By Jack Ellis for Tech in Asia
Singapore-based fintech startup Validus Capital has received US$3 million in funding from venture capital firm Vertex Ventures along with an additional US$600,000 from angel investors, it announced today.
The online lending platform said in a statement that it will use the new funds to finance its expansion into new markets in Southeast Asia.
Validus uses a proprietary algorithm to make credit assessments of small and medium-sized enterprises (SMEs) on behalf of prospective lenders, who must be accredited investors under Singaporean law.
Co-founder and director Vikas Nahata tells Tech in Asia that Validus offers financing against SMEs’ accounts receivables and invoices – in other words, the value of orders that the SME has completed, but for which it is still awaiting payment from customers. “We help them realize that their accounts receivable is their biggest untapped asset against which they can get cash from accredited investors,” he says.
As with most P2P lending models, the idea is to cut costs associated with more traditional ways of completing financial transactions. However, Nahata says that Validus is not a P2P platform in a strict sense, as it does not work with retail investors. This is what differentiates the startup’s offering from those of other local players such as Funding Societies and Moolah Sense, he adds.
Another differentiating factor is the insurance that Validus offers to its lenders – who must be accredited investors under Singaporean law – allowing them some added peace of mind when making investments, Nahata says.
A new initiative that Validus has been rolling out – and that it suggests will benefit from this latest capital raise – is its supply chain-focused financing service. Under this scheme, Validus partners with larger corporates to help secure funds for their SME suppliers and customers that are in need of finance.
As part of the rollout Validus has teamed up with Visa to provide SMEs with virtual cards – in other words, a credit card hosted online without the need for a piece of plastic – to finance their business growth ambitions. Using the virtual card provided by Validus and Visa, SMEs can clear invoices more quickly, improving their cash flow. The startup claims that this is the first such collaboration between a fintech marketplace and a global payments company in Singapore.
Local food and beverage supplier GroXers is the first publicly announced adopter of the solution. Validus claims that it is particularly suitable for SMEs in industries like distribution, retail, and manufacturing because such businesses don’t have much in the way of typical collateral to pledge in return for financing. As such, invoices and accounts receivables become a potential asset for securing a loan.
Beyond this, Nahata tells Tech in Asia that Validus will use the funding to expand its business to Indonesia. “Along with Vertex, we are now actively looking for a strong partner in Indonesia and are excited to take our fintech lending products to the country,” he says.
The cash injection from Vertex comes just a few weeks after Validus closed a pre-series A round worth around US$726,000. That money came from angel investors in the education, fast-moving consumer goods, financial services, and real estate industries.
Converted from Singaporean dollars. US$1 = S$1.38.