Kelvin Lee left a good job at a big firm to start Fundnel. Although there is nothing surprising about that move, given that people in his cohort of young finance professionals are characteristically dynamic and ambitious that mobility is in their nature, Lee was actually doing very well in his previous position. But as he told Portfolio, he felt he did the right thing.
“Yes, definitely, if I didn’t feel sure that I could make a difference with Fundnel, I would have never started it in the first place. One of the more memorable IPOs that I did was for a standout Hong Kong-based technology company based out of China that was on the road with us for an NYSE IPO.
“I was helping out the management teams with roadshow rehearsals, and could vividly recall the CEO’s frustrations with the amount of time and money spent with bankers on the process.”
While Lee was preparing his client to meet the media, the latter candidly told him that the way investment banks were going about raising funds for companies was outdated and they would eventually be replaced by technology platforms.
“If founders could raise growth capital for their companies without spending so much money and time with bankers,” he surmised, “they would surely prefer to do so. That resonated with me, and paved the way for me to create a quicker, sustainable and more permeable method for companies to raise funds.”
- NEVER EVER EASY
- A MATTER OF SIZE
- SMART CLIENT SERVICE
- BATTING AVERAGE
- BRIGHT PROSPECTS
Never Ever Easy
Nobody ever said that starting an enterprise from scratch is easy: There is no infrastructure, no support system and no safety net. Statistically, 90 per cent of startups fail, so the odds are literally stacked against Fundnel from the start.
“What I would count as our advantage is our steadfast belief in and passion for what we do and the difference it can make for the world. It is central to everything we set out to achieve—to create an ecosystem for prolific companies to get the funds they deserve, and create innovative products that will change the world.” Being a startup, Lee realizes, gives them the agility and ability to maneuver quickly in a quickly changing finance world that is being disrupted by Fintech companies—such as Fundnel itself.
“The distinct disadvantage of any new idea is public skepticism and lack of knowledge,” Lee affirms. One can have the best solutions to the world’s most pressing problems, he elaborates, but it wouldn’t matter if no one knew about or believed in it. “That is why I strongly believe in market education, and engaging with key stakeholders constantly while we improve our product and platform. I believe we’ve made many inroads already, closing 15 deals worth US$49mm with a small team.”
Lee believes that they have built a strong foundation for themselves at Fundnel to get out there and make believers out of skeptics, and get more people to see the impact and difference that the company can make for companies and investors.
- NEVER EVER EASY
- A MATTER OF SIZE
- SMART CLIENT SERVICE
- BATTING AVERAGE
- BRIGHT PROSPECTS
A Matter of Size
Lee did not feel that size is an important factor in achieving business objectives. At the end of the day, success and failure depend on the people – not so much the company’s size. Bad leadership and bad attitudes are the downfall of any endeavor, nothing is too big to fail – examples that come to mind are Enron and Barings Bank.
“That’s why we invest heavily in our employees and company culture. We want everyone to be inspired go-getters that want to break the status quo, and not just be a part of it. We are innovators, first adopters, and risk takers.”
Fundnel is in Singapore, Malaysia, Indonesia and India, targeting SMEs and companies looking to expand, usually in the high-growth and pre-IPO stages. “We reach companies that would have never been able to raise funds with the current investment options available due to the large amount of red tape, and parties involved.
“The majority of fundraising companies originate from Singapore due to our strong domestic market presence, bolstered by our MAS-approved CMS license. Combined, our three focus markets contribute over 90 per cent of our total fundraising traction.”
- NEVER EVER EASY
- A MATTER OF SIZE
- SMART CLIENT SERVICE
- BATTING AVERAGE
- BRIGHT PROSPECTS
Smart Client Service
Fundnel has proprietary tools and third-party software partners that help it to reduce the ‘human’ effort and increase efficiency by leveraging the automation that such tools provide to sort out company evaluation, and legalities such as company disclosure.
Once companies are approved and listed as an open deal on the Fundnel platform, the company provides tools that assist private investors to work within their own circle.
“We also have a customer relationship management (CRM) tool that allows for effective investor targeting, and our technology allows companies to reach a larger group of investors without compromising security. E-signing and online payment methods help to keep the settlement process relatively hassle-free while reducing the level of paperwork involved.”
All deals and supporting documentation can be accessed on a single interface, and the Fundnel aggregator enables access to deals across multiple platforms, allowing for clearer comparisons.
Innovative due diligence channels such as webinars, live chats and social media, and crowdsourced due diligence and industry research reports help to paint a holistic deal evaluation scenario.
“Fundnel has an online-based escrow service that handles investor money for increased security, and better risk disclosures for increased transparency. Post-investment monitoring is also facilitated by Fundnel to increase the level of transparency between company and investor.”
Fundnel’s criteria for funding companies comprise three elements: relative evaluation, where private company data collected over time allows it to build sector-specific benchmarks in the region; scalable analysis, which refers to the ability to do more ‘first-cut’ quantitative screening with lower manpower requirement; and ‘investability’ scoring, where weights are customized based on specific interest and mandate for different investors.
Fundnel does not restrict itself to any particular sector. Lifestyle, services, and technology have all contributed to the vast majority of its funding success to date. Whereas F&B, hospitality, and other consumer sectors typically manage smaller funding rounds. Fundnel deal sizes tend to range from US$3m-20m.
- NEVER EVER EASY
- A MATTER OF SIZE
- SMART CLIENT SERVICE
- BATTING AVERAGE
- BRIGHT PROSPECTS
Batting Average
"Of all the companies that we put through our due diligence processes, only 10 per cent are eventually selected for a fundraising opportunity. From this 10 per cent, expert investors on our platform then select which among these companies complement their portfolio. By the end of the whole process, 20 per cent of the companies that are raising funds on our platform would have successfully concluded deals.
“We have a stringent, transparent process in place to vet companies, ensuring only the most qualified are introduced to our investors.”
The opaque nature of the private equity industry means that many working professionals do not have access to this asset class. They end up with more traditional purchases such as cars and homes that they relate to or would only be able to invest when the company goes public at an IPO often with dismal returns.
The millennial generation is also no longer investing in the public markets (see above chart), and they do not relate to companies that are currently listed or do not care enough about investing in them. Millennials would prefer to invest in a business that they can see, feel, and experience in their daily lives.
Millennials are a generation of dreamers, who really want to get out there and fulfil their ambitions beyond the status quo. We have the economic stability, the tools, and the support to go out and create our own mark on the landscape.
At Fundnel, we look for companies that appeal to the Millennial mindset – modern, driven, and innovative game changers.
Fundnel has the best deal completion rates amongst similar platforms, and have established itself as a market leader in the private equity investment platform space. “I’m really proud of our lean six-person team who have screened more than 700 investment opportunities; this is unheard of in the space of large-scale investments that usually require three times more people, and a significantly longer amount of time,” Lee points out.
“We’re proud of the impact we’ve had on the companies that have raised funds on our platform. Listing publicly was too arduous a process for these companies, even though they had the potential to do so.
“We’ve simplified this process and given them an avenue for raising capital that they would otherwise never have had. Our hope is that these companies will use the funds to create a positive impact on society and create meaningful change.”
Fundnel is the first fintech company in Singapore to tackle private investments, and to really push for change in the very traditional and rigid private investment industry. “We want to save time, money and effort for companies seeking to raise funds, and we want to provide investors with a modern way of investing in private equity,” says Lee.
“We are matching investors who would never otherwise invest in equity, with companies who would never otherwise raise funds from a pool of investors.” To date, Fundnel has facilitated US$49m worth of transactions with a small team of investment professionals, which, again, is unheard of in public IPOs.
The company has taken the first of many steps towards a bolder, quicker and more modern solution that will create a new standard in equity investments.
- NEVER EVER EASY
- A MATTER OF SIZE
- SMART CLIENT SERVICE
- BATTING AVERAGE
- BRIGHT PROSPECTS
Bright Prospects
Lee has his sights set on the future – and it is characteristically bold and bright. “We’re building momentum toward creating a ‘private stock exchange’ that will be an ecosystem consisting of regulators, banks, analysts, unlisted companies and investors – all supported by modern technology.”
Lee predicts that by 2020, Fundnel will be the first port of call for private investments in everyday businesses for investors, and especially the upcoming generation.
“We’re always moving, always hungry,” Lee notes. Fundnel is constantly increasing its investor pool and deal sizes, and scaling its technology. It also engages with financial regulators to work on how it can implement its long-term vision in this region.
Lee believes that Fundnel can make a big difference in the world. “We are creating jobs, growing companies and helping great ideas to flourish. We are not building a typical e-commerce site, dating app or online game; we are building nations.”
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