Southeast Asia’s loyalty and cashback platform Fave is said to be in the market scouting for prospective buyers to acquire the firm, according to multiple sources aware of the development.
One source added that Grab Financial is among the firms that Fave has approached so far, but it is not known whether their conversations have been fruitful.
Grab did not respond to queries by DealStreetAsia at the time of publishing.
Fave founder and CEO Joel Neoh rejected the claims. In his response to DealStreetAsia’s queries, Neoh said the firm remains focused on growing its fintech platform and helping merchants adopt cashless payments and loyalty solutions. He also declined to share updates on Fave’s fundraising progress.
Neoh, however, noted that Fave has been onboarding “thousands” more merchants digitally in recent months as a result of the COVID-19 pandemic. He added that merchant traffic on Fave has returned to about 70 per cent of pre-outbreak levels with October turning out to be Fave’s “highest volume of sales” for this year.
But the numbers paint a different picture.
According to Fave’s FY 2019 financial report, the Malaysia-headquartered firm’s net losses were already widening before COVID-19 hit Southeast Asia’s shores.
Fave Group incurred a net loss of $9,969,000 for the financial year ending 31 December 2019, up by around 30 per cent compared to the same period one year ago. Its operating cash outflow also remained in the red, incurring $7,543,000 in FY2019 compared to $7,453,000 in FY2018, after close to five years of operations.
Ernst & Young LLP, the company’s auditors, warned about COVID-19’s impact on Fave’s operations across Malaysia, Singapore and Indonesia, adding that the prolonged slowdown may “restrict the ability of the Group to generate sufficient revenue as well as the potential shortfall in liquidity.”
Ernst & Young further stated a material uncertainty on the company which may “cast significant doubt about the ability of the Group to continue as a going concern”.
COVID-19 is likely to have dampened any progress Fave was hoping to secure for its fundraising efforts this year. In December 2019, DealStreetAsia reported that the Southeast Asian fintech platform was raising $50 million for its Series C round, which was “oversubscribed” by potential investors. The round has yet to materialise.
In July 2020, Pine Labs, a merchant platform from India, invested $4 million for a 12 per cent stake in what appears to be a down round in Fave. According to company filings and Venture Cap Insights documents, Fave’s valuation halved after that deal with Pine Labs, from $73.8 million during its last Series B round in September 2018 to $34.5 million post-Pine Labs.
Fave’s CEO Neoh declined to comment on its fundraising efforts.
The audit report, however, stated that Fave Group was “confident that it will be able to successfully secure funding within the next twelve months from the date of the financial statements based on advanced discussions with potential investors.”
Fave, formerly Kfit, was founded in 2015 by Neoh, who was the former CEO of Groupon’s Asia Pacific business. The firm acquired Groupon’s assets in Singapore and Malaysia in 2016 to eventually expand its product line into payments, cashback and loyalty programmes. In Southeast Asia, it competes with other rewards and cashback apps like ShopBack and Rebate Mango.
To date, Fave has raised $46.9 million in venture capital from investors. It last raised $20 million in its Series B round from Sequoia India, SIG Asia Investment, Venturra Capital and others in September 2018. It counts 500 Startups, Axiata Digital Innovation Fund, and Segnel Ventures among its early investors.