funding start-up phase businesses and more on supporting their later stage investments
increase over the next 7 years, with the market tripling in size by 2030 – circa $600b annualised funding,” Ruddenklau said.
In particular, Ruddenklau identified three waves of innovation that will sweep through the financial services sector: embedded finance, AI-enabled advice and complex brokerage, and the transformation of risk taking and balance sheetbased manufacturing.
On the other hand, investors will likely become more selective with higher interest rates unlikely to abate in the near future, Liang said.
Connectivity
Connectivity will be a central theme in the future of banking and finance, bringing investment potential that investors will surely not be able to resist long-term.
In fact, although funding has dipped in 2022 compared to the past year, there are fintech sectors–and markets– who are being positively impacted by the recent market correction, as well as their position as “the next wave of digitisation,” now that COVID has marked the “closure” of the first round of digitisation.
“It would be fair to say that COVID capped off the last ten years of digitisation of financial services with a significant focus on connectivity – this included digital payments, mobile channels, open data and the first wave of blockchain,” Ruddenklau said.
“This year, we have seen several fintech sectors positively impacted by the recent market correction. These sectors are very much aligned to the next wave of digitisation and include Climate & Carbon, Physical Supply Chain, Agribusiness, Regtech, AI, Crypto infrastructure and Crypto Risk software,” he noted.
Outliers
Whilst most markets are on a downward trend, some countries in APAC actually managed to remain relatively stable: Singapore and Indonesia, analysts said.
“Singapore is holding its position well. As the trusted hub for high growth and rapidly digitising Asian markets, the diligence in developing an open, cross-border ecosystem is paying dividends,” Ruddenklau said.
Singapore reported “robust” fintech funding results in the first six months of 2022. This is mostly thanks to receiving a boost in its cryptocurrency funding, according to Ruddenklau.
“Both fintechs and investors looking to Southeast Asia’s growth opportunities will likely look at Singapore first, being the strategic entry point. Many start-ups that are headquartered in Singapore have key markets in Southeast Asian countries,” he added.
In a separate report, KPMG said that Singapore even doubled its global market share by deal value to 6.4% in Q2 from just 3.1% in the whole year of 2021. Its share in the number of deals globally also went up to 5.1% from 3.4%.
The country’s deal sizes have likewise grown up to 10% to average US$43.9m in Q2 22 from US$39.8m across FY2021.
Neighbouring Indonesia also bucked the global trend to hit a record-high investment value in the first half of the year.
According to a report by information services provider Fintech Global, investment value in Indonesia in January to June 2022 has already surpassed the previous year, with US$1.8b reported across 51 deals in 2022. In comparison, US$1.6b investments were received by Indonesian fintechs for the full year of 2021.
For the full year, Indonesia’s fintech investments is expected to reach US$3.6b, whilst deal activity in the country is expected to increase slightly by 5% reaching 102 deals in 2022.
Consolidation in the cards
But even operating in a market as stable as Singapore, some fintechs just are not meant to last, analysts told Asian Banking & Finance.
“There are over 1000 fintech firms based in Singapore, representing over two thirds of the ASEAN fintech market. Many are too subscale to be commercially viable in the short or medium term,” Ruddenklau said.
“Equally, investors are focusing less on funding start-up phase businesses and more on supporting their later stage investments. Between the start up funding squeeze and loss-making scale up firms, acquisitions will be highly attractive,” he added.
KPMG International now anticipates consolidation to be concentrated in the last wave of fintechs – those focused on bankfintech relationships.
“Some fintechs will invariably be left to fail – particularly zombie crypto firms – and others will be acquired by legacy institutions to support their innovation agendas,” Ruddenklau noted.
Liang echoed this sentiment, adding that current financial services players will be the ones to snap up fintechs with offerings that compliment their current digital services.
“Incumbent financial services players and ecosystem players may have the opportunity to start acquiring fintechs for new technology to complement existing products and improve user experience, whilst valuations are more amicable now,” Liang said.
