Funding Societies (Modalku in Indonesia), a digital financing platform for small and medium enterprises (SMEs) in Southeast Asia, has acquired Singapore-based payments solution startup CardUp for an undisclosed amount. 

As per the deal, Funding Societies will acquire CardUp’s payments capabilities, such as card payments to non-card accepting recipients (domestic and cross-border), e-payments acceptance, invoice automation tools, and its licenses and integrations with third-party business software. 

CardUp’s payment services will complement Funding Societies’s lending products. This will enable SMEs to manage and pay expenses, receive payments, and borrow funds within a digital platform.

Funding Societies Co-Founder and Group CEO Kelvin Teo said, “Acquiring CardUp enables us to leapfrog and accelerate our market leadership in the regional fintech space, integrating payments capabilities, enhanced user experience and local licenses to our digital lending experience across key markets.”

Once the acquisition is finalised and approved by the regulators, Funding Societies will add CardUp Founder and CEO Nicki Ramsay to its management team to lead its payments business. All other CardUp employees across Asia will be retained. 

Also Read: Funding Societies enters neobanking space with investment in Indonesia’s Bank Index

CardUp will continue to operate its consumer and business services and maintain its relationships with card networks, issuers, and media partners. 

Launched in 2016, CardUp is a payment solution that helps individuals and businesses make payments to suppliers and collect payments from customers digitally. Businesses use CardUp for payments related to payroll, rent, corporate tax, vendor payments, receivables flows, and cross-border expenses. 

With a presence in Singapore, Malaysia, and Hong Kong, CardUp has served many companies in the B2B and C2B industries. 

Funding Societies provides digital financing services, where developing MSMEs can apply for up to SGD2 (US$1.5) million in working capital financing funded by institutional and retail investors through a digital market.

In addition to Singapore and Indonesia, Funding Societies also operates in Malaysia, Thailand, and Vietnam. The company has facilitated more than SGD3 (US$2.2) billion in working capital through more than five million MSME loan transactions.

Also Read: Samsung backs Funding Societies to drive its vision of financial inclusion for SMEs in SEA

Funding Societies is backed by SoftBank Vision Fund, SoftBank Ventures Asia, Sequoia Capital India, Alpha JWC Ventures, SMBC Bank, Samsung Ventures, BRI Ventures, Endeavor, SGInnovate, Qualgro, and Golden Gate Ventures, amongst others.

In February this year, Funding Societies announced a US$294 million funding led by SoftBank Vision Fund 2.

SMEs are expected to push ASEAN’s digital finance market to US$60 billion by 2025. The region’s business payments sector will grow at a CAGR of 10 per cent over the next five years. 

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A large-scale disruption is going to emerge in the field of the automotive industry, as it is currently witnessing many technology-driven trends in the area of transportation. Electrification is a key one among them and innovation and sustainability is undoubtedly the main driving factor shaping the growth of the global market for electric vehicles and EV charging station.

In a carbon-conscious world battling environmental pollution and global warming, along with the ever-increasing prices of oil and unavailability of oil sources, the gradual shift to EVs is inevitable. The prior the auto industry understands this and adjusts itself to this reality, the better it will be able to receive the benefits of electrification.

EV is not a modern-day invention. EV goes back to the 19th century. Exactly in the year 1842, the first-ever EV was produced in Scotland.

In the early 1900s, almost 40 per cent of the then-running vehicles were powered by electricity. As oil became readily available and cheaper the ICE (Internal Combustion Engine) started to rule.

It was with the emergence of Tesla as a major player and Elon Musk’s avowed mission “to accelerate the world’s transition to sustainable energy”, that the global auto industry started to change rapidly.

The global interest in the adoption of the EV by the auto industry seemed to have opened with the wheels being set in motion by Tesla. An entire community has sprung up since, comprising auto manufacturers, battery manufacturers and components suppliers.

India has recently taken some small yet significant steps aimed at accelerating the adoption of Electric vehicles in India. The Ministry of Heavy Industries, Government of India has shortlisted 11 cities in the country for the introduction of electric vehicles (EVs) in their public transport systems under the FAME (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India) scheme.

In order to increase the sales EV amongst the customers, the government announced providing an additional income tax deduction of ₹1.5 lakh (US$1,907.74) on the interest paid on the loans taken to purchase EVs.

These are some of the essential steps, but more needs to be done to reach a stage where EVs become a viable choice for many. Let’s examine what would be the next steps.

Continued government action needed

Incentives and subsidies by governments across the world have been key factors propelling the growth of EVs in the last couple of decades.

Also Read: How electric mobility startups are tackling climate change in Asia

China, currently the world’s largest EV market, has mandated a quota for EV production for all auto manufacturers. Before the 1990s, there were many attempts to commercialise electric bikes and scooters in China.

All those attempts failed. The electric bike market in China never really took off until the late 1990s. This was facilitated by favourable local regulatory practices in the form of motorcycle bans and loose enforcement of electric bike standards.

By this time, many Chinese cities started to ban motorcycles. Many cities suspended the issuance of new motorcycle licenses. These local motorcycle bans became the ultimate driver for the electric bike boom in China.

The alleged justifications for these bans include relieving traffic congestion, improving safety and reducing air pollution. The bans were imposed on all motorcycles, regardless of their power sources. However, electric bikes were categorised as non-motor vehicles and therefore exempted from the bans.

This loose enforcement of electric bike standards, however, is a result of the ineffectiveness of China’s local governments, rather than of conscious decisions to support electric transportation. Frankly speaking, the boom in China’s electric bike market was a policy accident rather than a policy success.

India should consider a carefully calibrated mix of fiscal and non-fiscal measures in this regard while being mindful of the current economic headwinds that the auto industry is facing.

Turbocharging the technology

EV adoption becomes easier when charging EVs is made easy and convenient.

“Range anxiety” needs to be addressed. The major threat to the adoption of EVs is the fact that most EVs today have a range of 150 to 175 km on a single charge, leading to a sense of constraint and anxiety, stemming from a fear of being stranded while on a drive, among owners.

Though it has improved, charging infrastructure in many parts of the world, including India, is still not where it needs to be. Utility companies, infrastructure providers and the Government have to work together in Public-Private-Partnership (PPP) models to make large networks of charging stations available to the general public.

The development of new, EV technologies is set to make this segment more appealing to consumers. Batteries are the key and critical area of innovation, where EVs are concerned. Lithium-ion batteries are the ones commonly used today in EVs. They are not yet adequately available and their costs tend to be high due to the insufficient supply of the raw materials.

Also Read: Why global investors are eyeing China’s EV landscape (Part 1)

Numerous new innovations are at present being created to discover proficient options in contrast to the Li-ion battery. Solid-state batteries are one such alternative being explored. A few businesses in India have started working on these technologies.

The smart, sustainable mobility solution

Initial costs of EVs are higher than that of ICE cars, but in the long run, they cost their owners far less as they consume no fuel and are cheaper to maintain. This is possible because a battery-powered electric vehicle has fewer moving parts than a conventional ICE car, making servicing and maintenance much more cost-effective.

Not just in the personal vehicle segment, the adoption of EVs in public transport systems can significantly reduce carbon emissions, thereby slowing down global warming and its catastrophic effects on climate change.

To emerge as a leader in the global EV space, India should chart a plan to manufacture every sub-system required by EVs, including components, batteries, and charging infrastructure. This will also help generate new jobs in the auto sector in the long run.

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US- and Singapore-based fintech company Miti Ventures, which operates under the brand name yufin, has bagged about US$1 million in early-stage funding from Mastercard Chief Marketing & Communications Officer Raja Rajamannar and former Portfolio Manager of Cadence Capital (a subsidiary of PIMCO) Kathy Burdon, among others.

77 Capital, Boleh Ventures, Zennon Kapron, Ramu Arivuvel, and Krishan Grover also joined.

According to the United Nations, micro, MSMEs account for 90 per cent of all businesses, 60-70 per cent of employment and half of global GDP. In the Philippines, there are many micro and small enterprises, such as sari-sari stores, street food vendors and carinderias — often run by women and many unbanked.

yufin serves under-served small and micro-merchants in emerging markets. The mobile app helps merchants manage their cash and credit transactions over their mobile phones. Using the app, merchants can accept digital payments, sell online on digital stores, order from B2B marketplaces and access better loans.

Also Read: 3 critical trends SMEs should zero in on in 2022

The product is currently available in the Philippines. The firm claims it has signed about 3,000 small merchant partners for yufin in Mindanao (the Philippines) since its launch in May 2022.

Shubhrendu Khoche, Co-Founder and Chief Strategy and Product Officer, said: “We are only scratching the surface. The potential is huge to benefit millions of small and micro-entrepreneurs in the Philippines and other emerging markets, raising income levels and increasing financial inclusion. We look forward to adding many more merchants to the yufin family over the coming months.”

Miti Ventures was set up by Khoche (ex-Mastercard and American Express) and Kurt Weiss (ex-Citi Innovation in New York). The firm has 16 employees in the Philippines and is planning to scale rapidly with the aim to roll the business model out elsewhere in Southeast Asia and in Mexico.

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It was an investment in Sky Mavis (Axie Infinity) that turned the spotlight on Ascend Vietnam Ventures, a new VC kid on the block. The early-stage VC firm, launched by former 500 Vietnam Partners Eddie Thai and Binh Tran in May 2021, made several successful bets after this investment, including in Kilo and Virtual Internships.

Recently, Ascend Vietnam announced that its early-stage fund, AVV Alpha, exceeded the US$50 million target amidst the funding winter, which has affected growth-stage startups globally. Against this backdrop, e27 sat with Eddie Thai for an interview. He touched upon the funding winter, the Vietnamese startup sector and the local Web3 industry.

Edited excerpts:

The world is gripped by a funding winter. How is the Vietnamese startup sector faring amidst the global downturn?

It has been pretty okay so far.

Part of it is probably a lagging effect. [As the startup world is undergoing a winter], public markets are going south and growth equity and early-stage capital are pulling back. However, it didn’t impact Vietnam much because the local startup scene is a bit younger than others; there are more early-stage startups and fewer late-stage startups.

The second reason is probably gravity. Whereas valuations in markets like the US were often untethered from fundamentals, valuations in Vietnam were probably less inflated by comparison. In other words, the bigger they are, the harder they fall.

Also Read: 500 Startups’s top execs set up new seed-stage VC firm Ascend Vietnam Ventures

But I think Vietnam’s relative insulation from the global downturn is more a factor of the positive forward opportunity. As per the International Monetary Fund’s latest World Economic Outlook (even though it was released in April after a bunch of headwinds hit the global economy), Vietnam’s GDP is forecast to grow at least 5 per cent this year and 7 per cent next year. And within that growth, technology is going to be a significant component.

How does Ascend Vietnam Ventures look at the overall investment scene in Vietnam?

Vietnamese founders have endured harder times before. Not long ago, Vietnam received only 0.3 per cent of all venture capital worldwide. Since then, the digital economy and startup scene have changed dramatically. More and more entrepreneurs worldwide are discovering that Vietnam can be an excellent launchpad for their regional or global businesses. It has great tech talent, affordable startup costs, and a relatively accessible local market.

Due to the winter, many high-growth companies, including unicorns, fired employees en masse as they could not raise follow-on- funding. What does this indicate? Will the turn of events force growth-stage companies to go slow on their growth plans and focus on profitability?

I have indeed heard of companies in the US and elsewhere laying off many employees. As I understand, it’s not that these firms have not been unable to raise follow-on funding. Instead, for many companies, it has been pre-emptive cost-cutting in anticipation of a tougher fundraising climate and slower growth in the near term.

For most founders, this is the hardest thing to do. But it may be the difference between running out of runway vs survival and long-term success.

A tougher fundraising environment in the near term means many companies will have to step off the growth gas and work on their unit economics. But we have seen in past downturns that the best companies (and especially the ones that already have excellent unit economics) will continue to attract capital.

Globally, there are hundreds of unicorns, but most are non-profitable and don’t have a clear profitability path. For example, in India, only 25 per cent of the 100+ unicorns are profitable. The rest are burning cash. So do you think we should really celebrate unicorns?

Surely, the ultimate celebration should be for companies that achieve sustainable impact at scale. Yet the entrepreneurial journey to get there can be long and hard, so it’s important for founders to be able to celebrate intermediate wins when they have them.

Most of the entrepreneurs I have worked with only take a brief moment to do so before they turn back to their work. With each successive milestone, they feel more and more pressure.

Ascend seems to be very bullish about Web3. Does it have plans to back more Web3 companies from AVV Alpha? What is Web3’s future in the country?

We believe in the long-term potential of Web3 and the paradigms it enables to solve problems and create experiences in unique ways. It’s a reason we have hired our friend and former colleague Edith Yeung (one of the most influential people in crypto) as advisor of AVV Alpha.

Also Read: The 27 Vietnam startups that have grabbed our attention this year

We want to continue to be thoughtful about how we approach the space (we invested in only two Web3 companies with our prior fund). We need to know that each project will do what it purports to do in a way that’s genuinely better than other approaches. And of course, we will want to see the project led by a strong team with a long-term perspective and proper incentive alignment.

Crypto winter is tough on folks, but the silver lining is that it will clear out some of the hype and noise and allow stronger teams to emerge. So we expect to invest in a handful of companies out of AVV Alpha, perhaps three to five out of over 25 companies.

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