Deal focus: Fintech start-up WeLab seeks scale

WeLab is facing a quantity and quality challenge. The Hong Kong-based mobile lending and credit analytics platform had approximately 60 staff when it closed its Series A round in January 2015. Now, with the Series B just completed, the headcount is up to 200, and by the end of the year it will be between 300 and 400. However, sheer numbers are only part of the issue.

"In a Series A round you want a jack of all trades - one guy who can do everything because you don't have a big office, you don't have the budget to hire specialists," says Simon Loong, founder and CEO of WeLab. "But as you get bigger you have to start specializing because that is how you become more sophisticated. It is like the growing process from a teenager to a young adult."

The transition that takes place in the early institutional rounds, from proving a concept at Series A through scaling up at Series B and C, often results in growing pains and can be capital intensive. While WeLab's first round of funding came in at $20 million, the successor is worth $160 million. Malaysia's Khazanah Nasional is the lead investor, with participation from ING Bank and state-owned Guangdong Technology Financial Group.

This reflects the growth in WeLab's two lending platforms. When the Series A closed, the company had 14,000 members and had processed over HK$1 billion ($129 million) in loan applications, primarily through the Hong Kong platform. It is now being outstripped by its mainland counterpart. Wolaidai, a mass-market peer-to-peer (P2P) lending platform, accounts for 2.4 million of WeLab's 2.5 million customers and roughly 70% of the RMB9 billion ($1.36 billion) in loan applications to date.

The business model operates under the same rationale: filling the gaps in the market left by a banking system constrained in terms of reach and loan size due to the physical infrastructure it must maintain. "A bank may find that it cannot break even if it lends less than RMB200,000 because fixed costs are so high," Loong says. "For us, because we do it fully online, we can do deals of a few thousand renminbi and still be profitable."

A large portion of the Series B funding has been earmarked for taking the technology that has been proven over the last two years and making it work on a larger scale. However, WeLab also provides technology to third-party clients - it has 2-3 partnerships and this year will start working on initiatives with e-commerce platform Ule and Postal Savings Bank of China.

Loong sees enormous potential in these partnerships to take WeLab into new areas of consumer finance, and that is one of the reasons why ING, which has considerable experience in internet banking, came on board. "As we work, we discover that the methodology, the principles, the data we have collected have an application in other financial products, which means above and beyond lending," he says.

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• Topics
• Expansion
• Greater China
• Financials
• Venture
• Technology
• Technology
• Financial Services
• Venture
• Growth capital
• China
• Khazanah Nasional