Building a business takes persistence, but that persistence doesn’t guarantee success. So, what drives a person to take the entrepreneurial route despite the challenges of starting a business? Kelvin Teo, Co-Founder and Group CEO of Funding Societies, shares with us why he became an entrepreneur, and what it takes to build a successful business from scratch.
In this episode, Kelvin Teo, Co-Founder and Group CEO of Funding Societies, walks us through his entrepreneurship journey, from meeting his co-founder in university, to establishing Funding Societies as a leading peer-to-peer lending platform in South East Asia. Kelvin also shares with us some of the challenges Funding Societies faced as a startup, how he manages his team across different countries, and how you can raise funds for your own business.
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Philipp: Hello listeners, welcome to another episode of In Your Best Interest, your finance topic podcast. With us today, I'm very pleased to have Kelvin Teo, he's the Group CEO and Co-founder of Funding Societies. Hello Kelvin.
Kelvin: Hi, Philipp, thanks for having me.
Philipp: Yes, thank you for being part of this. I think we have a lot of super interesting topics in store today with Kelvin. Obviously, coming from an entrepreneurial background, I really want to get you guys some insights into entrepreneurship and what it takes to start your first business, or start any kind of business. As well as being the CEO of Funding Societies as an alternative investment player in the fintech space here in Southeast Asia. I thought it was also super interesting to go into alternative investing as an asset class as well with Kelvin. But before we do this Kelvin, I always like to get a little bit of background on you as a person, and kind of maybe your upbringing. We do it with all the guests that are on the show because I think it really helps people understand where you are now [02:00] from where you came from. So maybe just to start with that, can you tell us a little bit more about where you grew up, and maybe where you went to university, etc?
Kelvin: Sure. So I’m Malaysian by birth, grew up in a small town called Senai with about 100,000 to 150,000 population known for oil palm plantation and manufacturing. So I came to Singapore on a scholarship by the Singapore government at the age of 15, and went to university in Singapore, went to the National University for my tertiary education in accountancy, where I graduated valedictorian. Subsequently, during that period of time, I also did a year of entrepreneurship minor in the US with the University of Pennsylvania. And that's where the whole interest with entrepreneurship started.
Philipp: Interesting. So at 15, you left your hometown to come to Singapore to study. I think this is something Freddy did as well coming from Malaysia over as well. So what was that like? I imagine at 15 you're still young, leaving home. Yes, what was it like coming to Singapore then being by yourself?
Kelvin: It was actually perfect. My parents were a bit sad that I was leaving home so early at a young age. For me, I thought it was an excellent opportunity because Senai was a relatively small town, so there weren't a lot of opportunities. So that really gave me the education, exposure to actually do what I’m currently doing. So the experience was phenomenal.
Philipp: Yes, I can imagine. Lots of new sensories, especially with Singapore, and coming to Singapore from a small town that's super interesting. I myself went to high school in the US for a year at 15 as well [04:00] by myself, I think it shapes you for life right from those experiences. Makes you a lot more independent as well. But yes, so when you said then you went to university here in Singapore, did some stint in the US as well. What was your major that you studied and why did you choose them?
Kelvin: Sure. So I studied business administration with a specialization in accountancy. The key reason is because I'm interested in business, in general, and that being a traditional Chinese, accountancy is considered the core, the basics of business. It's an iron rice bowl, so that's why we picked it. It's a professional degree that will allow you to continuously find jobs. So, that was the basic thinking around the choice. But I picked National University of Singapore for a very specific reason, and that was for its overseas college program, the entrepreneurship program that allowed me to study in a university overseas at an entrepreneurial city. So studying part-time while working at a startup for part-time for a period of one year. So it was for that specific program that I chose to go to NUS, and that has been life-changing.
Philipp: Yes. What company did you do entrepreneurial; when you said you worked at a startup there, what was that startup?
Kelvin: The name of the startup was iMeet.
Philipp: Okay.
Kelvin: It's a hospitality platform that connects hotels with their overseas counterparts.
Philipp: Oh, interesting. But I think those programs are so valuable, I think I haven't heard of many of them, but in Germany, [06:00] there's a program where I'm originally from where students can, once you get out of high school, you can choose to go full time to university, or you can actually choose to work for like the big companies like SAP, or Bayer, or Daimler. They have these programs where you kind of like you work for a few days a week or two days a week or three days a week, and the other time you're studying at university actually. So they're kind of like paying for it, but while you get valuable work experience on top of the university stuff as well. So I think it's a super good combination. So for listeners that are interested in getting exposure to work while also studying, I think this is a great alternative to just doing programs where you just do internships in the summer, right? It's kind of the same, but a little more immersive, I would say. No, super cool. So after university, then, did you straight go into entrepreneurship, or did you go first into a consulting or an accounting type of job?
Kelvin: So upon graduation, I actually chose the safer path, which was to enter into consulting. My first role was basically as a strategy consultant with Accenture management consulting for a year plus. And subsequently, someone from McKinsey actually reached out to me and asked if I would be interested to join them. So, after a year plus with Accenture, I’ve basically moved on to McKinsey for management consulting for another two more years. As usual, if you perform reasonably well, McKinsey basically gives you a sponsorship for you to do your masters, and they basically pay for your masters with the condition that you have to come back to work for them for two years. So I took up that offer, and in the interim before entering the MBA, I basically worked for about a year at KKR Capstone, which is basically the operating [08:00] arm of the private equity firm.
Philipp: Yes. Oh, okay, so super interesting. So then getting your first job in a strategy with a consulting firm, I always like to ask our guests, actually. What did you do with your first paycheck? Because we get really interesting answers from people, and they vary very widely. But what was it for you? After studying so hard, moving to Singapore, going to school. What was it that you bought with your first paycheck?
Kelvin: I gave it to my mom.
Philipp: Oh, very honorable. And also along the lines of what Freddy has done as well, which you haven't listened to yet because, at the time of this recording, it wouldn't have been out yet. But yes, okay. Very interesting, but an honorable thing to do. The other thing is before we go right into the entrepreneurship topic I like to ask, what is the best investment you have ever made? And it can be a financial investment; it can be whatever it might be for you. What was it that stands out for you?
Kelvin: I think I can, for the best investments I’ve made, I can perhaps talk about financial investments or asset classes I’ve invested. But in all candour, I find that the two most meaningful one to me, one was education and another was basically the house or most basically a home, right? So from an education perspective, after receiving the offer from Harvard Business School. In all candour, I did consider whether to give up the offer primarily because KKR was an excellent place to be in, and it does prepare me for entrepreneurship eventually. So if you're already in a place that you are in, why did you need to go back to spend two years on education. But I personally find that has been one of the most empowering experiences [10:00] that I’ve had. May not be financially NPV positive, but from an overall holistic perspective, I think it is one of the most fantastic investments I’ve made. And of course, a home is a home is a home because it gives one's sense of rootedness, and that helps to plan for your life, and of course, to put things into perspective.
Philipp: No, that's great. I think, a home I feel very strongly just like you about as well, and then yes, I think education makes a lot of sense. And especially from you, as I was doing my research for today's podcast, correct me if I’m wrong, but during your studies in your MBA at Harvard, you actually met your co-founder, right? Reynold for Funding Societies, and the idea was born there. So, I think that's a good bridge to your entrepreneurship story, but I think that probably adds to that why you ranked this so high as a good investment, right?
Kelvin: Yes, it is. And that is still true regardless of whether the startup eventually becomes successful or not. Because I think the whole experience itself is once in a lifetime, and if you miss this window of opportunity, you'll miss it for life.
Philipp: Yes. So with that being said, I think we kind of like moved through your history. And then to me, what stood out, what I would like to understand better is Funding Societies, first of all, the first business you ever started? So did you go straight from your KKR, MBA, or did you do something in between, maybe in high school, or in university that prepared you for this step?
Kelvin: Besides the entrepreneurship program, I did, no this was our very first startup, and the reality is [12:00] that when I decided to do my masters at Harvard, it wasn't because hey, I was looking to start a company after. It was really all stars aligning, and that finding out this is a business that I’m passionate about. So I'm interested in starting Funding Societies, I’m not interested in starting any other business. And the reason that we think Funding Societies is special is because it is really solving a big problem, a generation shifting problem for Southeast Asia. And that we are passionate about the underdogs, the SMEs that usually are facing some fund-financing challenges that’s hindering them from fulfilling their full potential. And there's a realistic path for us to be number one. So it's really because of us chancing upon this opportunity that is very much aligned to our heart and aligned to our market such that we decided to start this company. So we are not interested in entrepreneurship in general, we're just interested in solving this problem specifically.
Philipp: Yes. Which is a societal problem, and I think especially the SME space. It's not like your peer-to-peer lending, like the big players that started in the U.S. first in this area where they were giving loans to individuals, right? Because they wanted to refinance their credit card. I can actually see hey; this can make an impact, right? This can help an SME to grow further, right? To become something bigger, to solve a need in the community, etc. This must have been one of you guys’ aspirations there as well, right?
Kelvin: Yes. It is also exactly why we have called ourselves Funding Societies, it’s to basically fund the growth and find the development of societies in Southeast Asia.
Philipp: Yes. And Kelvin, if we take a step back into you coming to the Harvard [14:00] campus, doing your MBA. Why did you guys decide to start it? Or how did the idea come up while you were studying for your MBA?
Kelvin: So, the idea came up when someone from Funding Circle came to speak at the university. We found that as a business model that could potentially work in Southeast Asia if we adapted to the local context. So right after that talk, I found it really interesting and decided to research more. Went to the West Coast to visit the various peer-to-peer lending platforms in the US at that point in time to really understand business. Pitch it to Reynold because just myself, we will not be able to create a company that is number one in the space. But I think together, because of complementary skills and background, we have a realistic chance to be number one. So I share the idea with him, very fortunate that A, his core values are very much in alignment with me, and B, he's also passionate about this space because he comes from a family business background.
And his family did go through a near-death experience when their credit line was withdrawn. So because of that, we started spending more time on the idea, and before we knew it, the business was incorporated.
Philipp: So you already incorporated while still being in school?
Kelvin: Yes, correct. We started a company while we were still in school. In fact, we raised our seed round and Series A while in school.
Philipp: Oh, wow, that's super interesting. And I want to get into how to get financing to start a company here soon. The other thing I wanted to get to, though, was when you guys started the business, how did you make sure that yes, [16:00] you guys were aligned. But in order to start Funding Societies, you also needed to have a tech background, right? It's a fintech company; it's a platform, you have an app and everything. When you first started out working on the business plan together, the idea made sense. What are the other hurdles that you had to overcome, and I’m just thinking out loud because I’m not coming from a tech background myself either, right? So how did you find the right people to start working on the product?
Kelvin: So that's a very good question, because who would want to work for two students who have never started a company before, who are not physically around in the country that the company is being started. So that was a big challenge for us. But I think to us; the key is to start somewhere. So through relationships, we were introduced by an IT firm in Jakarta who was willing to basically build the product for us. So literally, we used a vendor to build a product initially. And when the company gained traction, we basically asked the founder of that IT company to shut down the company and join us, which she did. So we're very fortunate to be able to build a product while we're still in school.
Philipp: Yes, super interesting. And then I think we're recording this during the COVID-19 period, right? Building a company like you guys did remotely, I think is well, this was already a few years ago, I think now it will gain even more traction, right? Because tech teams can be scattered around the globe, you can now find tech talent from anywhere and still, make it work.
And I think this is really; I think this period in time right now is probably a huge accelerator in that space. [18:00] So right now, do you guys have your team all centrally located or are they still scattered around a bit?
Kelvin: Currently, the team is scattered, because we are currently present in four countries. So Singapore, Indonesia, Malaysia, with a satellite office in Thailand. So as SME finance is a very localised business, it's a regulated business in each of the country. And we're licensed in each of the countries; we need to have a local team in them. Whereas there are regional teams where a local presence is not as important, for example, product data engineering, finance accounting, legal, HR. So these functions are less localised. So to that extent, we basically set up a center of excellence based on where we can find great talent.
Philipp: Yes, that makes perfect sense there. So let's get back then to, you already mentioned it, you mentioned financing, right? And I think for a lot of people when they look at hey, maybe quitting their job or like they have a business plan in mind, the next thing is how do you get financing, right? How do you start? Do you go out and ask your family and friends for angel investing round? Do you directly go to VCs? You mentioned you guys raised the seed round already in college. So maybe you can go a little bit in more detail on what your thinking was behind getting funding for the business in the beginning, and yes, what your steps were in reaching that goal.
Kelvin: I think we were very fortunate in a sense that we were able to raise our seed round from Alpha JWC, which is an Indonesian-based venture capital firm during our summer holidays in our masters. The fact is that when we first started the company, our plan was to bootstrap.
But we realized that timing is very important, the window of opportunity is closing. [20:00] If we do not build up and establish ourselves fast enough, we'll miss our window of opportunity. So instead of bootstrapping, we decided to raise funds. And I think we just got extremely lucky in the process that during summer holidays we came back to work with our team. So basically, at that point in time, we have a team of four whom we recruited by posting ads on startupjobsasia.com on the website through skype and managing the teams through skype and emails, right? So we basically met the team for the very first time after working for a few months. So during those months, Reynold and I basically work from 8 p.m. to 3-4 a.m. Boston time, because it's 12 hours difference compared to Singapore. So that the team can feel that we are present, but I think the summer holidays allow us to actually really be physically present with this team. And that's when they share with us the whole Tech in Asia pitching competition. We went there; we pitched, we happened to win it and there was some media coverage for that. VCs started approaching us, and we were fortunate to sign a deal with Alpha JWC before we returned back to college.
Philipp: And so after funding, how long was it until you guys were able to go live with the product?
Kelvin: Oh, we went live before the funding.
Philipp: Oh, before the funding already?
Kelvin: So, after incorporating, within 100 days of incorporation, we have launched a platform. So when we went into the pitching competition, we actually had a live business with some customers already.
Philipp: Oh, wow. So rapid development there, even from abroad. So that is super cool to hear. But so then you got the funding, kind of what were the next steps, like how did you manage to grow the company and build a customer base up till now? And I’m especially [22:00] interested because for you, you actually have two kinds of customers, right? You have to have relationships with companies, the SMEs, plus you have to have a relationship with investors who provide the funding to the SMEs. So you actually have to basically acquire two sets of customers with different needs. So how did you guys manage to do that and grow up till now?
Kelvin: Sure. Yes, I think there are quite a few articles and knowledge research online on how to solve a two-sided platform problem, right? I think for us we took the approach of first getting natural advantages on one side, and then working to solve the second, the other side. And I think the natural advantage is that we chose to use nature advantage on the investor's side.
So we were very fortunate Reynold has a family business that can help us to bankroll some of these loans initially. So the family agreed to fund the first million dollar of loans, so we're really grateful for the family. And then meanwhile, we start building up the base for both borrowers and investors. So with that initial funds, at least we can be assured that any borrowers that we brought on board, there is money to be lent. And that helps to kick-start the traction of the overall platform. So when initially when the platform just started, even though it's a crowdfunding business, it was a crowd of two, basically Reynold and I. But we were very fortunate that through PR and media who have been really kind to us, we managed to gradually attract quite a number of investors through press coverage.
Philipp: So, that's then kind of some nice insights on how to grow the business, and how you've done this on both sets of customers. Let's talk about some of the challenges that you faced, right? If there are any one or two [24:00] challenges that you would single out as the biggest ones so far. Or was there anything that was really challenging? I know starting a business is always challenging, but there might be one or two where you're like, oh my gosh, is this actually going to work, right? Or we have to close down the shop, have you had those moments?
Kelvin: My theory is that you have to go through three near-death experiences before you become really prepared for it. I think there have been major episodes of challenges for us in the last few years be it in terms of being attacked by bigger tech firms, as well as the first major default. And of course, as COVID hits, this is a difficult period for everyone. I think we are relatively fortunate to have our Series C money amidst COVID. But I think in the startup situation, there isn't quite a cookie cut; there are common problems that most startups face as they scale up from an organizational behaviour perspective or from a unique economic perspective. But I do reckon that a lot of these challenges seem really big at that point in time, but when you're looking down into smaller pieces and solve it bit by bit, and you look back, you'll realize that actually it's not as big a deal after you've passed through that.
Philipp: Yes. I think that's a good approach, piece by piece, right? Because the problem seems mounting at the time and then if you just cut them up like you said, they seem a little bit easier to solve or easier to swallow. So that's a very good lesson there. What is then your vision for [26:00] Funding Societies? Let's look five, ten, fifteen years into the future. Where do you see Funding Societies? Is it more of an expansion in different markets, is it other products? Yes, how do you see this company of yours evolve?
Kelvin: So I think our vision is to evolve into a full-stack SME financing platform, right? And when I say full stack is how we can not just provide financing, but really provide other forms of services that can help SMEs to grow from a technologic and non-technological perspective. And eventually assisting not just SMEs in Singapore, Indonesia, Malaysia, but covering all key six economies of Southeast Asia.
Philipp: Okay. So expansion, product expansion as well being there more holistically with different products for the SMEs is your vision in the future. Then what is some advice, to close up the entrepreneurial section, what is one piece of advice that you would give to our listeners who want to become entrepreneurs themselves?
Kelvin: I find entrepreneurship is a hot topic. I’m not sure if it's still going to be a hot topic after COVID-19. But a lot of people like to talk about it with starry eyes that hey it's a romantic experience; you have full autonomy to do what you want and so on and so forth, right? But I think the reality is that the whole entrepreneurship experience is extremely hard. And that unless you have a very clear reason as to why you want to do it, it is very important to know why you want to do it before you embark on that journey. Because the challenges will come, the rewards are great [28:00] if the company is successful, but the challenges will come. And when hard times is going, you will not be thinking about the rewards. You'll be thinking about why you are doing what you are doing, right? So having that self-awareness and clarity, I think is very important before one starts the company.
Philipp: Thanks for that advice. I think that's a valuable lesson there from a successful entrepreneur like Kelvin for all the listeners out there.