Meet Alibaba’s first fintech investment in Hong Kong

Aiming to fix cash flow issues for companies operating in Hong Kong, Andy Chan along with his partner Winston Wong, set out on a mission to craft Hong Kong’s first invoice trading platform, Qupital. Having seen the impact of similar platforms in Europe, Chan, Qupital co-founder and director, believed that Hong Kong was ripe with opportunity.

“There are a lot of SMEs in Hong Kong, and a number of them deal with trade, especially international trade on open account payment terms,” explains Chan to The Asset.

Since its inception less than a year ago, the company has started to gain attention from companies including Chinese e-commerce giant Alibaba. Alibaba’s Entrepreneurs Fund, along with MindWorks Ventures, led a US$2 million seed-funding round for the company in May.

“Alibaba is a great shareholder to have. They have their own B2B segment through Alibaba.com. That is where we want them to help market us – not only in Hong Kong but the rest of Southeast Asia,”

At its core, Qupital is a platform which connects two parties: funders and businesses. For businesses/sellers, the platform allows them to sell their receivables/invoices and get cash right away instead of waiting for payment from customers. For funders/investors, the platform gives them exposure to a different asset class to mobilize idle cash in hopes of an attractive return.

In terms of generating revenue, Chan shares that when an invoice is purchased, Qupital would take between 25-75 basis points of the total invoice value. Moreover, the company would take 20% of net gains made by funders.

Currently, Qupital has 15 businesses and 10 funders on its platform, consisting of family offices and high net worth individuals. Chan highlights that the company is aiming for institutional and professional investors rather than retail investors at this time.

Despite the gradual onboarding of funders and businesses, Chan expresses that the journey has been an educational process. “At the beginning, there was a bit of educating, in letting businesses know that online financing was actually a viable path,” he says. “It’s a lot easier to educate the investor side. A lot of them know about receivables themselves. They may have been involved in businesses before. Our marketing efforts are getting the sellers onboard.” Qupital has been able to generate returns of 12% per annum for investors who are free to make their own investment decisions.

Chan also stresses that KYC – especially when it comes to onboarding businesses – must be sound. “We welcome any Hong Kong-registered company with at least one year of audited financials and a minimum of HK$2 million in turnover,” he says. “The most important part is a business’ financials. We make sure to check that they have a real business relationship with their customer. We need to check their previous trades and the documentation for those trades.”

With fresh capital from high-profile backers, Chan has his sights on deepening his business in Hong Kong with an eye on expansion to other markets in 2018 such as Thailand and Vietnam. “We would like to have 200 sellers on our platform by the end of 2017,” he says.

Date

15 Jun 2017

Channel

Treasury

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