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The future of financing is AI and data analytics, says Validus Capital

Co-founder of Validus Capital Vikas Nahata shares how his company gives your SME financing even without you approaching them.

$1 billion. That’s how much financing Validus Capital has given out to date to small-medium enterprises (SMEs) in Singapore, Indonesia, Vietnam and Thailand since its inception in 2015. We speak to co-founder and executive director Vikas Nahata about the key difference that separates Validus Capital from its peers and how the company uses data analytics and artificial intelligence to power its business.

Why did you decide to start Validus Capital, and what does the name mean?

Between 2010 and 2014, I visited Singapore frequently for my business in India and often came across SMEs that faced cash flow issues. They had multiple projects in hand and were helmed by passionate entrepreneurs. However, they found it hard to raise the cash flow needed to fund their expansions.

In 2014, I also noticed the rise of crowdfunding as an alternative funding source for such SMEs across the region. I sized up the opportunity in South-east Asia and felt it was meaningfully large to venture into. So I started Validus Capital in 2015.

SMEs are often seen as risky because they do not have hard collateral to pledge. However, if we could “em using data gathered over a period of time, they could easily borrow when growing their businesses. I felt no one had really dived deep to understand and “validate” their risk profiles, hence the name, Validus.

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Validus Capital won the first prize in the Singapore FinTech Festival 2020 under the Singapore Financial Institution category for its Credit and Customer Monitoring System (CCAAT).

Validus Capital won the first prize in the Singapore FinTech Festival 2020 under the Singapore Financial Institution category for its Credit and Customer Monitoring System (CCAAT).

What have been the greatest challenges in the past five years?

Many come to mind. First, reputation. Many platforms similar to us also sprung up and received licensing from different regulators. However, some shut down for multiple reasons. Naturally, investors and lenders had a terrible experience and unfortunately, they painted us with the same brush. We spent a significant amount of time explaining to multiple stakeholders how Validus differs from them and how our governance is better.

Another challenge has been building the right team with an agile and ambitious DNA and culture. We encourage our people to think like mini entrepreneurs while working together as a team.

Covid-19 was a tremendous challenge too. We studied our risks and underwriting criteria across all countries. Luckily, while we slowed down our volumes for those few months, we kept very low defaults across the board and emerged from the pandemic stronger than ever.

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I understand Validus Capital uses data analytics and AI in its business operations. Could you share with me how that works?

Let me give an example. After signing a Data Privacy Agreement with a corporate organisation, we get between two and five years of trade data that the organisation has for their vendors and distributors. Using this trade data, we can offer pre-approved financing to them with the click of a button. We don’t even need to take financial statements.


“We’ve given out over 30,000 loans to date. As we penetrate… across the region, we are potentially looking at more digital plays, specifically digital banks in some markets.”

Vikas Nahata of Validus Capital evaluates the company’s next move

The key is to evaluate accurately what the SME can become in the short to medium term and proactively offer financing to the SME when it needs it, without the enterprise needing to even come to us. For example, if we see an unpaid invoice to an SME in the live data feed, we can offer the company an invoice financing offer if it wants the receivables to be financed.

Such behaviour and patterns go into our data lake. We run machine learning algorithms to gauge the SMEs behaviour over time. The variables for credit judgment are then picked up by the machine, not by humans. However, this takes time and data to develop and curate.

What’s next for Validus Capital in the next five years?

We’ve given out over 30,000 loans to date. As we penetrate more SME markets across the region and understand them better, we are potentially looking at more digital plays, specifically digital banks in some markets.

On a lighter note, if you had to describe the work of Validus Capital to a 5-year-old, how would you do it?

That’s a tough one. Hmm, think of the smallest but fastest child on the playground. Validus gives them wings to fly!

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