KB’s investment unit offers to match funds for start-ups
It is a new way of promoting crowdfunding, one of emerging fintech areas, and supporting start-ups to raise funds, suggested in January by KB Financial Group, a leading financial group in Korea. Four start-ups reached their goals on the platform, and financed additional funds from the KB securities arm as of February.
This match funding program is the essence of the KB Starters Valley, a fintech start-up incubator with one-stop services from discovery of promising firms to business consultation and funding.
“We believe funding is the most important factor for start-ups, and crowdfunding is forecast to become another major source of funding, which will help discover many promising start-ups,” said Kwon Hyug-soon, head manager of the KB Financial Group Fintech Hub Center, in an interview with the Korea JoongAng Daily on Friday. “Among the nation’s four major financial holding groups that opened their own fintech labs, I would say that KB’s fintech center is strong in connecting the right start-ups with the right affiliate,”
A. The group has started collaborating with Opentrade, a crowdfunding firm, since last year to jointly operate the match fund in the wake of the so-called Korean fintech boom.
As soon as the financial regulation was eased in January to allow retail investors to invest in start-ups via securities-based crowdfunding, we launched the match fund in which KB Investment & Securities offers the same-size funding as the crowdfunding goal.
The center is mainly aimed at financing early-stage start-ups that need business consultations and money to test out things.
Actually, two start-ups that recently received KB’s match fund moved into our office today, which is located in KB Kookmin Bank’s Myeong-dong branch in central Seoul. We offer free office space as well as training.
As they entered today, two existing members exited the program after nearly eight months of training. The center has hired seven early-stage start-up incubators, which help the companies successfully present themselves and find a partner.
Is the Fintech Hub Center the only arm of KB that invests in fintech?
KB Financial Group has operated two other fintech start-up programs, in which different assistance is offered to start-ups in different stages.
KB’s 12 affiliates have separately signed alliances with matured fintech start-ups, so that their technologies can be implemented into our mobile finance services. About 12 start-ups became the affiliates’ partners last year.
As a result, KB bank users enjoy sending money without punching in long bank accounts, via a partnership with Viva Republica’s service Toss, and they can also sign up for a robo-adviser-operated investment trust program jointly offered by Quarterback Investments. Our insurance arm is working with a big data start-up to develop customized auto insurance products depending on each driver’s driving habit.
KB Investment, an investment bank arm of KB Financial Group, also operates an investment funding program specifically for fintech start-ups. It set aside a total of 15 billion won ($13 million) last year to be invested in companies in four strategic business areas that KB has named to have the largest growth potential. The investment happens via corporate stock purchases or in financing the company’s intellectual property.
Of 15 billion won, 5 billion won went to start-ups in security technologies, 4 billion won each to companies in self-verification and big data analysis, and the remaining 2 billion won to payment and money transfer start-ups.
We make investment taking into account each company’s profit potential to encourage them to work harder. Five of our fintech specialist analysts choose which companies to invest.
Coinplug, a Bitcoin start-up, was one of the recipients last year. Later, our KB bank mobile app implemented a new system, where our bank customers can exchange KB check card membership points with Bitcoins and use them in real life. After the alliance with us, the company has gotten so busy these days entering partnerships with other banks like Shinhan and Woori.
We’re looking into implementing four to five more new fintech services into different KB affiliates’ services.
Which fintech areas will KB Financial Group focus on the most?
We hope not to limit the spectrum of cooperation into a single fintech area. Instead, we hope to become a generalist like how our center works with small start-ups in any type of fintech business.
We ended up with such a conclusion for various reasons. KB thinks that we should invest in different fintech technologies and implement them in multi layers at the end of the day, because many financial consumers and even experts raise concerns that the Korean fintech technologies are still in their early stage and need more time until they gain public trust in security and accuracy.
For example, KB has kept funding start-ups in fingerprint self-verification and facial recognition in order to roll out a non-face-to-face self-verification system by the end of this year. We hope to design the system to identify a user over two steps to ensure security.
Such a plan is in line with KB’s group-wide business strategy, which aims to do well in all types of financial services, and the corporate culture that emphasizes close communication between affiliates under the holding company’s leadership.
BY SONG SU-HYUN, KIM JI-YOON [email@example.com]