This Entrepreneur Has Given $1 Billion In Loans To Small And Medium-Sized Businesses In Asia
Kelvin Tao has raised millions of dollars to help others sustain and scale their ventures. His fintech startup is now one of the largest in Southeast Asia, and even bigger than some banks.
During our interview on the Dealmakers Show Kelvin shared his journey into entrepreneurship, what’s changing in the business and fintech landscape post COVID-19, what’s important to creating a sustainable business and getting funded now, the advantages of launching in emerging markets, and differences between the US and Asia for startups.
Listen to the full podcast episode and review the transcript here.
Kelvin Tao was born in Southern Malaysia. A small town built on factories and palm oil. At just 15 he was recruited to a scholarship program by the Singapore government.
Both of his parents were teachers and would become very proud as he ended up attending some of the best schools in the world.
As a part of Singapore’s National University entrepreneur program Tao had the chance to spend a year at U. Penn’s Wharton, while simultaneously working at a startup.
After graduating he took not just one career path that has produced many highly successful entrepreneurs, but two.
He worked with Accenture, McKenzie and KKR. This put him on the other side of the table and gave him insight into what businesses were doing well, how they could be improved, and gave him experience in operations.
After working on operations transformation for a bank through McKenzie, Kelvin went on to Harvard Business School.
This founder launched his peer to peer lending and SME financing startup with his fellow student Reynold Wijaya while still in school. After all, their parents definitely wouldn’t have approved of them dropping out.
Kelvin was inspired by listening to Peter Thiel talk about his book Zero To One. So, he began studying the 50 most innovative companies in the United States to evaluate ideas, and to find something they could bring back to Asia.
He looked at three qualities when studying and choosing opportunities:
It should solve a problem he was also passionate about · It should be a huge problem · There needed to be a reasonable expectation and path to becoming the number one leader in that space
The only one that really stood up to the test was peer to peer lending.
They dug in and started working on it through the night. There was still a 12 hour time difference back in Singapore. So, they would work from eight at night, to three or four in the morning on building Funding Societies. Then head to class at Harvard in Boston at nine in the morning.
Funding Societies got its first funding during their summer break from Alpha JWC.
They were approached by Sequoia, only to have to wait until they graduated to have them fund their $7M Series A round, when they realized they were still just students.
To date they’ve raised $58M in equity through a Series C round. Within the past five years Funding Societies has funded more than $1B in loans to SMEs.
They’ve now become the biggest platform of their type in the region, making them as big as some banks, and three times bigger than their nearest competitor.
One of the biggest differences Kelvin found in starting his business in Southeast Asia versus the USA was lack of regulation.
In many ways the US has put up many barriers to business, investing and innovation with all of its regulations and highly litigious environment. Tao found the complete opposite when launching. There was no regulation. He actually, invited regulations.
While no regulation may sound nice, he saw that without them, bad operators could tarnish the reputation of an entire industry, and ruin it for everyone. So, they proactively go involved to put oversight in place.
The Southeast Asia startup ecosystem and venture capital space has evovled a lot over the past few years. The government of Singapore actually began by seeding venture capital funds itself. That has taken off, though many startups still find they need to go looking abroad or come to the US by the time they are hitting their Series C.
The attitude towards working at startups has changed too. It used to be a scary plan B for many workers. Like the US, it has not become much more fashionable to work at a startup than it used to be.
Even before COVID-19 the big WeWork mess started changing the world of business and investing. Kelvin, whose startup was also funded by Softbank says he has seen more of a shift from focusing on growth to profitability. That’s happening at a macro level, and as a natural progression for companies as they begin to mature too.
Tao sees the rotation in cycles and tumultuous events of 2020 leading to more of a consolidation, especially in the lending space. That could soon include more digital banks which provide a more holistic range of services to their users, including small business customers.
Listen in to the full podcast episode to find out more, including:
Growing yourself as a leader as your business grows · The future for Funding Societies and digital lending · Kelvin’s top advice for new founders · How they tackled the dilemma of starting a marketplace business · The venture ecosystem in Asia
