Payment service Toss becomes Korea’s newest unicorn after raising $80M – TechSwitch

South Korea has its fourth unicorn startup after Viva Republica, the corporate past widespread cost app Toss, introduced it has raised an $80 million spherical at a valuation of $1.2 billion.
This new spherical is led by U.S. corporations Kleiner Perkins and Ribbit Capital, each of which reduce their first checks for Korea with this deal. Others taking part embody current buyers Altos Ventures, Bessemer Venture Partners, Goodwater Capital, KTB Network, Novel, PayPal and Qualcomm Ventures. The deal comes simply six months after Viva Republica raised $40 million to speed up progress, and it takes the corporate to almost $200 million raised from buyers thus far.
Toss was began in 2015 by former dentist SG Lee who grew pissed off by the cumbersome manner on-line funds labored in Korea. Despite the truth that the nation has one of many highest smartphone penetration charges on this planet and is a high person of bank cards, the method required greater than a dozen steps and got here with limits.
“Before Toss, users required five passwords and around 37 clicks to transfer $10. With Toss users need just one password and three steps to transfer up to KRW 500,000 ($430),” Lee mentioned in a previous assertion.
Working with conventional finance
Today, Viva Republica claims to have 10 million registered customers for Toss — that’s 20 p.c of Korea’s 50 million inhabitants — whereas it says that it’s “on track” to succeed in an $18 billion run-rate for transactions in 2018.
The app started as Venmo -style funds, however lately it has added extra superior options targeted round monetary merchandise. Toss customers can now entry and handle credit score, loans, insurance coverage, funding and extra from 25 monetary service suppliers, together with banks.
Fintech startups are “rip it out and start again” within the West — akin to Europe’s challenger banks — however, in Asia, the strategy is extra collaborative and assistive. A variety of startups have discovered a candy spot in-between banks and shoppers, serving to to match the 2 selectively and intelligently. In Toss’s case, primarily it acts as a funnel to assist conventional banks discover and vet prospects for providers. Thus, Toss is graduating from a peer-to-peer cost service right into a banking gateway.
“Korea is a top 10 global economy, but no there’s no Mint or Credit Karma to help people save and spend money smartly,” Lee instructed TechSwitch in an interview. “We saw the same deep problems we need to solve [as the U.S.] so we’re just digging in.”
“We want to help financial institutions to build on top of Toss… we’re kind of building an Amazon for the financial services industry,” he added. “We try to aggregate all those activities, covering saving accounts, loan products, insurance, etc.”
Former dentist SG Lee began Toss in 2015 after founding guardian firm Viva Republica in 2013
Lee mentioned the plan for the brand new cash is to go deeper in Korea by advancing the tech past Toss, including extra customers and — on the provision facet — partnering with extra firms to supply monetary merchandise.
There’s loads of competitors. Startups like FolksFund focus squarely on monetary merchandise, whereas Kakao, Korea’s largest messaging platform, has a devoted fintech division — KakaoPay — which rivals Toss on each cost and monetary providers. It additionally counts the mighty Alibaba in its nook courtesy of a $200 million funding from its Ant Financial affiliate.
Alibaba and Tencent have a tendency to maneuver in pairs as opposites, with one naturally gravitating to the rivals of the opposite’s investees, as just lately occurred within the Philippines. It’s difficult in Korea, although. Tencent is caught in limbo as a result of it’s a long-standing Kakao backer. But would possibly the Ant Financial deal spur Tencent into working with Toss?
Lee mentioned his firm has a “good relationship” with Tencent, together with the occasional residence/away visits, however there’s nothing extra to it proper now. That’s intriguing.
Overseas growth plans
Also of curiosity are future plans for the enterprise now that it’s taking up considerably extra capital from buyers who, even with probably the most affected person cash on the market, finally want a return on their funding.
Lee is adamant that he gained’t promote, regardless of Viva Republica more and more wanting like a great entry level for a cost or finance firm that has missed the Korean market and needs in now.
He mentioned that there are plans to do an IPO “at some point,” however a extra quick focus is the chance to develop abroad.
When Toss raised a PayPal-led $48 million Series C 18 months in the past, Lee instructed TechSwitch that he was starting to solid his eyes on alternatives in Southeast Asia, the area of greater than 650 million shoppers, and that’s more likely to see definitive motion subsequent yr. The Viva Republica CEO mentioned that Vietnam might be a primary abroad launchpad for Toss.
“We’re thinking seriously about going beyond Korea because sooner or later we will hit a saturation point,” Lee mentioned. “We assume Vietnam is sort of promising. We’ve talked to potential companions and are at present articulating concepts and technique materials for subsequent yr.
“We already have a very successful playbook, we know how to scale among users,” Lee added.
While the plan remains to be being put collectively, Lee steered that Viva Republica would take its time increasing throughout Southeast Asia, the place six distinct nations account for almost all of the area’s inhabitants. So, relatively than quickly increasing Toss throughout these markets, he indicated extra deliberate, country-by-country launch might be the technique with Vietnam kicking issues off in 2019.
The Toss group at HQ in Seoul, Korea
Korea rising
Toss’s entry into the unicorn membership — a vaunted assortment of personal tech firms valued at $1 billion or extra — comes weeks after Coupang, Korea’s high e-commerce firm, raised $2 billion at a valuation of $9 billion.
While that Coupang spherical got here from the SoftBank Vision Fund — a supply of capital that’s threatening to change into tainted given its hyperlinks to the homicide of journalist Jamal Khashoggi — it does symbolize the primary time Korea-based firm has joined the $100 billion mega-fund’s portfolio.
Some milestones may be dismissed as frivolous, however these two coming so shut collectively are a sign of elevated consciousness of the potential of Korea as a startup vacation spot by buyers outdoors of the nation.
While Lee admitted that the unicorn valuation “doesn’t change a lot” in every day phrases for his enterprise, he did admit that he has seen the panorama shift for Korea’s startup ecosystem — which has solely three different privately-held unicorns: Coupang, Yello Mobile and PUBG developer Blue Hole.
“More and more global VCs are aware that South Korea is a really good opportunity to do a startup. It is getting easier for our fellow entrepreneurs to pitch and get access to global funds,” he mentioned, including that Korea’s high 25 cities have a cumulative inhabitants (25 million) that matches America’s high 25.
Despite that potential, Korea has tended to concentrate on its “chaebol” giants like Samsung — which accounts for a double-digital share of the nationwide economic system — LG, Hyundai and SK. That means lots of potential startup expertise, each founders and staff, is locked up in safe company jobs. Throw within the conservative custom of household expectations, which might make it exhausting for youngsters to justify leaving the protection of a giant firm, and it’s maybe no surprise that Korea has comparatively fewer startups in comparison with different economies of comparable measurement.
But that’s altering.
Coupang has been one of many highest-profile examples to observe, alongside the (now public) Kakao enterprise. But with Viva Republica, Toss and a charismatic dentist-turned-founder, one other startup story is being written and that might simply encourage a future technology of entrepreneurs to stand up and be counted in South Korea.
Note: The unique model of this text has been up to date to right that Blue Hole can be a unicorn.