Deal focus: Kredivo cuts through SE Asia growth-stage gloom

David Gowdey (pictured), an M&A professional who has cut deals for TPG Capital and Yahoo was hired by Jungle Ventures in 2015 as a managing director and “exit guru.” Interestingly, his savviest move with the Singapore-based VC firm to date may well have been pulling the plug on its biggest exit opportunity.

Indonesian consumer credit company Kredivo, formerly known as FinAccel, had agreed to a USD 2bn merger with a special purpose acquisition company (SPAC) managed by its existing investor Victory Park Capital in August 2021. The PIPE was raised just as public markets started to soften and SPAC fever started to break.

The listing was called off, with a view that Kredivo would raise money as a private company further down the track and perhaps try again when conditions improved. That plan moved ahead last week with a USD 270m Series D round led by Mizuho Bank and featuring Jungle, Openspace Ventures, and Square Peg Capital, among other long-time backers.

The deal is most striking as an anomalously large developing market technology deal at a time when such risks have clearly fallen out of favour. Indeed, it is the largest investment in a Southeast Asian start-up since September, when BlackRock led a USD 300m pre-IPO round for Indonesia’s Traveloka.

“Kredivo is a much more well-rounded private company, having had that SPAC process, and I think that helped in the Series D,” Gowdey said. “But I still think great companies will raise capital regardless of the macro environment. This round was super competitive.“

Gowdey is also among those who hope Kredivo’s patience will rub off on the Southeast Asian start-up ecosystem, where several large players have arguably gone public subscale in the past 18 months. Real estate portal PropertyGuru and e-commerce provider Bukalapak are among the most widely cited examples.

The irony of all this is that, in the currently anaemic exit market, start-ups don’t have much choice. Sticking it out as a private company is now the only option, and there are not likely to be many Kredivo-style transactions in the months to come.

“If you cannot grow into your valuation and you don't have VCs that really back and support you through good times and difficult times – not just in terms of continuing to provide financial resources but also strategic advice, support and technical expertise – it is unlikely to end well for anyone involved,” said Jessica Pouleur, a partner at Openspace.

“Fintech was one of the most funded sectors across the region at the peak of 2020. Companies that were reliant on high CAC [customer acquisition cost] models to fuel growth largely funded by cheap capital will have to find other means of growth while generating profits to survive.”

CAC is said to be one of Kredivo’s core strengths. The company spent years investing heavily in marketing and name recognition upfront while building out its algorithms for assessing underbanked individuals’ creditworthiness. By the time it was ready to begin onboarding customers in earnest, CAC was essentially zero, at least in its core buy now, pay later (BNPL) offering.

Indonesian e-commerce has historically been a cash-on-delivery process, but once Kredivo’s logo was able to establish trust, the company was able to entice shoppers into clicking a BNPL link next to the usual cash checkout option.

A consumer enters his or her details, the algorithm assesses them almost instantly, and another client is onboarded for effectively zero CAC. Across Asia, CAC for BNPL models generally falls in the range of USD 30 to USD 50 per customer.

“If you look at the financials of the company, not only is it the best fintech company in Southeast Asia, I would think it’s one of the best tech companies in Southeast Asia,” Gowdey said.

“It’s one of those businesses where every month, you get the MIS [management information system] report, and they’re at or above plan. They’re very good at predicting out the business, very good at execution, just a phenomenal team.”

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• Topics
• Southeast Asia
• Technology
• Expansion
• Financials
• Indonesia
• Fintech
• Growth capital
• Jungle Ventures
• Openspace Ventures
• Square Peg Capital
• Financial Services