First Circle said Wednesday that their first private equity funding was closed successfully after being upsized by more than 108 percent.
Global venture capital firms Accion Venture Lab and DeepBlue VC provided the capital to the fintech startup, bringing the company’s total seed funding to US$2.5 million in addition to an undisclosed sum of debt funding.
The startup first raised its seed round at US$1.2 million last October led by Dublin and London-based Key Capital. Other investors who participated the round were 500 Startups and IMJ Investment Partners.
SMEs lending is common in most Western countries, but the challenges are more apparent in emerging market as banks tend to prioritize larger and more established clientele in which risks are perceived to be lower. This prevents small businesses from capitalising on the economic recovery and the development of their businesses.
Established in 2015, First Circle provides short-term working capital to small and medium-sized enterprises (SMEs). This is especially significant in the Philippines, as in a country with a population of nearly 100 million, SMEs represents a sector that takes up 99 percent of all businesses in the country.
“Lack of access to capital is a big problem that needs to be fixed. If it isn’t, millions of hardworking entrepreneurs and their businesses will not be given the chance to reach their potential,” First Circle co-founder and CEO Patrick Lynch said.
The company also intends to make their lending processes more SME friendly, reducing the processing time which can traditionally be as much as a month. Simplifying the paper trail, First Circle claims that it only takes 10 minutes for business owners to sign up online for an unsecured loan and only 24 hours for the final result.
“We plan to use the latest funds to further develop First Circle’s technology and data analytics platform. This includes proprietary software and credit scoring to increase access to financial services for the underserved in the Philippines,” he further adds.
The startup is also considering to reach SMEs in other parts of Southeast Asia, but prioritize the improvement of its service locally before such considerations.
“The SME market segment in the Philippines is so big that it will take some time before the company can reach a penetration rate,” said Lynch. “We will however still look at markets where there are low levels of SME financing, increasing e-commerce penetration, and sub-optimal availability of capital for further opportunities.”
This year, the company expects to be lending in tens and millions of dollars to SMEs and states that it could potentially be raising its Series A funding round.
Commenting on the deal, the managing director of Accion Venture Lab Vikas Raj said, “We are thrilled to partner with Patrick and the First Circle team to advance access to capital for small businesses in the Philippines and beyond. The combined use of both traditional and alternative data and automated processes to acquire and understand potential borrowers can help First Circle expand access to credit quickly and efficiently at a low cost.”
Accion Venture Lab is part of the global finance-focused non-profit organization Accion. Since its inception in 2012, it has continued to support microfinance institutions that provide financial services to low-income communities. To date, the venture capital has deployed over US$10 million across more than 25 startups that work in over 20 countries worldwide.
By Vivian Foo, VCNewsNetwork
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