It would probably be fair to say that Seoul is not recognised as a global fintech hub – at least not yet. In fact, one might instinctively expect that Korea’s market conditions to be inconducive to fintech innovation. After all, the country’s economy has long been dominated by a handful of large conglomerates, known as chaebols. The sheer size of these companies has traditionally made the task of establishing a successful start-up very tricky indeed.
But despite these challenges, there are a growing number of innovative fintechs setting up in Seoul – and taking on the country’s big players in financial services and technology. One of these is QuotaBook. Based out of the city’s Gangnam district, QuotaBook is a fintech infrastructure start-up that was founded by a group of former venture capitalists and Silicon Valley engineers in 2019. The company’s platform allows both start-ups and their investors to sync equity and corporate governance data through a single online portal. They already boast an impressive client base. Most of the leading start-ups and VC funds in Seoul use QuotaBook’s solution.
Having met QuotaBook’s Director of Global Business, Mia Chung, at the Singapore Fintech Festival, #DisruptionBanking visited their offices in Seoul to chat with CEO and Co-Founder, Andy Choi.
Andy started by explaining QuotaBook’s essential mission. “It’s all about digitising information and bringing it together on one platform,” he said. “Private equity and private corporate data, as well as funding information, all goes online on our portal. This allows every stakeholder to access everything easily.”
QuotaBook services two broad kinds of clients by solving a problem that both groups share. The first is “on the start-up side” – the entities that are issuing equity. The other is investors – those who are buying equity instruments. Even now, many start-ups find that the majority of crucial equity and corporate data is scattered around in different formats and locations, and therefore isn’t easily accessible for investors. Cap tables are often in Excel or Microsoft Word and are sometimes updated by hand in an entirely manual process. Different entities might format their data in different ways. This isn’t just a time-consuming and inefficient method, but it poses challenges for investors.
Andy encountered this issue personally when he was working for a VC. Before leaving to launch QuotaBook, he worked in the revenue investments team for a major VC fund for almost three years. In that period, he realised the amount of time which is wasted because of inefficient data sharing methods.
“When I was working for a VC, I was working with a lot of start-ups, and also with our own back office, both of whom were pinging data back and forth,” Andy recalled. “Most people would think that 100% of a VC’s job is about making investments. But what I learned is that is only that’s about 20% of your work. The other 80% is portfolio management, catching up with the data – all of which was done in a manual, rudimentary way.”
This is what inspired Andy to think about a potential solution. He was aware that software existed in the States – a widely used platform called Cartra – through which companies sent out and managed their cap tables and equity certificates more easily. Originally, Andy tried simply to import Cartra into Korea, but ran into regulatory difficulties. The system had been built to comply with US securities laws and wasn’t flexible enough to adapt to Korea’s slightly different landscape. Instead, he decided to build his own software to provide a similar service for the Korean market.
A Single Data Proxy
Andy went on to explain why he believes QuotaBook’s is so important. VCs are under a range of obligations when it comes to the monitoring of data relating to their portfolio companies. Not only commercial obligations – the need to make strong returns – but also regulatory requirements, not least their fiduciary duties.
“Once they’ve invested in a start-up, VCs have to keep in touch with the cap table at least once every quarter,” Andy said. “They have their fiduciary duty to report to the limited partners (LPs). To do that they need to know how their fund is performing, which is all based on how the cap tables look like, based on factors like the company valuation and ownership percentages.
“They also need data such as the price per share when they invested, and what that price is now. It goes further than just cap tables as well. It’s also about the company performance: metrics like team headcount and business strategies.”
Despite the importance of this information, the exchange of data continues to be done on a very informal, manual, and ad hoc basis. Data requests are still mainly made just by emails or texts. While this might be manageable for funds that only have one or two portfolio companies, most VCs will have hundreds of different portfolio companies. Each of these companies will also format their data in a slightly different way. “So there’s obviously a big limitation on how you can reach out one-by-one to each portfolio companies.” And the problem goes the other way, too. As a start-up grows and brings more and more investors on board, they’ll find themselves inundated with requests from different investors with slightly different expectations. Trying to service these requests can quickly become overwhelming.
QuotaBook aims to solve this problem. “We act as the single proxy for all these different data types and different operations. On the corporate side, they only have to publish their data once. Our platform will publish it in different formats depending on which each investor has requested. And for investors, they have a unified portal where they can access all the data they need, whenever they want it.”
Despite its considerable success, both in Korea and in other Asian markets, QuotaBook is still at a relatively early stage, having only been incorporated in 2019. Andy’s ambitions about wanting to build additional functionalities on top of the existing platform. For example, his engineers are working on developing the technology to support online voting for investor and shareholder meetings. He also wants to enhance QuotaBook’s stock option functionalities, such as by allowing companies to cover the full employee stock option cycle from issuance to exercising.
At the moment, QuotaBook is largely focused on data management between existing stakeholders. But Andy believes there’s potential for the software and technology to be developed to help investors take positions in the market. By using analytics to survey collected market data, in the future QuotaBook could help with the implementation of alpha strategies and thereby further boost companies’ bottom lines.
“Once we have enough market data, we can have the capacity to give out more analytics and insights about individual investments, or individual fund performances,” Andy said. “If you’re looking into investing in an e-commerce company, for example, you could probably show what the market looks like in general and how this company compares to competitors. We definitely want to move into that side of the data business later on as well.”
It seems that the Korean government is attempting to encourage more fintech innovation in Seoul and elsewhere. Andy believes that they’re “trying to make the fintech environment more open,” and that the authorities are successfully nurturing a more productive environment thanks to sandbox programmes and favourable regulation. QuotaBook has certainly emerged as a serious player in Asian markets as a result of these conditions. With the private equity and investment banking scenes also growing along with fintech, Koreans have every reason to believe the future of their financial services will be bright.
Author: Harry Clynch
#Seoul #Korea #Fintech #VCs #Digital