Day: April 7, 2021

Startups are regarded as the seeds for economic growth around the world, and fintech startups in Hong Kong in particular are in the right place, at the right time. Amid the challenges of COVID-19, the city’s fintech sector proved itself to be a resilient, economic oasis, with companies continuing to hire and grow.

Bucking the global trend, we’ve seen a thriving fintech sector in the city not least with the launch of multiple virtual banks and fintech startups. As a part of the ecosystem, we have also seen an acceleration in everyday fintech adoption which is an encouraging sign for the future of the sector.

Recently I had the honour to become a judge of a fintech startup pitching competition. This was a good chance to reflect on where the emerging opportunities are and what are the traits of successful startups.

Let’s take the payments space as an example. The move to online shopping was already a trend prior to 2019 but the pandemic has accelerated this. This has created new challenges, and therefore new opportunities for startups to address.

One such challenge is the increasing complexity and choice in payment options. Hong Kong is unique in that it has a very diverse range of payment options, ranging from stored value card to digital wallets and QR payment codes.

With even more payment methods expected to come into the market, there remains a need for a solution to integrate these payment methods and manage the increasing complexity across the payment ecosystem to provide consumers an enhanced user experience.

Another opportunity is addressing increasing growth demands. Brands and merchants are actively looking to expand into new markets. Last year our Hong Kong Merchant Survey found that 45 per cent of the merchants we had spoken to were actively looking abroad to expand their addressable market.

Also Read: Three lessons from building a fintech startup that is 80 per cent women

Yet entry into new markets comes different challenges, such as language barriers, currency exchange issues and new regulatory requirements.

In both of these examples, fintech startups have the chance to turn challenges that have emerged from the pandemic into business opportunities. With this in mind, I am often asked what I look for when judging startups. Most startups I screened had really strong propositions.

However, here are some aspects that are apparently in those with the potential to truly scale up.

The first thing is passion. Founders should be starting a startup because they are passionate about the challenge they are solving, not simply because it is a hot sector. Startups should not be tempted to forcibly retrofit AI or blockchain into a solution or the sake of doing so.

Not only will it not increase their valuation, but they are also likely to lose any competitive advantage they might have had prior. Start with the problem and look at the best solution, technology and approach to addressing it.

Next, everyone knows the fable of how David defeated the Goliath. In Hong Kong, smart startups are those that understand how David can harness Goliath to scale up. Traditional financial institutions are increasingly open to working with startups, and indeed become their customers. In fact, this is where Hong Kong excels.

Hong Kong’s financial institutions have proven to be progressive in their adoption of technology. According to an industry survey, the rate of fintech adoption in Hong Kong is higher than that of the US, Japan, or France.

At PayPal, we see partnerships as growth opportunities. By allowing our partners and ourselves to focus on our unique values, as well as leverage each other’s strengths and assets, we are able to move faster and drive meaningful progress on fintech and digital payment adoption.

Another trait that I look for is how well the founders and their company build trust. It is possible to have a highly differentiated business model and technology supremacy, however without any trust, there isn’t a scalable business.

Also Read: How fintech in Asia is enabling and making education affordable for everyone

In fact, an HKTDC survey on startups, last year found that winning the trust of customers was the single greatest challenge Hong Kong’s startups faced, therefore it is not as easy as it would seem.

On the road from startup to scale up, there will no doubt be a number of opportunities, challenges, and discoveries along the way. Fintech is a fast-paced sector that is evolving at the pace of markets and society, if not faster. Strong entrepreneurs are those that are not afraid to shift to a new strategy and pivot.

If a company is always playing catch-up, if there is too much competition or the market has become saturated, then these are signs that a pivot might be required. It is all part of the problem-solving process to determine what’s needed to survive and thrive.

There has never been a better place nor time to be in fintech. The key to success is understanding these principles and harnessing Hong Kong’s fintech environment. And as a part of this wider ecosystem, we hope to nurture promising fintech startups and see even more success stories come out of our city.

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It was late in 2019 that I decided to help start a company that focused on bringing a massive change in the financial services industry in emerging markets, starting with my home country of the Philippines.

We had this idea that if we can use data and technology the right way, we can potentially unlock the potential of millions if not billions of the next generation of human beings that might not have been given access to formal financial services because the old system was optimised to serving the top five per cent globally and not to spread the opportunity to the 95 per cent that is left.

Not knowing that a few months later, one of the most devastating humanitarian, health, and economic crisis will be hitting the world, we would have never known that the next 12-18 months will be the biggest test in my career to start building a company from scratch during a time that the world is changing very quickly, not for the better, but the worst.

As I write this article today, only one word comes to mind that probably exhibits the spirit of many of my peers who are starting or pushing through building companies that try to solve large difficult system problems during a time where their personal and professional job securities are at risk daily, it would be the word conviction.

For entrepreneurs, conviction is often seen as the will to move forward despite overwhelming odds. I am sure that most of us know the story of David vs. Goliath, or the battle of the 300 Spartans, or maybe Frodo in The Lord of the Rings.

Conviction for most startup entrepreneurs is deeply rooted in achieving a world-changing idea because we fundamentally believe that if we are successful, the world will be better with this technology being utilised.

It is also the driving force for founders that despite the hundreds of rejections from potential partners and customers to try the product or the 1000s of no’s they receive from investors, they still find the spark to not give up and get discouraged.

Also Read: Ecosystem Roundup: AirAsia to fly into Grab’s territory in Malaysia; SEA gets new massive startup funds

Conviction is a term that most venture capitalists talk about while considering the decision if they would like to invest in a startup. As investors, many meetings, data points and discussions are pointed towards answering the questions, ‘do we have enough conviction to invest in this deal.’

The venture capital industry despite funding scalable companies still has unscalable decision-making processes– often relying on human logic and emotions before they decide to invest. Can the committee of venture partners decide without a shadow of a doubt that out of the thousands of deals that they could put money into, this would be one of the few that they would put their careers on the line for.

For the past 18 months in building a startup, I had many moments of fear and doubt that I had to overcome both on the personal and professional side, whether it be delays in product launch because we needed one more regulatory hurdle, or seeing the stock market drop my life savings while having no income coming in and worrying if my family have enough if an unexpected medical bill would come, or do we have enough runway to make it to our next milestone to raise the next round of funding.

These are many points where I just had to have a belief to keep on pushing despite overwhelming pressures as a founder and as a father. During this time, I had many thoughts, what if I had a stable job to ride out the pandemic, or maybe I am not cut out to be a founder, or should I find a backup plan if this thing does not pan out.

It seems that every time I get into these modes of desperation, glimmers of hope start to flash up whether it is an unexpected support program from the government, or a milestone that unlocks another source of funding, or an acceptance in supportive communities like the OnDeck, Techstars or StartX that gives you the network to keeps you focused and helps accelerate your startup goals, or a VC that decides to cut you a check to increase your runway by another 12-18 months.

These things balances out the hard times that I faced and make me realise that moments of desperation are sweeter when overcoming these are celebrated later on.

Also Read: 6 qualities to look for in a strong co-founder

Looking back in the past 18 months, I had to always ask myself, ‘why am I doing this, when it is just so hard, the answer that comes to mind always comes back to one point, the reason why we decide to build a company, and most entrepreneurs decide to build a company – because hard problems won’t be solved because it’s easy, but because a group of idealistic, crazy people risked a lot to give a chance to make their world a little bit better if they are successful.

I am very optimistic that we will find amazing entrepreneurs and ideas coming out of this pandemic economy that has overcome many near-death experiences, and still found a way to survive in this environment.

I am also excited for the investors that are taking bold investing risks at this time, and not retreating to a conservative ‘wait and see approach, but to back promising early startup companies that are tackling not just the needs of today, but the potential game-changing ideas that will impact the world, not just next year, but in the next 5, 7, and 10 years when the memory of the pandemic is over.

Although the result of my ventures are still unknown and may succeed or fail, I know that no setback, even at a scale of a global pandemic, will make me change my conviction that if I am successful, we have a real chance to unlock the human potential of millions if not billions in emerging markets, and I am grateful to have a chance to do this when the world might need it the most.

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Is insurtech in Southeast Asia an underserved market?

We previously spoke to Ganesh Rengaswamy, Managing Partner of Quona Capital and he shared the region is “lagging behind in the growth of insurtech, financial advisory, embedded finance to address daily life needs through financial innovations, and holistic digital banking.”

Also Read: ‘SEA is lagging behind in the growth of insurtech, financial advisory, embedded finance’: Ganesh Rengaswamy of Quona Capital

While Raunak Mehta agrees, he believes insurtech providers hold the keys to addressing this.

e27 sat down with the Chief Commercial Officer of Singapore-based insurtech firm Igloo (previously named Axinan) to discuss how insurtech addresses the underinsured gap and the important role regulators play in supporting innovation within the industry, among others.

Below are edited excerpts of the interview.

Why do you think insurtech is not lagging behind within Southeast Asia?

Insurtech has picked up over the last decade and we have witnessed tremendous growth within Southeast Asia. However, the pandemic has accelerated the digitalisation of insurance beyond our expectations within a short period of time.

Asia is shaping to become a lucrative market for insurtech – with over S$5.3 billion (US$4 billion) in investments injected in the last five years alone. Moreover, insurtech investments reached an all-time high last year. This growth has continued into Q1 2021.

We have also witnessed a historic level of activity for merger and acquisitions, new investments and public offerings. This clearly shows the insurtech industry has remained undaunted by the pandemic, proving to be resilient and adaptable.

At Igloo, we have also gone through a momentous year. In April 2020, we successfully raised US$16 million in funding. Gross written premiums facilitated through our platform have quadrupled as compared to 2019. We have also expanded our presence across key markets such as Thailand, Indonesia, the Philippines and Vietnam by entering into strategic partnerships.

Also Read: Why insurtech startup Igloo is eyeing Vietnam for expansion

This surging momentum suggests insurtech is on an upward growth trajectory, as countries in the region continue to accelerate their digitalisation drive, injecting fresh funds and resources to build a digital infrastructure that can compete on the global stage.

What are the key challenges to be tackled for insurtech companies in Southeast Asia?

The focus over the last decade has been to make insurance more accessible by employing alternative channels of distribution. While this has yielded some success, the growth has not been equally distributed.

Insurtechs have to overcome the distribution challenge and identify, develop and grow more avenues for insurance products to be made available to consumers.

Another challenge companies may face is the issue of gaining trust and brand recognition amongst customers and other insurance stakeholders. While digitalisation has been the buzzword for the past decade, many still view it with a veil of doubt and scepticism, perceiving it as inherently disruptive to industries.

This is one of the main barriers that are hindering insurance industries from going fully online. Hence, it is crucial for insurtech companies to showcase their reliability and credibility in the long-term, to build trust amongst customers and insurance companies and even regulators.

Regulatory policies have been a notorious challenge for insurtech companies. Have regional regulators been more supportive of new insurtech products?

The rise of insurtech has definitely been a game-changer for the insurance industry, affecting not just insurance companies, agents and customers, but regulators as well – and we recognise that this is the environment we must navigate in.

Rather than seeing it as a challenge, we perceive regulatory policies as an opportunity for negotiation and a sign that the insurance space is growing. As the industry continues to undergo digital transformation, insurance regulators will inevitably need to quickly adapt to the new reality, and keep up with the developments in the digital economy.

Also Read: Why fintech companies and regulators need to collaborate on gaining trust and compliance

However, they are often faced with the difficulty of finding a balance between exercising their traditional role to ensure financial stability and consumer protection; and allowing room for innovation to meet the changing needs of consumers and the market, and enhancing free competition.

Seen as such, regulators become proxies between innovation and law. As insurtech firms, we can actively collaborate with governments and regulators, as we have the advantage that traditional insurance companies do not – we can navigate the complexities of the regulatory environment more quickly and easily due to our size.

Could you share some new regulatory policies that have been implemented to support the growth of insurtech within the region?

There have been a number of new policies implemented to support the growth of insurtech within the region, and we foresee more to come in the near future.

In recent years, the regulatory sandbox model that was first developed in the UK has been adopted by Southeast Asian markets such as Singapore, Malaysia, Indonesia and Thailand to cultivate and encourage innovation in the financial technology sector.

This regulatory sandbox helps to allow startups with limited resources to study new and untested business models in a contained environment with loosened financial regulations, allowing them to explore the possibilities different technologies can offer.

The Singapore government has also been actively supporting the growth of insurtech. To date, it has one of the largest concentrations of insurtech startups – with over 80 companies registered. The Monetary Authority of Singapore (MAS), which regulates and oversees all insurance activities has been continuously and actively putting into place policies to promote digital innovation.

How have consumer habits driven the rise in demand for microinsurance products?

Covid-19 has definitely changed the way we live and work on a daily basis. With worldwide lockdowns and circuit breakers, more people have been going online – with over 40 million new users from Southeast Asia joining the internet last year.

The rise of verticals such as e-commerce, edutech and medtech, are all signs of this shift towards increased digitalisation and it seems that changing consumer habits and lifestyles are here to stay for good.

The question now arises – how can we meet these changing demands? This is where microinsurance comes into play.

Also Read: Microinsurance is key to Southeast Asian financial inclusion

As consumers’ working and personal lives have changed, we realise that there is an urgent need to address these demands by providing digitally-driven, lifestyle-focused microinsurance products that help to meet the lifestyle needs of customers and to address the pain points they face in their everyday lives.

Compared to traditional insurance offerings, microinsurance is more affordable as it offers coverage to lower-income people with little savings. In emerging economies, this allows more people to access insurance services.

Why is there an underinsured gap within the region? How can insurtech firms help address this?

Asia has one of the highest insurance gaps in the world. The primary reason contributing to that is insurance premiums tend to be costly and people cannot afford to pay when they are already struggling to make ends meet.

Due to the pandemic, this problem has become more severe. Economies worldwide have been badly affected and people have lost their livelihoods.

This is where insurtech plays a pivotal role in helping to make insurance more affordable and accessible to the common people. Technology has become a tool for the democratization of insurance, as people from all walks of life can now afford to purchase insurance and protect their loved ones and themselves.

How does the future of insurtech look like for you? What roles must the different stakeholders (regulators, companies, investors etc.) play for this to happen?

The future of insurtech looks promising from Igloo’s perspective. It is poised for growth because of the large underinsurance gap in this region.

As countries in the region look to pick up their economy following the aftermath of the pandemic, we foresee that microinsurance and insurtech will play an even more pivotal role in encouraging insurance penetration and financial inclusion for everyone. Digital insurance is expected to grow at least three times compared to the overall insurance industry.

However, stakeholders within the ecosystem – including insurance companies, regulators, investors and customers play an important role in ensuring that insurtech in this region thrives. Insurance companies will have to actively adopt digital means to improve their business operations and efficiency. One of the ways that they can do without overturning their entire infrastructure is to work strategically with insurtech firms in the region.

Insurance and insurtech companies have to work in collaboration with regulators to come up with the best practices and policies that can ensure overall room for growth in the industry.

Investors, on the other hand, can help insurtech firms improve and expand their technological capabilities by injecting fresh funds and capital, ensuring that the ecosystem is always moving ahead.

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Image Credit: Igloo

The post ‘Microinsurance will play a pivotal role in accelerating financial inclusion in SEA’: Raunak Mehta of Igloo appeared first on e27.

Singapore Deep Tech Alliance launches new venture builder programme

The story: Singapore Deep-Tech Alliance (SDTA2) has announced the launch of SDTA22, a venture builder programme, powered by XNode, a startup accelerator in China.

More about the SDTA22: A 9-month programme that aims to build deeptech companies that drive environmental sustainability through advanced manufacturing.

How it will help startups: By providing selected teams access to SDTA’s newly-patented technologies in the following verticals: semiconductor, energy, automotive, medtech and hardware.

XNode’s wide industry network will also be provided for startups to leverage on and lay the groundwork for expansion into China. 

More about the story:  The programme will kick off in July 2021 and will be split into three phases.

Each phase will be structured with deliverables based on technology application research, product development, market research, team development, and partnership acquisition, with the final demo day being the closing ceremony. 

Meesho joins India’s unicorn club following US$300M funding

The story: Meesho, an India-based social-commerce platform, has raised US$300 million in a Series E round, according to The EconomicTimes.

Investors: SoftBank Vision Fund 2 (lead), Prosus Ventures, Facebook, Shunwei Capital, Venture Highway, and Knollwood Investment.

Current valuation: US$2.1 billion.

Also Read: Ecosystem Roundup: Are digital art NFTs horrible for Mother Earth? BoT gearing up for digital currency test

What the funding will be used for: Hiring and growing its team across technology, product, and other functions.

StashFin raises US$40M to expand across South Asia

The story: StashFin, an India-based neo-banking startup, has raised US$40 million in a Series B extension equity funding round.

Investors: Altara Ventures, Uncorrelated Ventures, Kravis Investment Partners, integrated Capital, Saison Capital, Tencent Cloud Europe BV, Alto Partners, Snow Leopard Ventures, and Positive Moves.

What the funding will be used for: Expansion across South Asia, growth in existing markets, and to strengthen its customer platform for local languages.

About StashFin: A digital lending venture that allows customers to access their credit facility with zero annual fees and easy monthly installments.

InfuseAI raises US$4.3M Series A from Hive Ventures

The story: InfuseAI, a Taiwan-based startup, has raised US$4.3 million in a Series A funding round.

Investors: Wistron Corporation (lead), Hive Ventures, Top Taiwan Venture Capital Group, and Silicon Valley Taiwan Investments.

About InfuseAI: Founded. in 2018, InfuseAI helps businesses kickstart and manage the deployment of machine learning (ML) and AI quickly without worrying about establishing the computing, storage, and applications environment.

More about the story: InfuseAI mostly operates in Taiwan, where it largely serves financial and manufacturing clients.

Also Read: AppWorks raises US$114M for fund III to back Series A and B startups in SEA, Taiwan

The market for ML solutions is growing rapidly with the global market expected to reach almost US$4 billion by 2025.

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Image Credit: Rita Chou

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Singapore-based Flash Coffee, a tech-enabled coffee chain backed by Rocket Internet, announced today that it has raised US$15 million in Series A financing, led by White Star Capital.

The round was also joined by prominent investors, including Delivery Hero-backed DX Ventures, Global Founders Capital, and Conny & Co.

With this round, Flash Coffee’s total capital raised to date has touched US$20 million.

The latest financing will be used to expand the brand in 10 markets across APAC, which saw the emergence of the likes of Indonesian chains Kopi Kenangan and Fore Coffee.

Flash Coffee was co-founded by David Brunier (CEO) and Sebastian Hannecker (COO & CFO). Brunier was previously foodpanda CMO, whereas Hannecker worked for Bain Consulting before turning entrepreneur.

Also Read: Kopi Kenangan snags US$109M in Series B funding led by Sequoia Capital

Launched in January 2020, Flash Coffee claims it serves a menu of high-quality drinks at affordable prices. Customers can use its mobile app to order and pay online, choosing to pick up orders from its yellow storefronts, or order for delivery through major platforms in each market.

The app boasts of a streamlined pick-up feature, loyalty programme, personalised promotions and interactive challenges.

According to the startup, its unique coffee menu curated by World Latte Art Champion Arnon Thitiprasert sets it apart from conventional cafes and quick service brands. All drinks are prepared with premium ingredients and 100 per cent Arabica coffee beans. Its signature drinks include Avo Latte, Nutella Latte and Lychee Espresso, to name a few.

Flash Coffee now operates in 50 locations across Singapore, Thailand and Indonesia, with majority of its stores already achieving profitability. It plans to open 300 new stores across the region by end of this year.

“Our dream is to have a Flash Coffee every 500 metres in all major Asian cities,” said Brunier. “Strong investor support for our Series A round enables us to harness untapped potential in the region and replicate our success in seven new markets this year: Hong Kong, Taiwan, South Korea, Japan, Malaysia, the Philippines, and Vietnam.”

“We will also build a regional HQ in Singapore and expand our regional tech hub in Jakarta to 50 people to support our vision of fully leveraging technology to improve customer experience, proactively drive growth and significantly increase operational efficiency,” he shared.

Eric Martineau-Fortin, founder and Managing Partner at White Star Capital, added: “We believe that the brand’s tech- enabled approach will drive its ability to provide high quality coffee and service at excellent value to address an underserved demand for affordable premium coffee in these rapidly expanding Asian markets.”

The Southeast Asian coffee chain market is fairly overcrowded with Kopi Kenangan and Fore Coffee being the dominant players. While Flash Coffee with a slew of high-profile backers has made its intention very clear, it will be an uphill task for it to take on the local behemoths and find a place in the market.

Kopi Kenangan, which entered the market at least three years before Flash Coffee did, raised a massive US$109 million in Series B led by Sequoia Capital in March 2020. It already operates 426 outlets in 26 cities, with plans to further expand its business. Fore Coffee — backed by East Ventures, SMDV and Pavilion Capital — is also a serious player and is ambitious to expand locally in Indonesia.

Who is going to be the ultimate winner?

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Image Credit: Flash Coffee

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