The Singaporean financing platform levelling the startup playing field
“Everyone likes chocolate,” laughed Percy Hung when asked about the inspiration behind his business’s name. “It gives us a little more energy. And our tagline is ‘energy booster for your business’. So, eat chocolate, and level up!”
This energy and accessibility are things Hung has brought into the building of his FinTech investment company, Choco Up, launched in 2018. The CEO and co-founder of Asia’s largest revenue-based financing platform spoke to the Globe about overcoming the odds on the road to entrepreneurship, how to level the startup playing field and his advice for the next generation of aspiring business owners.
Choco Up has built its name as a financing platform targeting smaller businesses that would normally be overlooked by traditional venture capitalists investors. Hung’s experience prepared him well for working with this untapped potential of the startup scene.
“I’ve been trying to do small business since 2009,” Hung explained. “So it’s been a long journey!”
Singapore’s skyline of futuristic high-rises gleams with the promise of opportunity. The city-state is building a reputation as a global innovation and business hub. Even amid the economic uncertainty of the pandemic, new businesses were on the rise, with 27,764 registered in the first five months of 2021.
Yet, according to Hung, these businesses don’t launch from a level playing field. Family wealth and connections give certain entrepreneurs a critical leg up on the corporate ladder.
“I come from a really average family. There’s no initial capital,” he shrugged. While this didn’t stem the hungry student’s craving for entrepreneurship, he found the banks’ and venture capitalists’ cautious and conservative approach to funding stopped his ideas from taking off.
“They didn’t work out. Because a lot of times those businesses are not cool or fancy enough for VCs to invest,” he recalled of his early ventures.
It was only after finding numerous fellow business starters who shared his frustrations that he decided to partner with Brian Tsang, “a college buddy in finance” whom he met while studying at the Georgia Institute of Technology, to see if they could create “a product or financial service to help ourselves and people around us.”
From this mission came Choco Up’s creation and Hung and Tsang, the co-founder and COO, keeping their eye on the underdog.
“These smaller and more vulnerable businesses don’t fit in the mandate of traditional banking. Because traditional banking is, [out of] 20 checkboxes if [you miss] one, you’re denied. But the 19 other checkboxes could be very, very solid. And [with] VCs, if you’re not a really fancy high growth business, they’re probably not going to spend time with you”, Hung remarked.
He cites an example of a Malaysian company, which used recycled materials for their products across all their merchants. Because the company operated in a niche market, it was hard to get investor backing, but, inspired by their sustainable ethos, Choco Up took a chance.
“I think that was a great thing not just for the business owner or founders, but also for the society and environment,” Hung said. Since then they have made more efforts to align their partnerships with the latest environmental trends, such as EV (electric vehicle) startups across Asia.
The pair are also keen to support diversity across Singapore’s small business landscape, citing a commitment to empower women entrepreneurs, including their work with the CEO and founder of leading Asian insurtech company CXA Group, Rosaline Chow Koo.
To further support small businesses hit by the global health crisis, Choco Up operates on a model called Revenue-based Financing, or RBF. Payments on invested capital can increase or decrease according to their portfolio company’s ongoing revenues.
“A lot of times businesses, when they start, or they open up into a new product or something, you know, the curve is slow until later on,” Hung explained
RBF can give them time to find their feet. It also helps business owners achieve that rare goal of work/life balance by pausing repayments when the business isn’t earning.
“So if it’s Chinese New Year, you shut down shop, you don’t work,” Hung said, describing a common scenario for Singapore’s small companies.
While the entrepreneurs used “Western unicorns” as their business model inspiration, Hung is quick to stress that “Asia is a unique market… we can’t just copy and paste”. He describes the difference between Western countries where, in a wider and more homogenous culture, “people [will] go on eBay, go to Amazon, buy it no frills, the simpler the better” and Southeast Asia, where “it’s very segmented, every country has its own culture. And it’s very personal. As much as people like automation, people still like the human touch.”
Hung and Tsang built these human connections from the ground up. “We used our own personal network, then used our friends’ referrals, [then] other business friends’ referrals. We bootstrapped, went door to door to build a name,” Hung recalled. “It’s still that people need to trust you first in Asia before they use a service. I think that’s the biggest difference.”
The pandemic, and Hung’s personal experience, have taught him that the world of small business has big risks. He is pragmatic about his own achievements and in his advice to future business starters.
“Fail fast, fail cheap,” he suggested. “And if you’re going to try something, try it. And a lot of it’s going to fail, when you fail, don’t drag, just move on. You know this is not going to be your last gig. This is not the end of your career. If it doesn’t work, it doesn’t work.”
Like with chocolate, the sugary high of success may not always be long-lived. But for these business owners who’ve made it big through the pandemic, their good fortune tastes sweet.
