Loans, funding, fundraising and all things money, are a bit big part of the startup and SME ecosystem. How do businesses grow in competitive markets and industries without access to capital?

That is why the SME and startup loan industry is massive in the region, as well as the VC community that has been the main catalyst behind Southeast Asia’s quick ascension in the global startup market.

However, speak to any SME or startup and most feel that the industry is stacked towards those who already have a lot of capital rather than those who need the capital to ascend. There is often the question why large startups raise hundreds of millions of dollars multiple times a year when they still have cash leftover from the previous round.

We look at why Southeast Asia is still an investment hub despite COVID and more.

We had a chance to speak to the founder of a startup that wants to eliminate a lot of the risk, uncertainty and ambiguity around loans by automating a lot of the process. Jenfi is the new brainchild of Jeffrey Liu and Justin Louie, formerly from Guavapass, that is looking to introduce ‘Growth Capital as a Service’ as an alternative funding alternative for fast-growth businesses in Asia.

We speak to Jeffrey about his new venture, the industry in Southeast Asia and his experiences post-GuavaPass.

Could you share how the Jenfi platform works?

Jenfi provides revenue-based financing – ‘Growth Capital as a Service’ (GCAAS) – to rapidly growing businesses in Asia by funding their marketing, inventory, and growth campaigns. 

By integrating with the key services used by businesses, such as Stripe or Braintree, Jenfi uses real-time financial data from businesses to quickly and effectively assess the financial health and risk of a business without the hassle and long turnaround time of more traditional financing options. 

Funds are disbursed to a virtual Jenfi Wallet, which comes preloaded with a virtual Jenfi MasterCard. Once funded, a business can instantly activate and use the MasterCard for their online advertising spend.

Jenfi offers a unique variable repayment model that essentially ties the weekly repayment to a small percentage of sales. As a result, Jenfi is incentivized to ensure that the business continues growing healthily, aligning the success of the business with the success of Jenfi.

How do you measure the risk involved when deciding to provide funds to a company?

Jenfi assesses the health of any business by capturing real-time sales and spending through its proprietary Jenfi technology platform, up to the current minute of when the business can grow. 

These include native integrations with alternative data sources, including Stripe, Braintree, Shopify, Facebook, and Google, among others. 

Let’s take an example where an ecommerce merchant has its own website selling fashion sneakers via its Shopify storefront and the merchant advertises primarily via Facebook ads and Google Adwords. We are able to measure business’ productivity of growth, which in our view, is actually a leading indicator on risk. 

In other words, we measure how effective the merchant is in buying Facebook ads to generate a sneaker sale. The higher the return on ad spend (ROAS), the more productive the business becomes. Ultimately, a more productive business consumes less capital and becomes less risky. This drives a positive virtuous effect that compounds over time.

With this approach, Jenfi is able to step in and provide additional capital when businesses are at an inflection point and primed to take off.

What do the traditional financial companies and fintechs get wrong when measuring risk?

Most traditional financing companies and fintechs get caught up with automating the manual processes of a bank. This is great in reducing the administrative paperwork and processing required to underwrite a loan. However, these digital improvements does not necessarily translate to better underwriting and risk management.

We turn the entire underwriting process of its head by challenging the key assumptions that drive underwriting to begin with. For example, building technology integrations to access real-time business data is significantly more powerful than periodic assessments of a business’ financial and bank statements, which are often dated and backwards looking.

We are building towards an effective platform that allows us to anticipate potential issues which further helps businesses to overcome their growth challenges. 

Most of Jenfi’s risk management product builds are geared towards reducing the information lag. For example, Jenfi automates the ongoing sales reporting via its various API integrations, streamlining the reporting required. By relying on automation, Jenfi removes the emotions and errors caused from traditional manual oversight.

Where do you see the SME financing industry in the next 5 years?

The demand for SME financing is only going to increase as the entire industry represents 99% of businesses in the region. We foresee continued financial product innovations, such as Jenfi’s revenue based financing model, to drive improved access to credit. 

The biggest driver to these product innovations is the digitisation of the SMEs. As more and more businesses embrace the cloud (cloud-related services), these businesses become more serviceable as the data integrations improves transparency and allows fintechs to tailor unique offerings that truly serve the underlying needs of the SME.

Eventually, we will move towards truly customisable financing. One day, it will be just as easy to customise your financing as it is to customise a pair of sneakers at the shop.

How has the startup landscape changed from your time at GuavaPass to now?

The startup ecosystem is significantly more developed since the time I started GuavaPass in 2015. Everything has become more accessible – from technology, such as cloud-based computing, to drive the various components of a business to service providers and other players who cater to the growth needs of startups.

To put it plainly, it would have required significantly more capital and resources to start Jenfi in 2015 than it would have been today. The likes of Stripe, Braintree, and Shopify, among others, have truly democratised the accessibility for any startup or SME to launch any kind of business.

What’s next for Jenfi?

Jenfi plans to build the most robust growth financing platform in Asia – to fulfil our mission of providing access to productive capital and serve as a true partner to growing businesses in the region.

We have already seen early success to our model, with aggregate sales of Jenfi-backed portfolio companies showing accelerated monthly growth rates of 5-10% on average. 

Our goal is to provide a full suite of tools that allows a business to diagnose and recognise opportunities to optimise and grow its business. This includes analytical tools to measure marketing return on ad spend, improve campaign performances, improve channel performance, among others.