Singapore-based Helicap is a new fintech platform that aims to bring a fund management angle in the peer-to-peer (P2P) lending space. To make this happen, it has raised US$1.5 million in seed funding.
The round was led by Teo Ser Luck, the former Minister of State for Manpower who last year decided to trade politics for the startup sector. Fintech company Nufin Data, where Teo serves as chairman, also invested.
Helicap co-founder David Z Wang was introduced to the member of parliament through a common acquaintance. Teo told Wang he wasn’t keen on simply being a board member somewhere – he wanted to be more hands-on.
“If you have a seed-stage company, I’ll be very interested,” he told Wang. A few months later, Wang approached him for an investment into Helicap and Teo agreed.
Helicap is an extra layer between P2P lending companies that cater to small and medium-sized enterprises (SMEs) as well as the investors who lend through these platforms.
Similar to a fund manager, the startup sources capital from large-scale investors like pension funds, insurance companies, and family offices, and then deploys it through the platforms. It makes money by charging fees to these investors.
It also provides due diligence services, vetting players in the region and the best deals on their websites. For this purpose, it has partnered with Nufin to use the latter’s data analytics capabilities, combining them with Helicap’s credit assessment metrics.
Helicap has identified more than 300 P2P lending platforms in Southeast Asia and Australia.
Helicap will use the funding to grow its team and develop its technology backend. It will also put part of it into loans on platforms that the company is examining.
“We will deploy smaller amounts just to get to know them,” Wang says. Helicap plans to raise a larger amount of capital for lending in the next six months, ranging from US$5 million to US$10 million.
It has already deployed US$20 million to US$30 million worth of capital for loans in the last nine months, and is looking at a minimum return of 12 percent.
The team has identified more than 300 P2P lending platforms in Southeast Asia and Australia, and has targeted around 100 for collaboration. Helicap has started working with 10 of them so far.
The only one that’s publicly announced is Funding Societies, which recently raised US$25 million from Softbank Ventures Korea. Funding Societies CEO Kelvin Teo says his team has been working closely with Helicap.
A bird’s-eye view of the SME lending market
The crowdlending space tackles a significant gap in SME financing. Small businesses have difficulty finding credit, as large institutions don’t really service that market. More than half of Southeast Asia-based SMEs face this challenge, according to the ASEAN SME Transformation Study.
Through Funding Societies and other Singapore-based P2P or crowdlending startups, such as Capital Match and Validus, SMEs can post their credit needs online while investors can choose which ones they want to lend to. Like most crowdfunding services, the more investors the platform has, the more money available for SME borrowers.
The number of platforms servicing this market might be an opportunity for Helicap, though it all depends on whether the startups see the value in working with the company.
Capital Match CEO Pawel Kuznicki tells Tech in Asia the startup has enough investor demand to cover its capital needs. He stresses that his team’s credit assessment and due diligence capabilities are robust enough on their own right.
The startup raised its own series B in January from B Capital and Dymon Asia Ventures.
Validus co-founder Vikas Nahata says that additional due diligence is a good thing, but “the long-term objective should be to move towards greater transparency.”
The Vertex-backed startup recently helped form a committee under the Singapore Fintech Association to introduce best practices and more cooperation in the industry.
The importance of due diligence in alternative lending was highlighted by the plight of another Singaporean startup, Capital Springboard. The company and investors on its platform fell victim to an SME borrower that raised money by issuing fraudulent invoices.
We would like to be the community that platforms turn to for advice on the macro environment and credit assessment.
While Wang acknowledges that Helicap’s capabilities might not make sense right now for established platforms, he’s confident that the startup will be a valuable partner in attracting more diversified and long-term lenders.
“We would like to be the community that [platforms] turn to for advice on the macro environment and credit assessment,” he says.
Helicap boasts of a core team with chops in banking and investment, and advisors from Heliconia Capital, Morgan Stanley, and GIC. Wang has more than a decade of experience at Morgan Stanley and Credit Suisse. He was also chief investment officer at payments startup MC Payment.
According to Wang, Helicap has no competitors yet, but he does welcome new players. It will be good news for the space, he says.
“Maybe our fees or rates go down a little, but that’s fine. When you’re looking at a target of 12 percent, you can spare a few percentage points here and there,” he quips.