Deal focus: Fave scales fast as Southeast Asia goes O2O

Despite all the hubbub about Southeast Asia rapidly leapfrogging into a mobile digital age, the region's small to medium sized enterprises (SME) remain a conservative, guardedly offline lot. Of course, there's a business idea in that friction, and it isn't going unnoticed by venture capitalists. 

Sequoia Capital India is helping to underline this point by joining a $20 million Series B round for Malaysia-based online-to-offline (O2O) services provider Fave, alongside SIG Asia Investments and Venturra Capital. It follows closely on a string of O2O bolt-ons, including Groupon's businesses in Indonesia, Malaysia and Singapore, that was backed by the likes of 500 Startups and InnoVen Capital.  

Fave, which claims to be the region's largest mobile rewards platform, aims to help offline business owners enter the online economy and access a range of otherwise unimaginable marketing and financial services. The company positions itself as being at the intersection of an emerging cashless economy and a swath of traditional SMEs that are just starting to see the benefits of virtual vouchers and bookings. 

"Southeast Asia is the fastest growing region in adoption of mobile phones, so consumers are ready," says Joel Neoh, founder of Fave. "The challenge is that the businesses are not ready. There's been a huge push toward cashless mobile payments, for example, from governments in the region, but the businesses don't see the value in it."

The Series B will be devoted to building up the number of companies on the platform, currently about 10,000, and expanding their benefits to include more access to financial services, including lines of credit. Part of the plan centers around the recently launched FavePay product, which allows consumers and merchants to connect with each other via a number of established channels such as Alipay. 

FavePay is not an e-wallet and Fave doesn't intend to pursue financial technology to the point of getting a lending license. The idea is to work with operators that have already cleared the regulatory hurdles in such domains and act as a facilitator of overall ecosystem growth. Neoh attributes the company's rapid scaling – it has penetrated 15 cities in three years – to this respect for the complexity of cross-border expansion in Southeast Asia. "We try to collaborate instead of being disruptive in local markets," he says. 

Fave has reached about three million consumers to date in Malaysia, Singapore, and Indonesia and is mulling a wider expansion in the next two years, probably in Vietnam and the Philippines. 

"The fastest growing consumer platforms in Southeast Asia in the past few years have been the ride-hailing companies, but we think our headroom for growth is much higher because more people eat out than hire transportation," says Neoh. "We could see the number of consumers being north of 100 million."   

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• Topics
• Southeast Asia
• Technology
• Consumer
• Early-stage
• Malaysia
• Sequoia Capital
• Susquehanna Asia Investment
• Venturra Partners
• TMT