Building An Equity Crowdfunding Platform: Q&A with Khai Lin Chua, Co-Founder & CFO of Fundnel

In 2017, Fundnel was awarded the title of “Fintech Company of the Year 2017” by The Asset. 

In 2016, Fundnel facilitated US$49 million of fundraising across 15 deals for businesses across Singapore, Malaysia, Indonesia and India. As part of its regionalisation efforts, Fundnel recently expanded its footprint into Australia.

Started out her career in banking and private investments with firms such as J.P. Morgan, Citibank, and CIMB-GK Securities, Khai Lin Chua saw the opportunity to tackle private investments in Singapore and she aims to push for change in the very rigid private investment industry.

LadyBoss spoke to Khai Lin on Fundnel and she shared some insights for to build a successful company.

At Fundnel, we actively work to engage these businesses that are often overlooked by institutional investors in the traditional listing process. Our platform matches businesses who would never otherwise raise funds from a pool of investors together with investors who would never have otherwise invested in equity.

Q: Fundnel? Tell us more!

A: Established in 2015, Fundnel is a Singapore homegrown private investment platform that offers unlisted securities in the growth and pre-IPO stage businesses across industries to a qualified network of investors in the region. We are the first fintech company in Singapore to tackle private investments, and to really push for change in a very rigid private investment industry.

A recent report by the Business Times identified strict regulatory compliance and prohibitively high costs in the stock market listing process as the main factors that deter businesses in going down the IPO route to raise growth capital. Many high-growth, mid-sized companies are unable or unwilling to dedicate the significant time and resources towards raising capital from the public and private investors. This is where Fundnel comes in to fulfill the capital needs of such companies. Our solution saves time and resource, and simplifies the fundraising process whilst simultaneously providing investors with a modern way of investing in private equity.

Leveraging technology and data, we’ve taken the first of many steps towards the creation of a bolder, quicker, and more modern solution that will create a new standard in equity investments. Fundnel has facilitated transactions totaling US$100m+ to date with a small team of investment professionals, which is unheard of in public IPOs.

Fundnel has since expanded its footprint to Australia, and has investors from all over the region including Singapore, India, Malaysia, and Indonesia. In the long-term, it will look to eventually have a significant presence in all major financial markets around the world.

We’ve also been conferred the award of “Fintech Company of the Year 2017” by The Asset, one of the region’s premier banking and finance publications. The win is a testament to the capabilities of the Fundnel team, and is a platform for us to further enhance our service offering and trustworthiness to current and potential clients.

Q: Tell us more about your background and how it led you to Fundnel?

A: I’ve always possessed a deeply rooted passion for business and finance, starting out my career in banking and private investments with firms such as J.P. Morgan, Citibank, and CIMB-GK Securities.

In my line of work then, I came to realise that financial intermediaries/investment banks predominantly served large companies. This was largely due to an inherent cost structure which would make financial sense to these intermediaries only if a minimum amount of fees were involved. This led to an underserved market comprising private businesses that had typically been overlooked by institutional investors.

Two years ago, I observed that advances in technology had contributed to a rapid paradigm shift in traditional financial and banking models, changing the way things had conventionally been done and making fintech a most interesting space to be in. At the same time, returns in the private market seemed to be on a down trend, leading to increased demand for accessibility to investments in private companies.

With both demand and supply factors aligned, my fellow-co founders and I knew that we could make a real difference in the financial ecosystem. With start-ups sprouting all over the region, we realised that we were in a position to make a real difference for a growing underserved market segment. That was really the only motivation I needed to step away from a stable, well-paying job to establish Fundnel.

Q: What are your responsibilities at Fundnel?

A: My role as Chief Financial Officer means that I am primarily responsible for Fundnel’s financial and operational strategies, overseeing all financial procedures and protocols that are part of the company’s day-to-day operations.

However, as co-founder of a business in such a dynamic industry, I often find myself double and triple hatting, being involved in some way in almost every aspect of the business including product, HR, legal, and compliance.

With start-ups sprouting all over the region, we realised that we were in a position to make a real difference for a growing underserved market segment. That was really the only motivation I needed to step away from a stable, well-paying job to establish Fundnel.

Q: Do explain to our readers…what are unlisted securities?

A: Unlisted securities refer to shares of a firm that are not listed on any official stock exchange such as SGX. Unlisted securities are issued usually by smaller or new firms who are unable to or do not wish to comply with the listing requirements of an official exchange, and are mostly everyday companies that the general public can easily relate to. These businesses can be provision stores, restaurants, bars, retail outlets, or even that café or coffee shop that you get your coffee from each morning.

At Fundnel, we actively work to engage these businesses that are often overlooked by institutional investors in the traditional listing process. Our platform matches businesses who would never otherwise raise funds from a pool of investors together with investors who would never have otherwise invested in equity.

Q: What are some tips for SMEs interested in growth and expansion?

Q: First and foremost, it is important to note that every business and industry has its unique nuances, so there’s really no one size fits all solution. That being said, here are a couple of pieces of advice that has proven useful in guiding Fundnel’s success:

– Internationalise

With a market of 5.6m million, growth opportunities in Singapore are arguably limited compared to other economies in neighbouring Asia, with emerging ASEAN, China, and India widely expected to drive global growth. In an increasingly interconnected world, businesses need to set their sights on internationalising, tapping on opportunities in overseas markets. This view has often been echoed by the Singapore government, with a raft of supporting measures offered to SMEs through government linked institutions such as International Enterprise (IE) Singapore.

Fundnel’s expansion into Australia earlier this year was prompted by the rapid growth of Australia’s burgeoning tech ecosystem, with our interest further piqued by the country’s investors seeking higher quality yields. We also have an active presence in the Indian and Indonesian markets.

– Embrace Technology

Against the backdrop of rising business costs and a manpower crunch, investment in technology is perhaps key for SMEs in optimising productivity, placing them in prime position to capture growth opportunities and to and stay ahead of the curve.

Technology plays a central role here at Fundnel. We utilise proprietary tools and third-party software partners that reduces the “human” effort and increases efficiency by leveraging automation. For the evaluation process around any potential investment opportunities, we use a tool we call the Fundnel Factor, a stringent data-guided deal screening and evaluation process. This helps to eliminate unnecessary red tape and reduce the number of parties involved, resulting in an evaluation process that is quicker but just as detailed.

This is another focus of the Singapore government, with Budget 2017 featuring initiatives to help SMEs adopt new technologies and develop the necessary capabilities.

Q: In your depth of experience, what are the common mistakes you see in SMEs?

A: Having worked with numerous SMEs over the the course of my career, I’ve observed several mistakes businesses commonly make that have served to inhibit their continued growth. Some of these mistakes are:

– Expanding too quickly

Business expansion can be a game changer when executed at the correct time. However, it is vital to ensure that your business is well prepared for the the changes that will need to be made. Expanding too quickly can be incredibly damaging to a business’ reputation and financials especially if it does not possess enough resources to back such a move. A through assessment of the company and the business environment will be crucial in making clear if the time is ripe for expansion.

In Fundnel’s case, we waited till our market assessments revealed a clear demand for private equity investments in the region before taking the leap. Prior to our expansion, we placed a heavy emphasis on establishing a robust foundation, focusing on the creation of a tried and tested system that could be replicated in our overseas expansions.

– Being overly cautious

Mr Chee Hong Tat, Minister of State for Communications and Information and Health, once said ‘An attitude of risk-taking, and willingness to make mistakes, is what companies will need to thrive in the future’. In the business world and especially for fledging businesses, failures are inevitable. However, the key is to be able to learn from mistakes in order to bounce back from setbacks stronger than before.

Statistically, 90% of all startups fail, but as the popular saying goes – nothing ventured, nothing gained. Fear of failing never stopped me from risking a stable, well paying job to start Fundnel, in pursuit of what I believed in. Nonetheless, the onus still remains on business owners to carry out their due diligence to ensure that while they may be taking a calculated risk, the stakes are not so extreme as to cause the company to fold should things not go as planned.

– Being too rigid

Keeping an open mind to allow innovation and fresh ideas is essential for continued success and improvement. As a result of globalisation and rapid advances in technology, the economical landscape sees frequent changes that makes it necessary for SMEs to remain cognizant of evolving market factors, allowing them to adjust their strategies accordingly to avoid being disrupted.

An inclusive culture is at the core of Fundnel’s corporate DNA. We ensure that every member of the team has a part to play in decision-making, with a large amount of informal banter and discussion amongst all members of the team. This gives rise to innovative ideas that are then brought to life by quality execution.

Q: What are the key factors that can contribute to SMEs success?

A: I would consider having a good mentor as one of the key factors that has can vastly improve an SME’s success. Mentors may not necessarily have the solution to the problems a business might be facing, but they often possess a wealth of experience that they can tap upon to offer invaluable insights and ideas.

I have had the good fortune of having quite a number of mentors throughout the course of my career. They are generally individuals I met over the course of my work from my banking days as well as when I started Fundnel. I have found that people are open to sharing their personal experiences and advice if you are willing to devote the time and genuine effort to cultivate the relationship. It can be as simple as catching up over coffee from time to time.

There are structured mentorship programmes that could be of assistance to businesses as well. For instance, I had the privilege of having Mrs Josephine Teo as my mentor when I participated in the Young Women’s Leadership Connection’s mentorship programme last year.

Another key factor is to hire talent that share a common belief in the vision and mission of the company. Teams often comprise diverse groups of individuals from a variety of backgrounds, but employees that possesses a genuine passion for their work can make a real difference in driving a business’ success.

Along with sheer determination and hard work, I’ve found that these are the ingredients of the secret sauce behind the team at Fundnel. Thus, we’re always on the look out for talents that ‘walk the talk’; individuals that display a genuine passion for the job and a strong work ethic that can collectively strengthen the team and the organisation’s DNA.

“It is not what your decision is, but what you make of your decision”. This is one of the first things I learnt from my mentor when I left the banking sector, and has since become my personal mantra.

Q: What are the challenges and how do you overcome them when you started Fundnel?

A: Trust and low levels of awareness are issues that have traditionally plagued the fintech industry. In recent months, support from the Singapore government has been an invaluable factor in changing the public perception of fintech. Besides establishing the necessary regulatory framework to enable the growth of fintech, it has also held a very successful event at the end of 2016 designed to educate the public on the finer intricacies of what fintech involves.

On our part, Fundnel works closely with the Monetary Association of Singapore (MAS) to ensure our product is brought to the market through a safe and through process. Through our efforts, we have received our Capital Markets Service (CMS) license from MAS in 2016 which provides our investor network with validation that due compliance is in order, allowing us to push forward with existing as well as upcoming initiatives. This is a major step for Fundnel with regards to regulations, giving confidence to the team to innovate and bring the company to new heights.

In general, we foresee a gradual shift in perception towards the acceptance of fintech as it becomes increasingly prevalent in daily life, seeing more exposure to the general public through use cases such as cashless payment solutions.

Q: Your #1 business lesson..

A: “It is not what your decision is, but what you make of your decision”. This is one of the first things I learnt from my mentor when I left the banking sector, and has since become my personal mantra.

In the course of running a business, you will make many decisions that are neither right nor wrong. Oftentimes, decisions are made based on an assessment of information you possessed at that time in time. It is important to remember that you made what you determined to be the best decision based on the information available to you at that point in time.

In the event that the decision is later deemed to be the less preferred option, the key takeaway is that instead of dwelling on the past, one should evaluate why that decision was made, the outcome of the decision, and to treat it as a learning experience.

Q: What’s your vision for Fundnel?

A: Together with my co-founders, we have always committed ourselves to making private investments simple, accessible & transparent for everyone. Through our work, we aim to solve the fundamental issues that plague the activity of private investing:

(1) Lack of structured investment platforms and processes

(2) Negative perception of online private investing

(3) High level of opacity in private markets

After two years, the team’s ambition remains unwavering; we want to help businesses that experience insufficient access to growth and expansion funding, and create an ecosystem for prolific companies to get the funds they deserve, whilst creating innovative products for the betterment of the private markets.

Q: Success to me is…

A: Success to me is a new beginning of sorts! Throughout the course of my career, I’ve learnt never to be content or become complacent with success, but to continue striving towards improvement. In today’s fast-moving business environment, to rest on your laurels or stop innovating is a surefire way to be surpassed by your competitors.

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