How Kelvin Teo Built Southeast Asia’s Largest SME FinTech Empire

"Org structure is the last thing you should be integrating during an acquisition. Where you should be integrating is mindset, thinking, culture, and values—all the things that are below the surface. Before building trust and aligning values, recklessly integrating the org structure is a recipe for losing good people and drawing charts based on arbitrary ideas that don't fit Southeast Asia." - Kelvin Teo, Co-founder and CEO of Funding Societies | Modalku

"When it comes to customer acquisition, for every 10 customers that I meet and give me a document, I approve two—meaning I waste eight of them. What if I can actually keep them for longer? This is why we entered payments. It allows us to add multiple product lines so we have something for the customer and don't have to reacquire them, while using that payment data to complement our underwriting." - Kelvin Teo, Co-founder and CEO of Funding Societies | Modalku

"SME finance in Southeast Asia is a high-volume, low-margin business. If you aren't covering enough scale across the region, it’s hard to be successful. We realized that while bankers are often siloed in one country, a regional footprint in Singapore, Indonesia, Malaysia, Thailand, and Vietnam allows for diversification. When one market faces a macro shock, the others support the entire group." - Kelvin Teo, Co-founder and CEO of Funding Societies | Modalku

Kelvin Teo, Co-founder and CEO of Funding Societies | Modalku, joins Jeremy Au to discuss the journey of building Southeast Asia’s largest SME digital financing platform. From ideating at Harvard Business School to managing a regional FinTech through the COVID-19 pandemic, Kelvin shares first-principle insights on credit risk management, the strategic acquisition of CardUp, and why regional diversification is the ultimate survival mechanism. Discover how Funding Societies navigates fractionalized markets, handles the "willingness to pay" vs. "ability to pay" dilemma, and the hard leadership lessons learned from being an early mover in startup layoffs.

How do you scale a FinTech company across 5 countries while navigating global pandemics and regulatory shifts? In this episode of the BRAVE Southeast Asia Tech Podcast, Jeremy Au sits down with Kelvin Teo, Co-founder of Funding Societies | Modalku. Kelvin shares his incredible journey from being a "naive" Harvard MBA student to managing a platform that has disbursed over $5 Billion USD in SME financing.

In this episode:

The "First Principles" of Credit: Why traditional banking models fail SMEs and how Funding Societies rewrote the rules for Southeast Asia.

The McKinsey & Harvard DNA: How elite professional training helped (and hindered) the founding of a startup.

Mastering Regional Scale: The strategic logic behind expanding into Singapore, Indonesia, Malaysia, Thailand, and Vietnam.

Crisis Leadership: Facing social media backlash during layoffs and the "brave" decisions required to survive the FinTech winter.

M&A Strategy: Why Funding Societies acquired CardUp and the secret to integrating mindset over org structure.

Whether you are a founder, a VC, or an aspiring entrepreneur in the SEA ecosystem, Kelvin’s insights on concentration risk, counterparty trust, and regional diversification are essential listening.

02:02 Introducing Funding Societies: Empowering SMEs across SEA

04:10 The "Zero to One" inspiration and starting at Harvard

09:10 Hiring a "Ghost Team": Building a company remotely before it existed

14:20 Finding Product-Market Fit: Moving beyond secondary research

21:50 The Regional Moat: Why Southeast Asian startups need to go multi-market

27:30 Risk Management: "Ability to pay" vs. "Willingness to pay"

31:10 Learning from defaults and managing concentration risk

38:50 The move into Payments and the acquisition of CardUp

41:40 The "Brave" moment: Facing licensing hurdles and graduation without a job

43:10 Leadership through crisis: The reality of early startup layoffs

#Singapore #Indonesia #Startup #Podcast #southeastasia #techpodcast

How Kelvin Teo Built Southeast Asia’s Largest SME FinTech Empire - E678

Jeremy Au: Hey Kelvin, really excited to have you on the show. You’ve built a regional Fintech company that is inspiring to so many people in the ecosystem. Could you introduce yourself?

Kelvin Teo: I’m Kelvin, co-founder of Funding Societies. We are the largest SME digital financing platform in Southeast Asia. We exist to empower the growth of small and medium businesses in two ways. First, by solving one of their biggest problems: working capital loans. Second, since 2022, we’ve embarked on a journey to manage their payments. We acquired CardUp with MAS approval, and we now offer both solutions across Singapore, Indonesia, Malaysia, Thailand, and Vietnam.

To date, we’ve given out about $5 billion USD in financing and process about $1.5 billion in payments annually. I’m Malaysian by birth and came to Singapore on an ASEAN scholarship. I studied at NUS, went to the entrepreneurship program (NOC) in the US, and started my career at Accenture and McKinsey before attending Harvard Business School, where we started Funding Societies.

Jeremy Au: We overlapped at Harvard Business School (HBS) for our MBA. I remember seeing you and your co-founder in the cafeteria busy discussing what would become Funding Societies. What was that experience like, building a company while at HBS?

Kelvin Teo: It wasn’t an intentional idea to start a company at Harvard. Most people looking to start a company would probably choose a West Coast university. However, it was serendipitous. I bumped into an idea I was passionate about and met my co-founder, Reynold Wijaya, who was my classmate. Even though we only had a PowerPoint deck and a few pieces of paper in the cafeteria, our values aligned. We were two naive gentlemen who believed we had a path to be number one.

Jeremy Au: Why did you choose business school at that time? You had a path in private equity after KKR and consulting.

Kelvin Teo: It’s a regular path for consultants to have the firm sponsor an MBA. Many people go to get into private equity, and I was fortunate to be part of the KKR Capstone team. I enjoyed it, but I figured life is more than just a career. I had only spent a year in the US prior and thought Harvard was a great opportunity to explore. Candidly, it was the only offer I got; all the other universities rejected me! It was my dream school growing up, so I thought it was worthwhile, even if it meant I couldn't go back to private equity.

Jeremy Au: How did you move from exploration to building a Fintech company in Southeast Asia?

Kelvin Teo: I wanted to see how we could make Southeast Asia a better place. The trigger at HBS was a speech by Peter Thiel. He mentioned that Asia doesn't need innovation; it just needs execution because it’s so far behind. That was annoying but factually accurate in 2014.

We looked at innovative companies in the US over the previous decade. We shortlisted two models: a P2P lending model like LendingClub or Prosper, and a TransferWise equivalent. We realized for remittance, you need to be on both legs of the transaction to win. For P2P lending, we modified the model for Southeast Asia by focusing on productive loans, which have a higher multiplier effect. We used our time as students to visit companies like Prosper and Learning Circle to learn the intricacies of the model.

Jeremy Au: How did you handle the early days while you were still students in Boston?

Kelvin Teo: We hired a distributed team using Skype and job advertisements on StartupJobsAsia. We managed them by checking in at 9:00 PM Boston time (9:00 AM Singapore time) and checking out at 3:00 AM. We saw another founder from Stanford doing it remotely in Indonesia, so we thought we could too. What I didn't realize then was that he actually had a founder physically on the ground in Indonesia!

We incorporated in Singapore because it was the only country where we could. Years later, my team told me they were shocked when I told them the company was finally incorporated—they hadn't realized they’d been working for a company that didn't technically exist for months.

Jeremy Au: You found your co-founder first and then hunted for the idea together. How did you know it was a good match?

Kelvin Teo: We spent a lot of time together driving to find Asian food over the weekends. Reynold comes from a family business background, but he belongs to the category of people who don't want to be successful just because of their parents.

Starting a business with a classmate is often a "no-no" because you want complementary skill sets, but we trashed out all the hard arguments upfront. We discussed what would happen if someone wanted to leave or if the business failed. In Indonesia, launching could have been considered a jailable offense for deposit-taking at the time. Because we handled those hard decisions early, we were completely in sync when we finally moved back in 2016, even with him in Jakarta and me in Singapore.

Jeremy Au: How did you determine product-market fit from so far away?

Kelvin Teo: We just did it to see what would stick. We initially hired a team of four: credit, sales, marketing, and an analyst. For tech, we found a small IT firm in Indonesia. When we raised our Series A, we convinced the founder of that IT firm to shut down his business and join us full-time as our CTO. We knew there was a big need for SME financing, even if we weren't sure exactly how to solve it yet.

Jeremy Au: What was the transition like when you finally returned to Asia in person?

Kelvin Teo: It was funny meeting the team in person for the first time. The office had evolved from a dining table to a coworking space. That experience formed our DNA as a distributed team. My background in McKinsey and KKR gave me a soft landing in terms of execution and thinking from a shareholder's perspective. I also devoured about one book a week to recognize patterns in business execution.

Jeremy Au: You chose to build across Singapore and Indonesia simultaneously. What was the strategy there?

Kelvin Teo: SME finance is a high-volume, low-margin business. If you don’t have scale, it’s hard to be successful. We figured we needed Indonesia for that scale. Most of our competitors were bankers who were very siloed in one country. We had the regional footprint and the US Fintech exposure.

That diversification helped us survive COVID-19. When Singapore and Malaysia shut down, Indonesia supported the group numbers, and vice versa. Being regional also helps with talent and regulatory engagement. Many single-country players are vulnerable to shocks and did not survive the last five years.

Jeremy Au: Lending is one thing, but collection and risk management is another. How did you approach credit risk?

Kelvin Teo: Sequoia invested in us because they said we were aggressive in execution but conservative in risk management and regulation. In the early days, we barely had enough default data to train a model because we were so careful.

We thought from first principles: credit is the ability and willingness to pay. Banks focus on the "5 Cs," specifically capital and collateral. We couldn't win that game, so we focused on character, capacity, and condition. We looked at cashflow capacity, which meant our loan tenors had to be short—six to nine months. We had a risk committee to help us avoid the mistakes made in the Chinese market. Most of our peers who collapsed did so because of corporate governance or concentration risk.

Jeremy Au: How did you learn about concentration risk?

Kelvin Teo: We had a big default in 2018. We had already been telling investors to diversify, even forcing them to set limits on how much they could invest in a single loan. Human tendency is to give bigger loans to bigger companies because it’s easier, but that brings concentration risk. We realized we had to actively reduce that over time to survive sectoral recessions, like the construction slump in Singapore.

Jeremy Au: Southeast Asia often has "due diligence risk" or issues with financial transparency. How do you manage that?

Kelvin Teo: It’s an evolutionary stage for the industry. We took a contrarian view. While others said Fintech doesn't need much information, we asked for more documents than banks. Because our next best alternatives were moneylenders charging 48%, SMEs were willing to provide the data. It’s hard to doctor financial statements, bank statements, and tax filings simultaneously. Most of our defaults come from counterparty risk—where the SME’s customers don't pay them—rather than fraud.

Jeremy Au: Why did you decide to enter the payments space?

Kelvin Teo: To lower customer acquisition costs and gain more data. For every ten customers I meet for lending, I might only approve two. With payments, I can keep the other eight as customers. It’s the Square/Block playbook.

We acquired CardUp in 2022 because learning the DNA of payments from scratch would take forever. We’ve grown their transaction volume six times in three years. My major lesson there was that the organizational structure is the last thing you should integrate. You should first integrate mindset, culture, and values. Recklessly merging structures is a recipe for losing good people.

Jeremy Au: Can you share a story of a time you’ve been brave?

Kelvin Teo: Right after graduation, MAS introduced new regulations. Many players kept running while they applied for licenses, but we chose to clarify with the MAS. They told us to pause. At the time, we had a term sheet from Sequoia that hadn't closed, two months of runway, and 90% of our business was suddenly in a gray area. I was also getting married and had to tell my parents-in-law I might be jobless. We complied, hired lawyers, and pivoted to "on-balance sheet" lending to survive. Sequoia honored the deal because we were honest with them.

Later, during COVID-19, we were among the first to conduct layoffs. We knew revenue would drop and wanted our team to find jobs at Grab or Amazon before everyone else started laying off. We were destroyed on social media for it, as if we were the only ones failing. But leadership isn't about popularity; it’s about doing the right thing based on values and facts.

Jeremy Au: Thank you, Kelvin, for sharing your journey and these strategic insights.

Kelvin Teo: Thanks for having me, Jeremy.

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