Funding Societies, popularly known as Modalku in Indonesia, is in advanced talks with investors to raise over $50 million in a fresh funding round, according to sources aware of the development.
The fundraising may close by the end of 2021 and the company could end up raising a bigger amount, the sources added.
When contacted, the company, which specialises in digital financing for small and medium enterprises (SMEs), declined to comment.
Meanwhile, data from Singapore’s Accounting and Corporate Regulatory Authority (ACRA) accessed by DealStreetAsia DATA VANTAGE shows that Modalku has already raised $15 million from Sumitomo Mitsui Banking Corporation. The Japanese multinational banking and financial services institution lapped up 638,480 shares of Modalku at around $23.5 apiece, shows the ACRA filing dated Oct. 6.
Separately, a source privy to the matter said the investment has pegged the valuation of Modalku at over about $ 350 million.
ACRA filings only reflect the equity funding received so far in a round and the overall funding could be larger and have other components such as debt.
Sumitomo Mitsui has been ramping up overseas investments lately. In June, it agreed to invest around 10 billion yen ($90.3 million) in Philippine lender Rizal Commercial Banking Corporation (RCBC) for a 5% stake.
Separately, Modalku’s ACRA filing also shows that it had raised $2.3 million from investors including 500 Tuk Tuks, Endeavor Catalyst III fund, and SGInnovate earlier this year.
While the company confirmed the funding mentioned in the ACRA filing, it declined to reveal details.
The fresh funds will help the company in realising its growth potential and improving technology, said co-founder and CEO Kelvin Teo to DealStreetAsia.
In April last year, Modalku had announced raising $40 million in a Series C round from undisclosed investors. In 2018, it had secured $25 million in a Series B funding round from SoftBank Ventures Korea, Sequoia India, Alpha JWC Ventures, and Golden Gate Ventures.
Sequoia India and Alpha JWC Ventures are the company’s biggest institutional investors with over 18% and 10% stakes respectively, followed by Sumitomo.
The company’s initial operations were funded by Sequoia India and Alpha JWC, which contributed an undisclosed amount to the company’s first significant funding. It then raised $7.45 million in a Series A round in 2017.
Modalku’s other investors include Qualgro, BRI Ventures, SG Innovate, and Line Ventures.
In a separate development, Modalku has raised $18 million in debt led by Singapore-based Helicap Investments, the newly-launched Social Impact Debt Fund, and an unnamed “Japanese financial services group.” Helicap Investments made the announcement in a press release on Thursday.
Helicap Investments is the investment arm of Helicap, an alternative lending firm that provides private debt investments to family offices, high net worth individuals (HNIs), impact funds, and institutional investors.
The statement added that the company is on track to raise $120 million in institutional debt for funding the growth needs of micro, small and medium enterprises (MSMEs) in Southeast Asia. Modalku has also raised funding from European impact investors such as Triodos Investment Management.
Modalku will use the funds for lending to MSMEs, it said.
Founded by Kelvin Teo and Reynold Wijaya in 2015 while the two were at Harvard Business School, Funding Societies connects SMEs with retail and institutional lenders.
Following its Singapore launch in 2015, it entered Indonesia the following year under the brand name “Modalku” meaning “My Capital.” It also has operations in Malaysia since 2017.
It specialises in short-term financing for SMEs, funded by individual and institutional investors.
It claims to be the first platform to introduce e-signing of contracts and an auto investment algorithm for lenders, besides being the first to launch a mobile app for borrowers and lenders. The company claims its app has been downloaded over 370,000 times and that it has so far disbursed over 4 million SME loans worth over $1.6 billion.
The latest investor interest in Modalku underscores the appetite for fintech startups in Southeast Asia. The recent DATA VANTAGE report ‘Private Capital Markets Report 2021‘ estimates that fintech lending was the most popular sector for investments in terms of deal volume and value.
Fintech startups raised over $3 billion from 147 PE-VC deals between Jan 1 and Sept 25 this year.