How Startup Challenges are Helping Fintech and Agri Sectors
Before the industry became as big as it is now, fintech and agri startups' main arena to attract investments were startup competitions
Those familiar to the ins and outs of startup communities in Asia would know: there’s at least one startup challenge happening in the region every quarter, as governments and organizations seek new innovative ventures that tackle some of the world’s most pressing problems.
Perhaps one industry that has benefitted the most from this phenomenon in recent years is the fintech scene. With half of the region, or at least 1 billion people still unbanked, truly, there’s a vast opportunity for fintech players to close the gap between the financially marginalized, and affordable financial products.
In 2018, global investments in fintech ventures more than doubled from previous year levels to US$55.3 billion, with the majority of that amount going to Asia Pacific-based fintech firms, according to the data provided by CB Insights.
Before the industry became as big as it is now though, fintech startups’ main arena to attract investments were startup competitions. In 2010, the entire industry worldwide only managed to get US$1.8 billion worth of investments, and those in the Asia Pacific hardly got a dime of that.
Philippine-based startups would know this well. With access to capital as their primary problem based on a Pricewaterhouse Coopers study, some founders have turned to pitch competitions worldwide for cash.
For example, fintech startup Ayannah, which offers affordable online remittance services to Filipino overseas workers, joined a number of startup competitions just when it was raising seed funding. In 2011, Ayannah won the now-defunct ON3 Pitching Competition, which gave its founding team a chance to pitch to Silicon Valley-based investors. Two years later, it closed a $1-million funding from Singapore-based fintech VC Life.SREDA, Silicon Valley VC 500 Startups and London-based fintech VC Blue Compass among others. It has continued to join a number of pitching competitions even after reaching maturity.
This series of fundings has allowed the fintech startup to grow into one of the largest agent network fintech firms in the Philippines. Latest reports show Ayannah now processes around 50,000 transactions per day.
Another Filipino fintech firm that has taken a similar route is Acudeen, which purchases invoices of micro and small enterprises at a discount, to give them access to their capital at a faster and more convenient timeline. In April 2017, the startup won the Seedstars World Competition where it brought home $500,000 worth of equity prize.
Months later, the company closed a $6-million financing deal with a unit of Philippine-listed Rizal Commercial Banking Corp (RCBC), which allows the company to grow its capital access for invoice purchases.
This pattern has continued even in the agritech sector. In an agricultural country ridden with challenges, startups have risen to the occasion to bring innovative solutions to the table. And much like their fintech predecessors, some have turned to startup competitions for financial and institutional support.
Perhaps one of the best examples of this phenomena is Cropital, an investment-matching platform that serves as a bridge between small financiers and farmers. Since its inception in 2015, it has consistently joined pitching competitions, almost on an annual basis, most recently winning a trip to the Seedstars Regional Summit where they can have a chance to bag the $500,000 equity investment prize.
Its string of pitching competition wins has allowed it to remain running in the last four years as it remains to bootstrap for funding. So far, it has helped 700 farmers in seven provinces in the Philippines, with 3,000 active accounts on its investment platform.
Another startup that is taking a similar path is Talino Lab Ventures’ ASENSO, which aims to be an end-to-end microbusiness enabler, as it seeks to provide the key pillars needed by farmers to be successful in their ventures: capital, insurance and a ready marketplace for their goods.
While the ASENSO already has institutional support from the Philippines’ largest microfinance institution, CARD MRI, it didn’t stop the startup from the Asian Development Bank’s (ADB) Global AgriFin Innovation Challenge in November, where it won $10,000 but more important, the opportunity to do a pilot backed by ADB in an ADB project in the region.
It shows that aside from access to capital, startup challenges allow startups to garner the traction it needs to achieve access in the investing circle, and encouragement that their business ideas are not just good on paper. Moreover, these challenges allow founders to reassess their business models as they defend their startups in front of a jury who may not be their investors for now, but could be their backers in the future.
It’s a healthy environment for startups who wish to test the waters for their ideas. And with the success for these startups come the success as well of the very markets they cater to— the unbanked, the small entrepreneur, markets once ignored by the big establishments.