How HomeCrowd started from a Mamak's idea
The Idea from Mamak
Many of you have probably wondered how the idea of founding HomeCrowd came about. It happened during a conversation with my friend at a local mamak back in my hometown, Malacca. While having teh-tarik (tea) in the humble mamak (open-air food establishments particularly in Malaysia), he sprung me with a question that sowed the seed of HomeCrowd’s foundation today. “Why is there no platform that offers P2P home financing?” This was questioned because there were already 6 platforms that were granted the license by the Securities Commission in 2016. However, none of them provided P2P home financing. While I remembered telling him that it was a good idea, I did not take it seriously as I was comfortably working in an American private equity (investment) firm at Singapore.
The Opportunity Dilemma
Before the birth of Homecrowd, I was already an active follower of the tech sphere and was extremely impressed by the tech giants- Alibaba (esp Alipay), Facebook, robo-advisor (like Robinhood as I was in the asset management field), in how they grew exponentially to what they are today. My interest did not just stop at that. I have also been an avid follower of the crowdfunding scene ever since the emergence of Kickstarter, which was at the forefront of the crowdfunding industry. I dived deeper into the subject through LendingClub- the pioneer in P2P Lending in the US.
Lost My Corporate Job
(My last office in Avenue Asia Singapore)
Due to a change in top management, my service was no longer required at the company which I served as they moved into a different direction. I had lost my job. It was a mass-scale downsizing exercise, many of my colleagues at that time were retrenched subsequently after me. After losing my job, the journey to look for a new job was a tough one. I had difficulties in finding a new job in my field in Singapore. To make it worse, many of the job interviews that I had attended didn’t come back with any feedback at all. After a while, my headhunter managed to get some feedback, “They prefer local talents”. To put it simply, my chances were bleak.
Backpacking Around The World
(Backpacking in Bagan, Myanmar)
While looking for a job, I took the opportunity to finally do a solo backpack with Australia as my first destination, covering Melbourne, Sydney and Perth. My next trip focused on the SEA region, covering Thailand, Myanmar and Laos. The plan to venture into North Vietnam and Cambodia didn’t happen as I was abruptly called back for a job interview in Singapore. However, I did not clinch the role. After that, I took up a short-term contract job with a Chinese-based e-commerce infrastructure company which was undertaking IPO listing in Singapore’s REIT market. After helping the company to be listed successfully in SGX, I decided not to continue my career with the company mainly due to it being a family business. What followed after was my sabbatical trip in Europe, covering England, Belgium, Holland, Germany, Italy, Switzerland and Scotland.
While travelling, I did not just idle. I was also complementing on whether I should start up my own company or continue to climb the corporate ladder. It was through the backpacking experience that I have learnt to spend with a limited budget and to think on my feet in order to navigate over changing situations especially when traveling alone.
Triggering Events; Why I decided to pursue HomeCrowd
Having worked with the last company that was structurally similar to a start up, I had a good gauge on how the startup culture and expectation looks like. While I was still searching for a new job, my efforts were to no avail. I felt rejected and desoluted. Perhaps a corporate job was not suitable for me anymore. My passion and interest towards P2P Financing grew day by day, thus I took the leap of faith to pursue the HomeCrowd idea full time thereafter in 2017. Before taking the dive, I spent more time doing market research on the landscape of the industry globally. More importantly, I am passionate about solving meaningful problems with technology.
Next, I relentlessly spent my effort to discover the industry data, product-market fit to build an early pitch deck. This was extremely useful to recruit co-founder and advisors.
(Singapore Fintech Association Fintech Talent Programme Graduation on Feb 2018)
To dive deeper into the subject matter, I decided to pursue a 3-month course of Fintech Talent Programme which is organized by the Singapore Fintech Association. Being placed in the inaugural cohort, the programme emulated the online fintech course organized by Oxford University. Looking back at it, I really enjoyed learning from the programme. And more importantly, I had the opportunity in building the relevant industrial connections. To my exhilaration, I was offered an opportunity for a role with Visa Innovation Lab as one of my instructors is a Director there. This opportunity was the icing on the cake to propel us forward.
Building A Founding Team
(HomeCrowd early team)
Some said finding a co-founder is like finding a wife, this truly resonated for me. I had spent much time pitching to my friends to join me. This included the friend that had initially suggested and inspired the idea of HomeCrowd to me. Then, I had attended many startup events in Singapore to learn more about the startup ecosystem and in the pursuit to find a potential co-founder. After a while of scouting for the suitable candidate, I met a young front-end developer, his name is Alex Deng who was based in Singapore. After many cold messages sent via LinkedIn, I had found a full-stack developer, Thai Tran. He is of Vietnamese nationality and has studied his Master’s Degree in Australia before. It would seem that it was a beginning of permanency. However, our relationship didn’t last long. During the beginning, we didn’t manage to raise any fundings. As a result of that, both Alex and Thai stayed with me for 9 months and 3 months respectively. To sustain their livelihoods, they had to leave the team in order to pursue their next career plan. While that had happened, I was fortunate enough to receive support from my early advisors like Eric Yong and Mohd Ridzuan respectively. After a while, Kevin Koo eventually joined us as our legal advisor. This was the formation of HomeCrowd’s pioneer team.
Next stop, market validation
With the team newly built, it was time for HomeCrowd to move forward. Like any new startup idea, HomeCrowd’s value in the market needed to be validated. To do that, I gathered various feedbacks while networking in tech conferences and events. We didn't just do it in Singapore and Malaysia, our research efforts expanded into China and Hong Kong as well. In general, I did receive a couple of positive feedbacks; many advised me to go full force in this path and be prepared to endure the laborious journey.
Hackathon & pitching competition
(1st Hackathon event)
My very first step was to join a hackathon event with StartupWeekend Mega 2017 which was held in Singapore. There, I pitched and HomeCrowd’s name was originated there. Unfortunately, we did not succeed in the next round. Despite not advancing to the next round, my passion towards HomeCrowd was not deterred. In fact, I had planned to use the experiences and knowledge gained from the competition to my advantage.
(1st Pitching in Platform E, Singapore)
Our journey didn’t stop there. With my former co-founder, Alex; we then participated in a couple of startup pitching competitions. In our 1st competition, we were selected as a finalist to pitch to a panel of judges. Subsequently, we were also selected in couple of pitching competions in Singapore, Kuala Lumpur and even Bangkok as well.
Regulation was A Pain in The Ass
(Meeting with Securities Commission team by Mohd Ridzuan, Dave Chew and Eric Yong)
With market validation out of the way, we then encountered blunders with the regulators. Our solution did not fall under any of the regulation framework. Hence, its fate was lapsing in between two financial regulators namely Securities Commission (SC) and Central Bank of Malaysia (BNM). We had started our engagement with the former and it took us about 6 months to secure a meeting with them. After our meeting with SC (together with my advisors), they concluded that they are not going to regulate this segment beyond the SME lending that they are currently regulating for the P2P operators. At the same time, we also started engaging with the BNM team. This time, they reverted that they need SC’s feedback as well. This was a blow as it took us more than 9 months to secure a meeting with them. The silver lining came at last. After another meeting with BNM, which included both the Fintech and Housing teams, they finally concluded that they may support us in the Regulatory Sandbox. To proceed with this, we submitted the additional info required by them for the Application. The outcome was another setback. While they had seen the value in our proposition, we had yet to secure any funding - which was an important criteria to be admitted into their Regulatory Sandbox. Unable to secure the much needed license, it created a huge challenge for us to raise funding from any of the angel investors or government tech grants as Malaysia’s startup ecosystem was still growing.
(Meeting with KPKT, Housing Ministry by Kevin Koo, Eric Yong and Dave Chew)
Moving on, we had engaged with the Housing Ministry and Local Government (KPKT). There were many red tapes where we went through a couple rounds of engagement starting with meeting the Special Function Officer to Minister, Money Lending team, National Housing team and lastly the Secretary General (KSU). After having successfully addressed the concerns on the credit risk, the KSU agreed to support us. While this came as great news to us, we were still required to raise RM1mil (a relaxed amount from RM2mil for the normal lending license). Nevertheless, due to the fact of us contending for a special license under the Lending Act, they were willing to support us and waived some of the non-critical requirements. Having spent more than a year dealing with various regulatory obstacles, we were thrilled to receive their support.
Another Hurdle in Our Fundraising Effort
Thrilled with the good news, I was excited to update the potential investors (both angel and VC) that I pitched to earlier. Yet, they were not optimistic on the probability for us to secure the license. Due to that very reason, more and more investors rejected us. Facing this hurdle, I then shared my concern to the KPKT officer on the challenges and the rationale of why the license will be necessary to raise a bigger round of funding. It was critical for us to kickstart our business. Therefore, I negotiated with them to relax further on the paid-up capital requirement to RM500k. The response was a positive one. Just when we thought things were getting better, the support doesn’t help much to close our funding. We were rejected by as many as 80 investors from both the angel and early stage VCs.
FundMyHome Popped Up
During the Budget announcement in Oct 2018, the former Finance Minister, Lim Guan Eng announced that the government will support a private company to introduce a property crowdfunding platform. Some of my friends and a potential angel investor who have seen the news texted me congratulatory messages and asked whether we were the mentioned company. The truth is, we didn't even have the opportunity to meet the Ministry of Finance; how could we have been the one? Just after 2 days of the announcement, EdgeProp had suddenly launched their platform. The opening ceremony filled their new customers as well. Amused, I was puzzled how they got everything ready before the Budget announcement? Perhaps there was an unknown reason behind it. I shall leave it to the reader to concur whether the process was as fair as it would have seemed to be.
(FundMyHome opening ceremony on Oct 2018)
As a citizen and entrepreneur under the former ruling government-Pakatan Harapan, it was upsetting to witness that the company didn’t officially go through the long and tedious regulatory process that we went through with the 3 agencies, namely BNM, SC and KPKT respectively. Not to our surprise, their launch hampered our fundraising efforts as FundMyHome was seen to have all the advantages over us. The only driving force behind my decision to persevere was my belief that we have the better solution to the problem. Moreover, they had also helped us to educate the public on the awareness of property crowdfunding. An entrepreneur’s journey is not a sprint, but of a marathon. We were in it for the long run. Up till today, we have recently noticed that they may have ceased their operation observing from their inactivity.
(Demo Day of Chinaccelerator Batch 16 in Shanghai)
After the setback, we then received an offer from CA. It came at a good time as the accelerator funding is USD150k, which was sufficient for us to apply for our license. Besides, we felt honoured to have spent 3 months learning and connecting to the startup community in Shanghai and globally. Before the end of the programme, we wrote an appeal letter to the KPKT Ministry as advised by the officers whom I am liaised with. However, our application with RM500k paid-up capital was not accepted by KSU. This time, the main concern from the regulator was of our financial readiness to launch the loan offering.
Avengers Founding Team
With the small funding, building the pioneer team became possible with most of them agreeing to take some paycut to accommodate the company’s minimal budget in exchange for company’s share options. Sacrifices were made, but we were able to build our vision together as a team. I know that we came out stronger from all the trials & tribulations, and I can’t wait to see how the future of HomeCrowd is going to unfold.
My Passion & Vision for The Company
- In my opinion, we should solve a real problem that I am personally passionate about. The fact is, I can’t even buy my 1st house yet.
- The lack of access to house financing for millennials should be seen as a huge problem- an impending crisis.
- As a company, we have a reasonable path in becoming the number one leader in the digital mortgage crowdlending space. There are a couple of fintech unicorns in the US which have succeeded with similar business models.
22 July 2020 | By Dave Chew (Founder, CEO)