Fintech venture builder FORUM targets ASEAN consumer finance
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http://www.businesstimes.com.sg/banking-finance/fintech-venture-builder-forum-capital-targets-asean-consumer-finance
BT EXCLUSIVE
Fintech venture builder Forum Capital targets Asean consumer finance
& WED, SEP 12, 2018 - 5:50 AM
Singapore
IT isn't a natural comparison to make between Ukraine and the emerging countries in
Asean. But Gregory Krasnov, chief executive officer of Singapore-based venture
builder Forum Capital, sees these countries as ready for take-off where consumer
finance is concerned.
And his confidence in growth here comes from building a consumer bank in Ukraine,
his home country, from scratch into one of the top few consumer lenders in the
country before he exited the investment in 2013.
JAMIE LEE ' leejamie@sph.com.sg " @JamieLeeBT
From left: Mr Krasnov with his team at Forum - Jui Takle, research associate; Vaishnav Sunil,
investment manager; Keshia de Vries, communications manager; and Gerald Tay, HR recruiter. PHOTO:
FORUM CAPITAL
2. Mr Krasnov's venture builder outfit in Singapore is now building out a portfolio of
fintech firms tacking the trillion-dollar potential in consumer finance in emerging Asia,
with the five portfolio firms already showing significant expansion, even for startups
used to growing in multiples.
Further, what's unique is that two of the companies this year are crossing into Ebitda-
positive (earnings before interest, tax, depreciation and amortisation) territory.
Posting an operating profit allows the two startups to go straight from pre-Series A
funding to Series B - a rare occurrence.
SEE ALSO: The 'Blue Economy' and its vast potential
A venture building model is not as common as pure venture capital financing, and
works as a cross between operating portfolio firms, and investing in them. Forum,
started in 2015, provides seed capital to start up the portfolio companies, and then
helps them find investment leads. It has raised about US$10 million of third-party
capital thus far that goes towards building up these portfolio companies.
Of the five businesses, three are run by co-founders who are also former business
associates of Mr Krasnov. The co-founders have risk management expertise, having
worked alongside Mr Krasnov in building up the Ukraine bank to a bank of about
4,000 employees over an eight-year period. (To be clear, the bank had far less success
after being sold in 2013, and was reportedly liquidated.)
Based on net asset value as at end-June 2018, the mark-to-market on the return of
capital on Forum's portfolio has been about 8.7 times.
"In terms of valuations, the VC community is now understanding better what we do,"
said Mr Krasnov in an interview with The Business Times.
"Our attrition rate has been zero. Normally, you'd have an attrition rate of 70 to 80
per cent of companies from seed to third-party funding. All of our companies are
creating traction."
After exiting the Ukraine bank with a tidy sum, Mr Krasnov came to Asia intending to
take a sabbatical, arrived in Singapore via Thailand, "and just stayed". "When I came
to Asia about four years ago and started looking around after we exited the bank in
Ukraine, what I saw was that my skillset could be most useful and applied here," he
said. "The market opportunity here is enormous."
The room for expansion here comes as Mr Krasnov noted that GDP per capita in
markets such as Indonesia, Vietnam and the Philippines is hovering around US$3,000.
At that point, he observed, the demand for consumer finance tends to start picking
up, as it did in Ukraine and in parts of Eastern Europe.
3. After speaking to several consumer finance bankers in the emerging markets here,
Mr Krasnov noted the demand for faster consumer lending decision to be made
through data analytics. "The best they could do was two to three weeks to make a
credit decision. In Ukraine, our so-called time to "Yes" was 90 seconds."
CredoLab offers alternative credit-scoring solutions to more than 40 clients such as
banks, consumer finance companies and retailers in 15 countries across South-east
Asia, Eastern Europe and Africa. Forum also set up a debt-purchasing startup known
as AsiaCollect, which uses data analytics to offer proper debt-collection data and
services to consumer finance businesses in Indonesia, Vietnam and the Philippines.
This comes as the banks in the region have relatively immature processes when it
comes to non-performing loans, noted Mr Krasnov, adding that the lenders are
benefiting from taking more preventive action, rather than waiting for the loans to get
out of hand after 90 days.
There are synergies shared among the portfolio companies, which are heavily
focused on the key building blocks behind consumer lending. With the tools behind
both CredoLab and AsiaCollect, Forum's third portfolio firm AsiaKredit offers short-
term loans through a mobile app in the Philippines. Forum also has SolarHome, a
startup that offers pay-as-you-go rental for solar energy in Myanmar, with SolarHome
tapping CredoLab's alternative credit-scoring technology. SolarHome is expected to
reach 40,000 households in Myanmar by the end of the year.
Both CredoLab and SolarHome will zip straight to Series B funding, given their
expected profitability this year.
Mr Krasnov added that by the end of this year, the portfolio companies are budgeted
to generate over US$10 million in revenue, as measured by their annual run rate - a
measure that typically projects recurring revenue over 12 months. "That's not
something to sneeze at," said Mr Krasnov.
Forum is looking to add one portfolio startup per year, with Mr Krasnov seeing
potential of a unicorn - or a billion-dollar startup - from the portfolio mix in three to
four years. Forum has added recently to its portfolio Homsters, a property listing
service that ties in mortgage services.
"We're not taking an approach of creating the Walmart of fintechs. If we execute
correctly, based on the portfolio that we have, we'll do well."
As a hint of what may be to come, Mr Krasnov sees room to build a mobile or digital
bank in this part of the world. Digital banking startups will be "powerful players" in
time as retail deposits surge in tandem with economic growth, he observed.
"It is very probable that those will be built and take significant market share. If you
look at places like the Philippines, Myanmar, Indonesia and Vietnam, the penetration
of retail deposits per capita is very, very low. People have been putting their savings
into other assets," said Mr Krasnov.
"But we've seen the exact same thing in Eastern Europe. People have been buying
cars or flats or gold, but ultimately they go 'maybe I should have some in the bank as
well'."
SINGAPORE FINTECH ASEAN DIGITAL BANKING
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